Twitter's growth slump: First-quarter numbers tick up, but not enough

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Twitter is growing its user base and making money, but the glacial pace of that growth is a stark contrast to the quick-moving, real-time nature of the network—and Wall Street is not happy about it.

Twitter added 14 million users in the first quarter of 2014—only 3 million of them in the U.S.—which is higher than the 9 million users the company added last quarter, but not by much. Twitter now has 57 million American users and 198 million international monthly active users. Though user growth is not where it should be, Twitter is making money at a steady clip. The company pulled in $250 million, $226 million of which came from advertising—and 80 percent of ad revenue came from mobile.

But what good are ads if the amount of eyeballs on them is falling off? Facebook’s newly acquired WhatsApp messaging app is much younger than Twitter and recently hit 500 million active users. It’s unclear if Twitter, now an 8-year-old social network, really can jumpstart its growth. CEO Dick Costolo said during a Tuesday earnings call with analysts that the company is rolling out several initiatives this year designed to draw new users and reengage old ones.

twitter redesign

Twitter recently redesigned profiles to make the network more appealing to new users.

The first major change was a Web profile redesign that makes the network a little friendlier (and a little more similar to Facebook). The company has also experimented with push notifications and account recommendations to bring users back into the fold.

“We believe it will be the combination of changes we make over the course of the year that will result in a change in the growth of the platform, and we’re confident in that change based on the results we’ve seen,” Costolo said.

Upcoming changes included new ways to organize content and “innovating on direct messages,” Costolo said, though he offered no further hints as to what either of those new features will look like.

Keep ’em coming back for more

So Twitter isn’t adding all that many new users, but it does have a core group of fans who use the network throughout the day to stay on top of news and chat with their friends. How does it keep those users satisfied?

At first glance, it doesn’t look like Twitter is doing such a great job of engaging old users—Timeline views, which indicate how often people are checking Twitter, increased just 6 percent over the fourth quarter and 15 percent year-over-year. But Costolo attributed most of the flattening to the introduction of threaded conversations in the latter half of last year.

twitter install

Mobile advertising accounted for 80 percent of Twitter’s ad revenue in the first quarter.

“When you came to Twitter [before threaded conversations] and you wanted to follow a conversation, you had to hop around back and forth between Timelines, and that will drive up Timeline views,” Costolo said.

Costolo is expecting those percentages to grow, along with percentages of favorites and retweets, which grew 26 percent in the first quarter.

“The areas of focus for us have been increasing the value of the Timeline,” Costolo said. “Our net new users are just engaged as our existing users. We see that impact flow through to monetization. The engagement rates we’re seeing are fantastic.”

Costolo is happy, but Wall Street isn’t. Twitter’s stock plunged to new lows after reporting its first-quarter numbers.

A bright spot: MoPub, a mobile ad network that lets brands buy ads on other apps that aren’t related to Twitter, is now part of the Twitter fold and reaches 1 billion iOS and Android apps. Even if Twitter struggles to grow, MoPub will provide a robust ad exchange to contribute to its parent company’s bottom line—unless Facebook launches its own ad network, as it’s expected to Wednesday at its F8 developers conference.

This story, "Twitter's growth slump: First-quarter numbers tick up, but not enough" was originally published by TechHive.

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