Commentary

Another Tough Year For Twitter

2016 was a year of big wins for social media broadly speaking, including a victory lap for LinkedIn following its $26 billion sale to Microsoft, stratospheric growth for Snapchat, and steady progress for Facebook as it inserts its tentacles into every facet of human existence. But there was a big exception: Twitter.

Twitter has had a rough couple of years, but 2016 was arguably the worst. In social media’s foundational era the single most important metric of success continues to be user growth, and here Twitter has fallen off the wagon. The number of active monthly users has plateaued, scarcely increasing from an average of 302 million in the first quarter of 2015 to 317 million in the third quarter of 2016.

That’s an increase of just 5% over a period of a year and a half. For the sake of comparison, Facebook grew its monthly active user base from an average 1.44 billion in the first quarter of 2015 to 1.79 billion in the third quarter of this year, for a 24% increase over the same period.

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Twitter’s revenue growth has also lagged, though not quite so noticeably: total revenues came to $1.81 billion in the first three quarters of 2016, up 20% from $1.51 billion during the same period in 2015. While that would be a banner year for most traditional media companies, in the rarefied social media universe it is distinctly mediocre: using Facebook as a benchmark again, total revenues soared 56% from $12.1 billion to $18.83 billion in this timeframe.

Without spectacular revenue growth, of course, it’s pretty hard to turn a profit. On that note Twitter continued to post net losses this year, totaling $290 million in the first three quarters, down somewhat from $431 million in 2015.

And Twitter’s stock price has told the tale: shares which were trading at $23.14 at the end of last year are now hovering around $16.31. A temporary bump from September to November, when prices spiked amid rumors of an acquisition by Salesforce or another buyer, only served to illustrate the underlying weakness when all the bids were eventually withdrawn, sending the stock price back into the toilet (less than a quarter of its historic peak of $69 in January 2014, shortly after its IPO).

Can Twitter return to the years of double-digit user growth, juice its ad revenues, and restore its shine on Wall Street?  A number of big moves earlier this year, including a major push into live-streaming video through content deals with the NFL and other partners, hold promise but have yet to translate into substantial new user additions. Meanwhile the company is still grappling with several negative trends, including a wave of online harassment and bullying.

In several year-end tweets, founder and CEO Jack Dorsey solicited ideas from users for new or revised features they’d like to see, but these have mostly been cosmetic or procedural – for example allowing users to edit tweets within a certain set period of time. A good start, perhaps, but hardly the sort of thing to bring the masses flooding in.
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