Twitter growth slows, makes a loss and shares tumble

Twitter growth slowed down to 3.8% in Q4 2013, compared to 10% growth in Q1 2013, the company made a net loss of $645 million in 2013.

On the news shares fell 21% to $52.40 yesterday, wiping out nearly $9.8 billion in market value.

Analysts had expected the company to make a loss. However, revenues grew 110% in 2013 to $665 million.

In the last quarter of 2013, Twitter, the micro-blogging company, averaged 241 million monthly active users (MAUs), an increase of just 9 million, which was much smaller than the market had been expecting.

Twitter only has 54 million MAUs in the US, and added a mere one million in Q4 2013 from Q3 2013. This is an indication that in the US, at least, it has become a mature product.

Facebook, on the other hand, ended Q4 2013 with 1.23 billion MAUs, 757 million of which are DAUs (daily active users). Twitter’s DAU numbers are proportionally much lower than Facebook’s.

Twitter growth report triggers concerns about its platform

When Twitter was floated in the New York Stock Exchange last November, investors saw the company as a mainstream platform. This latest report will make many people wonder whether the company is losing that position.

The BBC quoted Stuart Miles from technology website, who said:

“Apart from professionals like journalists, the typical user gets on to Twitter, messes around, doesn’t quite get it, leaves it a while and then comes back a year or two later. But that translates into very slow growth.”

“The classic example of this is Satya Nadella, the new head of Microsoft. He used Twitter in 2010, then gave up for four years, and now is using it because he thinks it’s the way to communicate now he’s the chief executive.”

How do experts interpret latest Twitter growth?

According to investors, Twitter is either the owner of a niche product that has been grossly overvalued and will gradually fade, or is undervalued and will grow in the mobile telephone market.

Most brokers today believe Twitter has a future in the mobile market and will give Facebook a run for its money.

Reuters quotes Deutsche Bank and UBS as examples of two points of view regarding the latest Twitter growth figures. Deutsche Bank says “We remain firmly in the latter camp,” (Twitter will give Facebook a run for its money). It was impressed by Twitter’s improving monetization and expects better user growth this year.

UBS, according to Reuters, issued a “sell” recommendation, it was one of eight or more brokerage firms to reduce their target prices or recommendations on Twitter shares.

Twitter CEO, Dick Costolo, said on a conference call that the company will see sharp user growth in 2014. He added that the company is taking steps to address user growth. Twitter will have a new mobile sign-up process which allows people to see which of their friends are already on Twitter, it will also have integration of richer media, making it a better public and private conversation tool, he added.