Twitter's value drops by fifth after user growth stutters

Twitter: stock price drops 18%
Twitter: stock price drops 18%

Twitter's stock price has dropped by 18% in trading following the release of its fourth quarter results, as its average monthly active users increased by just 3.8% on the previous quarter.

The social network saw its users increase by nine million to 241 million from the previous quarter, while the year-on-year increase was 30%, figures that disappointed analysts and sent stocks tumbling.

Twitter’s revenues for the fourth quarter increased 116% year on year to $243m, but overall the company had an overall net loss of $645m.

Dick Costolo, chief executive at Twitter, said: "Twitter finished a great year with our strongest financial quarter to date.

"We are the only platform that is public, real-time, conversational and widely distributed and I'm excited by the number of initiatives we have underway to further build upon the Twitter experience."

Analysts were less convinced by Twitter’s performance and unfavourably compared its usage to that of Facebook, which with 1.23 billion monthly users is five times as big. 

Sotirios Paroutis, associate professor of strategic management at Warwick Business School, said: "Inevitably, the market is evaluating Twitter not in isolation but in relation to Facebook, which posted record quarterly results a few days ago.

"In other words, while Twitter is doing well, it needs to do better – and faster – to keep its advertisers, users and investors interested – or as its Dick Costolo admitted during the call to investors 'we simply need to make Twitter a better Twitter'."

Leila Thabet, the US managing director at We Are Social, believes Twitter’s financial success will be determined by how it leverages its dominant position when it comes to using Twitter as a "second screen" for broadcast entertainment and events.

She said: "But despite owning the ‘second screen’ space, Twitter hasn’t yet been able to monetise its products to anywhere near the extent of Google and Facebook.

"At issue is Twitter’s lack of an algorithm to determine relevant content, which means it has to show all tweets a person publishes, to all of their followers. This creates a crowded and time-sensitive newsfeed, and promoted tweets can add to the confusion."

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