Twitter user growth has dropped: what does it mean?
Mar 12, 2014
Twitter's growth slowdown is not a concern; its mature user base and revenue growth indicate a positive future.
Twitter's growth is slowing. This phrase may seem contradictory, given the high expectations of a volatile capitalist market. However, the reduction in Twitter's pace is not a bad sign for its users and should not be for investors or the market as a whole. The slowdown is more related to the maturity of the platform than to its weakening (which, from an operational point of view, is very solid). Twitter's balance is more about cruising speed than engine collapse. And this is not the only positive point in the scenario.
In economics, double-digit or higher growth rates usually indicate two things: either it's a localized bubble or the growth is because the starting point was zero (for example, countries whose economies are devastated by civil war, once the war is over, show growth of 20%, 30% or more - but they are still in misery). Companies that grow very quickly, outside the technology sector, also tend to have problems due to restrictions that are not always manageable - logistics, supply of raw materials, hiring of skilled labor, etc.
In the realm of successful social networks, epidemic-like growth patterns are common. This is because of the ease that companies have in making these exponential scale expansions feasible. Because of this, business plans for technology companies often suggest surreal values for the future. Unfortunately, they also tend to be immense sand castles.
Twitter doesn't seem to fit this case at all. The social network did not have growth similar to that of Facebook. Between 2006 and 2009, the curve was quite conservative, increasing considerably in the middle of 2009 and then from 2012 onwards. Last year's IPO was probably delayed taking into account that this expansion in the user base could boost the company's value in a matter of months.
However, as is clear in the graph below, the pace of growth has been slowing down (note - Twitter is still acquiring 135,000 users per day - it just slowed down its advance). From the perspective of a market that assumes it is possible to grow infinitely, perhaps Twitter looks a little faded. But there are already almost 700 million accounts, 200 million of them logging in at least once a month, generating almost 10,000 tweets per second.
Today, Twitter is the most diffuse digital media platform in the world, losing in the social environment only to the mammoth Facebook. But Twitter has two advantages that are absolutely decisive in its positioning. First, it had a much less aggressive IPO and has a more reasonable need to seek new revenue. Second, despite a smaller user base, it has an average profile that is more mature, more literate, and more capable of producing content that generates interest to attract an audience from other media in addition to positioning itself as an intermediate media, i.e., that can be used as a tool by other media companies in the generation of traffic and revenue. A great example is the *feature* that Twitter introduced allowing the inclusion of videos within tweets, already loading ads (native or not).
A problem that was the original drama of Twitter, revenue generation, seems more than overcome. In the last four years, the company multiplied its revenue by 10 without having sacrificed the user experience or having obscurity about how the content circulating in its 60 million daily tweets replicates for audiences (a problem that Facebook is increasingly facing).
The deceleration of Twitter's growth is, from the point of view of the product and the experience, an expected and even desired event. There was a change in profile. Twitter is no longer a tool dependent on early adopters, although few of them have abandoned their accounts. EMarketer's calculation is that by 2016, a quarter of the world's Internet users between 12 and 44 years old will have their account on the microblog and will access it at least once a month. This decrease in growth should not even disappear - Twitter's base is expected to stop growing in two digits next year and go just over 5% in 2018.
The more mature user base is, in fact, a big attraction that the company has to sell to its advertisers because it is a market with greater purchasing power and generates more engagement, but is not alienating younger audiences with changes in the experience (ranging from the amount and aggressiveness of ads to the possible control of the public that each user has). The user base tends to mature and continue on the tool because of the way users interact with each other.
In the long run, if the company is firm enough to prevent shareholders' thirst for immediate profits from compromising the experience given to users, technological developments, the maturation of its user base, and the creation of new instruments within the tool itself point to a safe future. Even in a niche whose development speed is frenetic and the evolution of products is a shot in the dark, the little blue bird seems to be flying in a calm sky.