Squeeze the bird

Twitter's slow user growth is an ill canary

Twitter's slow user growth is a sickening canary in the blog mine. Sure, first-quarter revenue doubled. But Twitter is finding it increasingly difficult to sign up new users or tempt existing ones to tweet more. That's a bad combination for the microblogging service that's losing money yet valued at 18 times projected 2014 sales.

The company had 255 million average monthly active users during the first three months of the year, 25 per cent higher than 12 months ago. That may appear healthy on the surface but in 2013's first quarter that figure was almost twice as high. The deceleration is alarming considering Twitter's size. When Facebook had this many users in 2009, it was growing its user base six times as fast. Mark Zuckerberg's social network also had a net margin of 29 per cent for that year. Twitter, by contrast, lost $132 million in the most recent quarter.

Perhaps just as alarming is user engagement. The company's favourite metric for measuring this is timeline views, or the number of times people visit Twitter, refresh their screens or look at search results. The figure was 157 billion for the quarter - more than last quarter, but slightly below the mark set in the third quarter. More telling is the fact that timeline views per average user have fallen eight per cent over the past year.

There are still avenues of opportunity. Twitter only makes about $4 per customer from advertising. Facebook manages more than twice as much. Closing this gap somewhat might be sufficient to drag the company to a small profit. Of course, placing more ads might slow user growth even further if people find the placements annoying.

Twitter's $24-billion market valuation, though, is a bet on rapid growth and a geyser of profits - not squeezing a bit more revenue out of existing users.