Twitter’s Slowing User Growth Mirrors Facebook’s Course

By Brian Womack RelatedTwitter CEO Costolo Says Adding Users Is First PrioritTwitter Inc. (TWTR)’s user growth is slowing at about the same pace as Facebook Inc. (FB)’s did when it was just as old, according to data compiled by Bloomberg.The shares of Twitter fell almost 10 percent yesterday on investor concerns that it’s too early for the company to face a deceleration. Twitter earlier this week reported its monthly active user base grew by 23 percent to 284 million in the third quarter. At about the same point in time -- six years after their respective debuts -- Facebook showed a similar trend with growth of 26 percent, according to data compiled by Bloomberg.

Facebook’s shares fell more than 50 percent in the months following its 2012 market debut, as investors focused on its ability to make money from users on mobile devices. The stock is now more than double the initial public offering price. Twitter is faring better, up 68 percent since it listed a year ago. Even though Twitter trails Facebook by more than 1 billion members, it doesn’t need to be as big as Facebook to deliver investment returns, said Neil Doshi, an analyst at CRT Capital Group LLC.
“It’s more of a social-utility tool versus a friends and family-gathering network,” Doshi said.
Facebook, which yesterday reported that its user base expanded 14 percent to 1.35 billion, has a market capitalization more than seven times larger than its
smaller rival. Twitter’s shares declined 9.8 percent to $43.78 at the close in New York following the earnings report. Facebook closed at $80.77.

Twitter traded at the equivalent of $43.08 as of 9:26 a.m. in Frankfurt today.
Jim Prosser, a spokesman for San Francisco-based Twitter, declined to comment. Representatives from Menlo Park, California-based Facebook didn’t return requests for comment.

Slow Growth

Still, Chief Executive Officer Dick Costolo is suggesting that Twitter’s user base could be much larger.
“We strongly believe, if we execute against our plans and our strategy, that Twitter should be valuable and vital to every person on the planet,” Costolo said during an interview yesterday on Bloomberg Television. “So we absolutely care about all sorts of demographics.”
Costolo said he’s focused on getting more users to log onto the service by making it easier for people to sign up and find content they might enjoy. Aside from its monthly active user base, “hundreds of millions” of Web surfers don’t show up on Twitter’s traffic data because they don’t log in, he said.

Photographer: Tomohiro Ohsumi/Bloomberg

Dick Costolo, Chief Executive Officer of Twitter Inc., said he’s focused on getting... Read More

The slowdown in user growth is normal, according to Martin Pyykkonen, an analyst at Rosenblatt Securities Inc. After more than doubling each quarter until early 2012, the growth rate has consistently dropped, and was less than 30 percent for the past three quarters. Facebook’s growth rate hasn’t climbed above 20 percent since mid-2013.
“I’m much more focused on usage than users,” Pyykkonen said. “It’s natural for the user growth to decelerate.”