Can Twitter Recover From Slow User Growth?


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twitter user growthTypically, the proper indicator for the healthy future of a company is to monitor its revenue growth. In a traditional capitalist economy, this is the most important metric. Basically, the metric ensures that the company gets bigger and more successful, which furthers the demand for the company (and the product or service it provides) which also cultivates more jobs and healthy competition. It also encourages innovation.

In the sharing economy, this has also been true. As social networking became more popular (with Friendster and Myspace) Facebook found a niche that catapulted it to the top. Other platforms followed and now we have not only massive interfaces like Facebook, but also the micro-blogging platform known as Twitter and the photo-blogging platform known as Instagram (among many others).

But in the sharing economy, growth metrics could be changing. For Twitter, at least, it appears that change might be now as Wall Street seems to be more focused on the platforms user growth instead of revenue growth. Over the last year, the company has been confronted by the idea that they may have hit market saturation, encountering slowing growth rates that indicate, perhaps, membership has peaked.

And in a time when traditional businesses are suffering from a tough economy, social media sites continue to flourish. Even with slowing user growth, for example, Twitter continues to post year-over-year sales growth of more than 50 percent.

That should be astounding, but investors seem to be blind to this. Twitter is also much smaller than Facebook—with an active user base of 320 million (last quarter) compared to Facebook’s 1.59 billion—and is even smaller than the job-searching network LinkedIn (at 414 million active users). LinkedIn stock plunged 44 percent on Friday which cost $11 billion in value (and that is more than the whole of Twitter’s market cap).

Ok, so what does all this mean?

It means that regardless of the direction Twitter (and its users) want to go in, they may have to look for new streams of revenue. In the social media world this could mean changes to the interface to attract new users. It could also mean increasing advertising strategies. Either way, the reluctance of investors may force Twitter to make the kinds of changes that devoted fans will not appreciate, which could cause them to abandon the platform altogether.

And that could mark the beginning of the end.

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