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Twitter Inc.'s User Growth Has Improved, but It's Still Well Behind Facebook's

By Daniel Sparks – Updated May 9, 2017 at 2:11PM

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Investors shouldn't get their hopes up yet about Twitter gaining the same sort of mass-market appeal Facebook has.

One of the big highlights in Twitter's (TWTR) first quarter was the social network's return to solid user growth. However, while Twitter's first-quarter user growth was strong compared to recent quarters, investors should keep the growth in context: Twitter's user growth is still well behind Facebook's (META -1.19%), even though Facebook has about six times as many monthly active users as Twitter.

Put another way, Twitter is not even close to demonstrating the same mass-market appeal Facebook continues to show.

Woman using a smartphone.

Image source: Getty Images.

Twitter's monthly active user growth versus Facebook's

For its first quarter, Twitter's monthly active users increased 6% year over year and 3% sequentially, above the company's 5% year-over-year and 1% sequential growth in its fourth quarter of 2016 and well ahead of its 3% year-over-year and 1% sequential growth in its third quarter of 2016. The return to growth undoubtedly helps alleviate some concerns about Twitter's ability to appeal to a larger audience.

But this growth pales in comparison to user growth Facebook consistently delivers.

Line chart showing Facebook's monthly active user growth versus Twitter's.

Data source: Twitter and Facebook quarterly SEC filings. Chart by author.

Facebook's monthly active users have increased at a rate of 13% year over year or higher in the past eight quarters. Even more, Facebook's monthly active user growth has accelerated during this period, with year-over-year growth coming in at 17% in the first quarter of 2017 -- quite a feat considering Facebook is now approaching 2 billion monthly active users and Twitter has just 328 million monthly active users.

Going further, Facebook continues to show its ability to attract bigger audiences with its other social platforms, including WhatsApp, Messenger, and Instagram. All three of these social networks, which now boast 1.2 billion, 1.2 billion, and 700 million monthly active users, respectively, continue to grow at a faster rate than Twitter.

So, though Twitter's user growth is kicking it up a notch, the growth isn't very exciting when compared to Facebook's ability to attract users across all four of its main social networks.

One aspect of user growth where Twitter is shining

But there's a glimmer of hope for Twitter's user growth. Looking beyond Twitter's monthly active users to its daily active users, Twitter's growth in daily active users recently has been rapidly accelerating.

Line chart showing Twitter's quarterly growth in daily active users.

Twitter quarterly SEC filings. Chart by author.

Twitter's year-over-year growth in daily active users accelerated for the fourth quarter in a row in Q1. Daily active users were up 14% year over year, far ahead of the 3% year-over-year growth for the same metric in Twitter's first-quarter of 2016.

What arguably makes Twitter's recent daily active user growth notable is that it's not too far from Facebook's daily active user growth. Facebook's daily active users were up 18% year over year in the company's most recent quarter. And, unlike Twitter, Facebook's daily active user growth has been largely the same recently; its 18% growth in daily active users is only slightly ahead of 17% growth in the year-ago quarter.

If Twitter's growth in daily active users can continue to accelerate, the company may begin giving investors some more concrete evidence that the service has potential to appeal to a much larger audience.

There's one big catch, however, to Twitter's daily active user growth. Twitter hasn't shared exactly how many daily active users it has, so it's impossible to know what base this growth is on. This growth could very well be on a base that is significantly smaller than Twitter's monthly active user base.

Still, Twitter's growth in daily active users is an important trend for investors to keep an eye on, particularly as Twitter's growth in monthly active users continues to significantly lag Facebook's growth rates. In addition, Twitter's accelerating growth in its monthly active users recently is still promising, even though the growth isn't as meaningful as Facebook's.

Investors should keep things in perspective: Twitter's user growth has improved, but it's still not great.

Daniel Sparks owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook and Twitter. The Motley Fool has a disclosure policy.

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