Even as Twitter's earnings more than doubled from last year's figures, investors are not impressed and shares nosedived to an all-time low due to the dwindling number of new sign-ups.
Twitter reported a massive surge in revenue after bringing in $250 million for the first quarter, beating Wall Street's expectations of $242 million and soaring 119% up from last year's first-quarter earnings of $114.3 million. A huge chunk of that, specifically $226 million, comprises Twitter's advertising revenue.
Unfortunately, investors are not happy as they note Twitter's dwindling user growth rate is detrimental to a company whose main profits come from advertising. The microblogging platform, which now has 255 million users in total, continues to see new users, with 14 million new sign-ups from January to March of this year. This figure, however, is 30% less than the 19 million sign-ups in the same quarter last year.
Twitter's stocks fell by more than 10% to an all-time low of $39.79 in after-hours trading. Although beating the predicted 3-cent loss, Twitter's earnings per share only broke even with a net loss widening to 23 cents per share from last year's 21 cents per share.
Media analyst Neil Doshi of the CRT Capital Group believes investors are also put off by the "less-than-expected" number of users even after big events, such as the "Olympics, SuperBowl, Oscars, Grammys, Ukraine, etc.," that took place early this year.
Engagement also fell by 8% as Twitter's timeline views per monthly users showed users already on Twitter are using the service less.
Twitter believes the reason it has not been able to recruit new users to its platform is new users find it difficult to figure out how to use Twitter.
"It's very much about making it easier for people who first come to the platform to get it. It's not just get it in their first weeks and months on Twitter. It's get it in their first moments on Twitter. That is absolutely a focus area," said Twitter chief executive Dick Costolo during its Q4 earnings call in February.
The company now seems to be focused on changing user experience, rolling out new Twitter profiles that look very much like Facebook's timelines. It is also moving past micro-blogging into image and video-sharing, although Twitter is still not nearly as popular as Facebook's Instagram or Snapchat.
Reports, although unverified, have also surfaced that Twitter is set on getting rid of its hashtags and @ symbols, two core elements that have differentiated Twitter from other social networks, because they reportedly make the Twitter experience confusing for new users.
The company does have protection against its slowing user growth in the form of MoPub, a mobile ad network that allows Twitter to post customized ads to people who do not use Twitter.
However, it still lags behind Google and Facebook, which own huge bulks of the mobile ad market. Google is soaring ahead with 47% of the market share with Facebook trailing second with 22%. Twitter owns only 2.4%, a number which is expected to rise at 2.7% in 2014.