Twitter’s growth stalls: can it ever go mainstream?

Fewer people are joining Twitter than last year and they’re using the site less often, according to its latest results.

Twitter is still adding users, up to 255 million from 241 million at the end of last year, but its growth rate is slowing, at 5.8% over the last quarter versus 10% seen at the beginning of 2013.

Twitter also admitted its users 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 the scale of Facebook. 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.

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

But cracks began to show in February, when Twitter disclosed that user growth had fallen to its lowest rate in years, prompting CEO Dick Costolo to promise tweaks to Twitter’s design.

Twitter’s stock fell more than 10% to $38.05, below its post-initial public offering low of $38.80 on 25 November.

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.”

On a conference call, Costolo repeatedly told Wall Street analysts that tweets from the Academy Awards show in March have been viewed more than three 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.”

Better targeting

Although overshadowed by the usage figures, Twitter posted better-than-expected revenues of $250 million, but the company said its net loss in absolute terms widened nearly five-fold to $132 million from $27 million a year ago.

The company, which has been steadily refining its targeting capabilities, also showed signs it is better able to present ads based on what it thinks each user would be interested in, and is thus able to command higher ad prices.

Twitter said its advertising revenue per thousand timeline views, which measures the effectiveness of its ads, nearly doubled to $1.44 over the past year.