The one number I wanted to see at Twitter’s (TWTR, Financial) second quarter earnings was how many subscribers they had added. Twitter ended the first quarter of this year adding five million monthly active users to their base, taking their tally to 310 million users, surprising many as the company had added only 17 million users in 2015.
Monthly active user base reached 313 million in second quarter, an increase of 3 million from the previous sequential quarter and an increase of 9 million from the 304 million they had in the second quarter of 2015. It's good to see theTwitter user base is growing, although it is not growing at a favorable rate. The biggest problem Twitter faces is the presence of Facebook (FB, Financial), both in terms of comparison as well as in terms of being a platform for advertisers.
Facebook had 1.71 billion monthly active users by the end of second quarter - a growth of 15% over the last year, adding nearly 25 million to its user base.
Let’s look at this from an advertiser’s perspective.
If you are a company that is looking for some eyeballs from social media and you had $10,000 dollars to spend, where would you put the money? The answer is simple, you would want to advertise on Facebook first and then Twitter to compare the results. If Facebook is getting you more clicks, then Twitter might go off the radar altogether.
In that sort of scenario, what would make you change your mind? As far as I can tell, the only thing that could sway your opinion is subscriber growth on Twitter, but even then you would rather have the bulk of your marketing money on Facebook because it is a proven platform.
The subscriber base issue is still a problem for Twitter, despite recent successes. But when you are making losses at the same time, it compounds that problem. There is less money to invest in growth and more and more investors to answer to.
That is not to say that Twitter is not trying its best. Stepping into video and live streaming is one area that can help the company stay relevant in a world where video consumption is growing at an astounding rate. The roll out of live video content can help increase user engagement and if engagement goes up, user base will, too. But it still remains to be seen whether they will be successful at it.
I have long held the view that Twitter is a good platform for interaction with my social media circle - and I have written about that in my article Can Twitter Dig Itself Out of the Hole? But as an advertiser, I am not so sure I would put my money into it. And that is essentially the view that most investors hold. If Twitter wants my money, they will have to convince me that they can make their video bid work.
Disclosure: I have no position in any of the stocks mentioned and no intention to initiate any position in the next 72 hours.
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