Twitter’s Mixed Signals: S-commerce potential rises as user growth lags

It’s been a busy week for Twitter. Concerning user growth figures, a slew of new product features, and news of expansion towards more effective monetizing and advertising were just a few of the buzz items surrounding the social media giant in the past few days.

Let’s break it down. Here are the key points:

User growth slowed, increasing just 1.4% from last quarter. Social media is only as effective as the number of people on the platform, so user growth is a closely-monitored metric. Twitter reported just 4 million new users last quarter, ending the year with 288 million monthly active users. In contrast, LinkedIn recorded 347 million users at year-end, while Instagram recently surpassed the 300 million mark.

Twitter rolled out a stack of shiny new features, including group direct messaging, real-time video sharing, and a missed-tweet function. In a clear move to bolster the user experience, Twitter’s new features fill in some gaps for power users. A better-rounded interface might draw in new users as well, which would alleviate concerns of Twitter’s continuing struggle for social media market share.

Some good news: revenue soared 97%, mostly thanks to in-app and video ads. Twitter reported a revenue of $479 million in the fourth quarter, nearly double compared to last year. The revenue numbers are a testament to the rising importance of mobile engagement, as well as the growing power of advertising on social media. It also ups the ante for social commerce – with native advertising such a success, a natural next step is in-app purchasing.


Revenue soared, but user growth slowed significantly. Graph source: Wall Street Journal

Twitter announced deals with Flipboard and Yahoo Japan to take ads outside of Twitter.Unsurprisingly, Twitter is moving to maximize this revenue-generating advantage. By syndicating Promoted Tweets into the interface of news-reading app Flipboard and websites like Yahoo Japan, Twitter can sell ads that have reach beyond the platform itself.

Another deal with Google means tweets will appear in search results. In another savvy move to engage non-users, Twitter has reached a deal with Google to make tweets more searchable. Instead of Google having to trawl the site for search-related information, it will have direct access to Twitter’s data stream. This will allow for more visibility, and possibly more click-throughs to a special “logged-out” version of the page that will display – of course – Twitter’s ads.

Twitter is confident that the fourth quarter user numbers are blips on the radar, not warning beacons. It’s true that Twitter has become a social media platform of cultural significance – tweets are often embedded into other publications, and live tweeting transformed how breaking news and knowledge spreads across the world. What’s more, Twitter’s integration of a buy button has already set the stage for in-app purchases. The platform’s advertising reach is strong, and growing – which could translate into formidable reach in social commerce, too.

By definition, however, social media requires a society of users. Organic reach grows along with a platform’s user base. Without more users to engage with and generate content to blend in with the promoted tweets, Twitter runs the risk of turning into a platform for spam.

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