Twitter disappoints investors as user growth hits wall

Twitter Inc reported its first quarter with no growth in users since it went public, stoking fresh concerns on how long it will take for the company to reverse the trend. The stalled growth in the average number of active monthly users came despite a series of changes to make Twitter easier and more engaging.

While the company said it is taking additional steps — including launching changes to the timeline of tweets — it told investors not to expect immediate results. “Our work will take time” before the company can create long-term shareholder value, said Executive Chairman Omid Kordestani on a call with analysts.

The company’s share price has declined more than 50 per cent since Jack Dorsey, one of the founders, returned to Twitter in July.

“The platform’s overall growth is under whelming,” said Randy Guisto, Vice President and lead analyst with Outsell, a research and advisory firm. “They have plateaued and can’t look to India or China as those markets are dominated by messaging apps like WhatsApp, as well as Apple and Google’s proprietary, pre-installed platforms.”
The microblogging service forecast first-quarter revenue of between $595 million and $610 million, well below the average analyst estimate of $627.1 million, according to Thomson Reuters I/B/E/S.

Twitter said in a filing it had 320 million average monthly active users in the quarter, unchanged from the third quarter and lagging a forecast for 323 million users from RBC Capital Markets. But Dorsey said that monthly active usage in January “has bounced back to Q3 levels.” Facing slowing user growth, Twitter has been experimenting under Dorsey, who became interim CEO in July and then CEO in October, to make its website more engaging.

The change to the timeline made last week is the most dramatic since his return. Twitter is altering the way it displays tweets on its home page —customizing them to individual users. The change is designed to appeal to advertisers by giving more prominence to tweets that advertisers pay for.

It is not clear whether the new timeline will work. Guisto said that “so far beta testing comments are not favorable. So far, we don’t see these changes attracting new users.” Van Wiemer (@shidolido) tweeted: “Twitter strongest trait was getting news up-to-date. Popular tweets on timeline are of no use. Users are leaving, soon me. #RIPTwitter.”

And some analysts have said the earlier efforts, including Moments, which showcases Twitter’s best tweets and content, have not taken off.

“It’s still unclear how Twitter will monetize Moments. Most likely it will be some form of sponsored or native ads wrapped around individual moments,” said Guisto. An exodus of some top executives last month added to concerns about its ability to reignite growth. 

The departures came as investors have already raised concerns about Dorsey’s dual role as CEO of mobile payments company Square Inc. — Reuters

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