Twitter's user growth is falling and it can't get up
New eMarketer report shows growth slowing to 10% by 2018, with most new users coming from Asia
Twitter, which had its IPO back in November, has released only two quarterly earnings reports in its short life as a public company. Both times the company's stock got absolutely slammed over growth that was slowing and not meeting expectations.
As much as CEO Dick Costolo wants to paint it as something temporary, slowing user numbers are a big, big problem for the company, which has seen its stock price get decimated since February.
Sadly it does not seem to be one that is going to go away any time soon as a new report out from eMarketer on Tuesday shows Twitter's user growth slowing to a crawl over the next four to five years.
This year, Twitter is expected to see its user numbers grow by 24.4%, down from 30.4% last year. And it only gets worse from there: while the company will have roughly 400 million users by 2018, by that point the company's growth will have slowed to a mere 10.7%.
That means that, including this year, Twitter has five years left of double digit before it really started to peter out. In other words, it is highly unlikely, if not impossible, for the company will ever be able to match Facebook's 1.25 billion active users. In fact, it will be lucky to get half of that.
There is even worse news for Twitter: eMarketer all but says that the company over-inflated its monthly active users (MAUs) numbers in its last earnings report. According to Twitter, they grew 25% year to year, to reach 255 million. Not so, says eMarketer.
"eMarketer's estimates identify how many individual users log in or access Twitter each month within the calendar year across the world," eMarketer wrote. "Our figures differ from Twitter's reported figure of 255 million monthly active users in 2013 because we rely heavily on consumer survey data to weed out business accounts, multiple accounts for individual users, and other sources of potential double-counting."
VatorNews reached out to Twitter, but the company had no comment on the report.
Despite the slowdown, Twitter is obviously going to keep growing every year. That is the other interesting aspect of the report: where exactly are those new users are going to come from?
Certainly not the United States, where growth already slipped from 43.4% in 2012 to 19.4% in 2013. By 2018, Twitter's U.S. growth will be down to a mere 6.4%. It will will still remain its largest user base, with 20%, but the market is just about saturated at this point.
Instead growth will be coming from the Asia-Pacific region, specially in countries like India and Indonesia, which will both be in the top five Twitter populations by this year. Indonesia has seen growth rates of 76.8% and 76.3% over the last two years, and will grow another 61.7% this year to get to 15.3 million users.
India's growth has been slightly lower, with 75% and 68.8% the last two years, and another 56.9% projected this year, for a total of 18.1 million users.
In all, eMarketer expects the Asia-Pacific region to account for 40% of Twitter's global user share by 2018, more than double what it will be in North America. Right now it is still the largest in the world, but by a much smaller margin.
That's all well and good, but it will likely do nothing to encourage investors who have already made their dissatisfaction about Twitter's direction known: On February 5th, the day that Twitter revealed its first earnings report, the company's stock ended the day at $65.97. The very next day it was down to $50.03.
Twitter shares crept up ever so slightly on Tuesday, ending regular trading up 0.03%, or $0.01, to $30.51 a share. But shares are now down around 54% from what they were a few months ago.
(Image source: flickriver.com)
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What is Twitter?
Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from Twitter.com, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests.
Where did the idea for Twitter come from?
Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.
How is Twitter built?
Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes.
We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.
How do you make money from Twitter?
There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.
In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within Twitter.com, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet.
At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.
Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on Virginamerica.com that were only accessible through the link in the @earlybird tweet.
What's next for Twitter?
We continue to focus on building a product that provides value for users.
We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.
Dick Costolo
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