Twitter (TWTR, Financial) and Facebook (FB, Financial) account for the two most significant players in the social networking space, but the companies are headed in opposite directions. Facebook is up over 15% year to date whereas Twitter is down approximately 18% year to date.
On the other hand, Twitter’s revenue growth is also gradually declining quarter over quarter. In the most recent quarter, the company reported earnings per share of 13 cents, beating the consensus estimates by 4 cents. The company’s revenue came in at $616 million, exceeding analyst estimates by $10.16 million.
However, that figure represents a growth of just 8.2%, considerably down from the 57.5% compared to a year-ago period.
For any social networking website, users play a significant role. According to Statista.com, Twitter has struggled in the past seven quarters to surpass 350 million monthly active users whereas Facebook’s monthly active users base is growing at a rapid pace. Facebook's monthly active users base currently stands at 1.788 billion users and still has huge upside potential.
As a matter of fact, the sluggish growth in monthly active users is a big problem for the company. It believes that coming back to significant MAU growth in the future is dependent on enhancing its product and feature proposing to prove its value.
To appeal to users, the company has plans to introduce live video service. It is a great move, but the company should keep in mind that it needs users who access this service on a daily basis. If Twitter is not able to surge the user base, the products and services offered by the company could be less striking to potential new users, which would negatively affect its operating results as well as financial situation.
Apart from this, the company’s new initiatives such as curated moments do not manage to appeal to new users or marketers. Moreover, the company recently decided to cut its losses by laying off 9% of its employees and terminating weaker services such as Vine, but stock-based compensation still acts a major weight on its earnings.
Furthermore, trimming will eventually decrease its ability to compete against giant rivals like Instagram, Facebook, etc.
Summing up
Twitter is down more than 18% this year, and it looks like more of a downturn is ahead if the company fails to enhance its monthly active users base. Moreover, a look at the current situation suggests the company will not be able to outdo rivals like Facebook that are growing rapidly.
Stockholders should stay away from Twitter and consider other options like Facebook.
Disclosure: No positions in the stocks mentioned in this article.
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