Please ensure Javascript is enabled for purposes of website accessibility

As Stock Plummets, Twitter Finds Itself Desperate for New Users

By Wired - Feb 6, 2014 at 5:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Twitter reports a notable deceleration in user growth, and investors are downright terrified.

Twitter headquarters. Source: Flickr (Aaron Durand for Twitter,).

This article was written by -- the leading provider of technology and innovation news.

No, Twitter (TWTR 0.99%) isn't ready for prime time.

On Wednesday, the microblogging outfit released its first-ever quarterly report, after going public this fall, and the numbers show that relatively few new users are joining the company's social networking service — a service that's extremely influential but nowhere near as popular as a site like Facebook (META 1.88%). Over the last three months, Twitter user growth decelerated to levels well below Wall Street expectations, and worse still, existing users are spending less time with the service.

The result: Shares plunged 17 percent after hours. The drop is not just a bad omen for Twitter in particular, but growing tech start-ups in general. Many are looking to Twitter as a bellwether for the next generation of tech IPOs.

Twitter reached 241 million active monthly users last quarter, but Wall Street expected 248 million. The number of users grew just 4 percent over the previous quarter, continuing a long slide. That's barely a third of the growth rate from a year ago. Meanwhile, the time these users spend viewing the Twitter timeline declined 7 percent from the previous quarter.

CEO Dick Costolo seems to realize that gaining new users is an urgent challenge. In a conference call with Wall Street analysts and reporters, he spent much of the time discussing recent initiatives and experiments that he believes will reignite growth, such as easier registration on mobile devices, recruiting those who used the service in past but are now inactive, and improving the service's private messaging functions. Costolo's primary goal is to get people addicted to Twitter in the first seconds after signing up for the service, rather than wooing them over weeks or months.

"We have massive global awareness of Twitter, and we need to bridge the gap between awareness of Twitter and deep engagement on the platform," he said.

It's a big challenge. At its current growth trajectory, Twitter will need 12 years to get to 200 million monthly U.S. users, as Sanford Bernstein analyst Carlos Kirjner pointed out during the call. Costolo responded by saying that changes already under way should get Twitter to that point much sooner, although he declined to set a deadline.

Twitter is up against more than just math. It also faces organizational complacency. The service has long been a darling of Silicon Valley as well as certain global pundits enthralled with the role Twitter played in various protest movements. The company is so iconic that, for years, it didn't have to worry about recruiting new users, just how to handle them once they arrived. "Until last year, our growth had been viral," Costolo said. "Growth was something that happened to us."

Now, Twitter must pivot from being a subject of interest to becoming a generator of interest. And no one knows that better than Costolo and the other Twitter employees who are watching their locked-up stock options plummet in value. Yes, Twitter stock is still at more than double its initial offering price. But it will only take a few more drops like today's to wipe out those gains.

And those employees aren't the only ones watching. So are others across Silicon Valley.

Written by Ryan Tate at 

More from Wired:

The Motley Fool recommends Facebook and Twitter. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Twitter, Inc. Stock Quote
Twitter, Inc.
$42.94 (0.99%) $0.42
Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$170.25 (1.88%) $3.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.