With the United States political class glued to their Twitter feeds — or just one Twitter feed in particular — it should be a great time for the social network in the U.S. of A.
Overall, Twitter just isn't growing as much as investors would like to see. That's the main takeaway from the social network's latest quarterly earnings report Thursday, in which the company reported the same number of users worldwide as it had three months ago.
Twitter's stock closed down 14 percent at $16.84 a share.
Twitter executives, including chief executive Jack Dorsey and chief financial officer Anthony Noto, brushed off concern about user growth during an earnings call. The two executives said that the firm is most interested in its number of daily active users, an emphasis the company has made in its past couple of earnings reports, but which deviates from the monthly tallies it and most other social networks have traditionally used to look at users. Twitter said that daily active users offer a more detailed picture of how people use its site. Looking at that metric, Twitter grew 9 percent in the United States, Noto said, adding that the company continues to see “stable growth rates.”
Although the company didn't offer hard numbers, Twitter reported that its daily active user growth overall was up 12 percent over the same period last year, but down 14 percent from the previous quarter. The company suggested that the flat growth was due to “seasonal” effects, but it didn't elaborate on what that meant.
"Taken at face value, we’re not overly concerned by this trend, as we have always believed Twitter to be a niche platform," said Pivotal Research analyst Brian Wieser in a note published after the earnings report. "We consider its user base to have plateaued," he added.
Twitter has touted growth as an important factor for the firm in the past, and continues to do so. The company has long associated user growth with a path to revenue growth, particularly as it tries to gain its footing in the digital advertising space. User growth has never been as fast as analysts would have liked, and it slowed significantly in the past year or so. That has drawn criticism from analysts who say that Twitter isn't doing enough to draw and retain users outside its most dedicated audiences.
Analysts had also worried about stagnating user growth for Facebook, but the network still managed to grow its daily active users to 1.32 billion — up from 1.28 billion the previous quarter.
There were some bright spots, however, in Twitter's earnings. The company reported stronger-than-expected revenue of $574 million. Analysts had projected $568 million. Earnings per share also exceeded expectations, coming in at 12 cents per share vs. a projected 5 cents per share.
Advertising revenue, however, continued to fall, down 8 percent from the same period last year to $489 million. That's despite engagement with ads — the number of times people view or click on them — growing 95 percent.
But analysts note that users will likely see Twitter experiment even more with video ads and other formats in pursuit of one that can take hold on the network.