Twitter Needs to Fix Its Growth Problem
Twitter says it’s the global town square. For that to be true, it needs a whole lot more people inside of it.
The company reported earnings as a public company for the first time on Tuesday. And while the ad business looks to be humming along fine, the numbers underscored an ongoing issue: They need to add more users. Twitter only signed up nine million more people in the last three months of 2013.
Twitter shares dropped more than 20 percent this morning on these concerns.
As we’ve said for a while, this is a big deal for the company. CEO Dick Costolo’s goal is to “reach every person on the planet,” not to be a niche service. The company has already set the stakes for itself, and they’re sky high.
Twitter does have a fast-growing ad business going for it thus far. While revenue was virtually nothing in 2011 and 2012, Twitter expects to do a billion-dollar 2014. That proves that Twitter isn’t just selling ads — it’s selling them fast.
Herein lies the problem: Twitter’s entire pitch to marketers is that it’s a new type of advertising that really connects with the mainstream. Real-time, relevant promoted tweets, delivered right when a consumer needs to see them the most, the spiel goes, make for the most effective sort of ad.
The issue with that is this: Advertisers are buying space based on the pitch that this is a mainstream product, and that those ads will reach the masses. And at 241 million worldwide active users, Twitter has hardly gone mainstream. Facebook, by contrast, serves about 1.2 billion users.
It’s the same deal with Twitter’s social TV pitch. Twitter says it’s the second-screen soundtrack, the place where users chatter about what they’re watching, and where brands need to be to connect with their audience. But as the numbers note, that audience isn’t as big as Twitter wants it to be.
Can Twitter make the product more accessible to normal people? Costolo says it can, via an “experimental” testing framework for rolling out new products. In other words, a data-driven Twitter will tweak things to figure out what people like the most.
For now, as my colleague Peter Kafka has said, advertisers are fine with toeing the waters in social. Advertisers will drop some marginal amount of experimental dollars on social ad spending. But if Twitter doesn’t fix its user growth problem fast, marketers may start to take their money elsewhere. (My guess? To Facebook, which actually is a mainstream service.)