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Twitter Suffering From Growing Pains (and Facebook Comparisons)

By Matt Kapko, CIO
February 18, 2014 04:06 PM ET

CIO - Twitter's honeymoon as a publicly traded company could be coming to an end. With growth stalling and timeline views on the decline for the first time ever, Twitter finds itself at a crossroads.

While its quest for more ad revenue continues unabated, the company faces even greater pressure to attract new users and dramatically increase engagement on the platform.

"Twitter has seen its sequential MAU growth rate decelerate sharply after hitting 50 million, raising concerns that its quirkier nature might cap its potential audience in the U.S. at a ceiling well below that of Facebook." -- Seth Shafer, SNL Kagan

"We as a company aren't going to be satisfied -- I am not going to be satisfied -- until we reach every connected person on the planet, period," CEO Dick Costolo said at last week's Goldman Sachs Technology and Internet Conference.

[Related: Dick Costolo prescribes a fix for Twitter's growth pains]

The challenge ahead for Twitter coupled with Costolo's grandiose goal puts the company in a predicament unlike any it has confronted before. It also fans the unfortunate, yet inevitable comparison to Facebook. While Twitter ended 2013 with an average monthly active user (MAU) base of 241 million, Facebook surpassed 1.23 billion. For every user that engages on Twitter, at least five are actively using Facebook.

"Twitter needs to do something to grow to the size of Facebook but the jury is still out if there's a clear path for Twitter or any other company to do that, or if Facebook is a once-in-a-lifetime anomaly that was in the right place at the right time," says Seth Shafer, associate analyst at SNL Kagan.

Costolo hasn't helped matters by failing to meet previous internal estimates for growth either. Early last year the executive reportedly told employees that he expected to reach 400 million MAUs by the end of 2013. Failing to double its active user base last year, Twitter reported a 30 percent increase in its stead.

"Twitter's overall MAU growth is still pretty healthy, but it's all coming internationally where users monetize at a much lower rate. U.S. growth has slowed significantly at about 50 million MAUs," says Shafer.

[Related: 14 Ways to Use Twitter to Market Your Business]

Facebook blew past 50 million U.S. MAUs without blinking and moreover, its sequential increases didn't dip into the single digits until it surpassed about 120 million users in the U.S., according to SNL Kagan data.

"Twitter, however, has seen its own sequential MAU growth rate decelerate sharply after hitting 50 million MAUs, raising concerns that its quirkier nature and niche focus might cap its potential audience in the United States at a ceiling well below that of Facebook," Shafer adds.

Twitter's 'Road Map' for Growth

Nonetheless, Twitter's lead executive says he is optimistic about rising user growth. While the company is being careful not to make specific promises or announcements about how it will improve on these points, Costolo has frequently referenced a road map of late that lays out a strategy for achieving better growth over the course of the year.

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