Shares in Twitter fall 10% after slowdown in user growth

Twitter reported lacklustre user and usage growth for the second consecutive quarter last night, deepening investor concerns about its struggle to gain a mass following.

Twitter’s stock fell more than 10 per cent after hours to $38.05, below its post-initial public offering low of $38.80 on November 25th last. Perhaps most worrying, the San Francisco-based company said its 255 million monthly users, on average, appeared to check the service less frequently than a year ago.

The results revealed slowing momentum at a company that exuberant investors just six months ago had argued could one day match Facebook’s scale.

At its peak in December, Twitter enjoyed a $46 billion market capitalisation on just $665 million of revenue in 2013, making it one of the world's priciest stocks. But cracks began to show in February, when Twitter disclosed that user growth had fallen to its lowest rate in years, prompting chief executive Dick Costolo to promise tweaks to Twitter's design.

Expectations of Twitter growing into a communications utility that Facebook has become are "unrealistic and divorced from reality," said Brian Wieser, an analyst at Pivotal Research.

“Twitter is and will remain a niche medium, and a very powerful one.”

Yesterday, Mr Costolo repeatedly told Wall Street analysts that tweets from the Academy Awards show in March have been viewed more than 3 billion times online and mentioned countless times more on radio and television shows.

“Twitter - the platform - we believe is already incredibly mainstream,” Costolo said. The challenge, he added, was to convince the world to see the “value of the logged-in experience.”

Reuters