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It Turns Out Twitter’s Not for Everyone

Twitter’s first earnings report shows that growth is slowing. Could it be a sign it’s meant to be a niche network?
February 6, 2014

After Twitter’s first quarterly report as a publicly traded company indicated slowing growth, the company is facing some skepticism about its prospects as a mainstream social network.

Late Wednesday, the company issued its fourth-quarter results, showing that the number of active monthly users totaled 241 million at the end of December—a jump of 30 percent year over year, but up just 4 percent from the quarter that ended in September and a smaller increase than it showed in that period. Meanwhile, the number of times users looked at their feeds of tweets on the site climbed 26 percent, to 148 billion, when compared with the same quarter a year earlier, but fell 7 percent from the previous quarter.

Several analysts issued concerned reactions to the report. Sterne Agee analyst Arvind Bhatia, for example, said in a client note that the results “are likely to raise questions on how mainstream the Twitter platform can be in the long term.” Investors drove the stock down 24 percent, or $15.94, in trading to close the day at $50.03 (the stock has traded as high as $74.73 since the company went public in November).

The issue, in part, seems to be that for Twitter to keep growing, it needs to figure out how to appeal to more types of users and make it easier for them to use the service. It is popular with a number of groups, such as journalists, celebrities (and their followers), and news junkies. But since it’s not as clearly focused as Facebook is on connecting with friends and family, it may be harder for it to gain such broad appeal.

During a call with financial analysts to discuss the quarterly results, CEO Dick Costolo said Twitter is trying to grow by making content—tweets, photos, and videos—the main focus, rather than the “scaffolding of the language of Twitter.” Recent changes to make this happen include featuring photos and videos right on users’ main Twitter feeds, and making a direct-messaging feature more prominent in some of Twitter’s mobile apps.

The changes appear to be helping current users engage more with the service, at least. Since the new features were rolled out during the fourth quarter, users are increasingly “favoriting” and retweeting others’ tweets, Costolo said.

But there’s clearly more work to be done if the company wants to remain what Costolo calls “the best product in the world for real-time, in-the-moment interaction, conversation, and discovery.” Twitter is working on a number of things, Costolo said, as he mentioned efforts to make it easier to sign up for the service and bring back currently inactive users.

Colin Sebastian, an analyst at Robert W. Baird, thinks one way Twitter could get the average user more interested is through more real-time search features that make it easy to find, say, updates on the latest food or entertainment in San Francisco. That would make sense, considering that searches on the site more than doubled year over year in the October-December period, according to Costolo.

Sebastian suggests it could benefit from taking a look at how Facebook heavily curates users’ news feeds on its site. Doing something similar on Twitter could help make the service less overwhelming for new users, he says.

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