Twitter Inc. (NYSE:TWTR)‘s biggest problem since going public has had to do with a slow growth in active users compared to its fierce rival, Facebook Inc. (NASDAQ:FB). Stifel Managing Director, Scott Devitt, during an interview on CNBC reiterated that Twitter will have to address declining active users if it is to survive competition in the space.
“Users growth is slowing towards 20%, engagement has been declining for four consecutive quarters and by all measures of monetization the company over monetizes relative to Facebook Inc. (NASDAQ:FB) by about four times,” said Mr. Devitt.
Facebook Inc. (NASDAQ:FB) and Google Inc. (NASDAQ:GOOGL) continue to generate more revenue from advertising, partly because of their high user base when compared to Twitter Inc. (NYSE:TWTR)’s. Twitter is losing a great deal from advertising mostly because advertisers are choosing to air the ads on platforms that are sure to offer them a big exposure to customers perfect for targeted advertising.
A number of investors are pointing fingers on CEO, Dick Costolo, on the underperformance of the company one year after the IPO. The CEO’s management style of hiring and firing top managers has also been cited as a probable reason behind recent underperformance. A number of people argue that massive reorganization only goes’ to affect the morale of junior staff as well as affecting the development stage especially on product development.
“You want to have sustainable heads and seats and that hasn’t been the case. Whether it is a problem in terms of who has been in those roles or it is a problem in terms of the business and that change that could negatively affect results in the short term, which is more what I think may be the issue,” said Mr. Devitt.
Devitt also remains skeptical on Twitter Inc. (NYSE:TWTR)’s push to monetize users logged out of the system instead of paying more attention to core users who can generate more value going forward. A loss of $175 million in the third quarter has only gone to raise an uproar in the company with big investors deciding to offload their stakes in the company to avoid any future accumulated losses. Twitter is one of the most popular websites in the world.
John Thaler‘s Jat Capital Management owns 7.32 million shares of Twitter Inc. (NYSE:TWTR) as at the end of the second quarter of 2014.