Tech bubble 2.0

Investors, Advertisers Lose Confidence in Twitter as User Growth Stalls

February 16th, 2016 by

TwitterAdvertisers and investors of Twitter (NYSE: TWTR) are worried that a lack of user growth may presage the beginning of the end for tech bubble 2.0.

Analysts have noticed that the expanse of the company’s user base has been slowing for the past three years. Company officials are constructing new initiatives to improve Twitter’s marketability, but warn improvements may not be seen for quite some time.

According to EMarketer, Twitter can expect to receive 9 percent of social-media spending this year, while Facebook is expected to receive 65 percent.

The company’s share prices have fallen by over 50 percent since July.

CEO Jack Dorsey has sought efforts to make the app more user-friendly and thus more mainstream, but for now, this appears a dubious prospect for keeping the little blue bird afloat.

Randy Giusto, vice president and lead analyst of advisory and research firm Outsell, expressed his disillusion with this prospect. “So far beta testing comments are not favorable. So far, we don’t see these changes attracting new users.”

Dorsey’s revamping efforts don’t begin and end with changing Twitter’s interface, though. He cut 8% percent of the company’s workforce, and appointed a new chairman, since taking the helm last year. With the departure of several executives last month, though, frequent changes to management may have a compounding effect on company growth.

Heath Terry an analyst with Goldman Sachs (NYSE: GS) offered the following:

“The continuing management instability is likely to further delay the development of the technology and product that Twitter needs to drive user growth, engagement, and monetization.”

In the final quarter of last year, the company’s monthly active users were 305 million. (Twitter has decided against including non-smartphone users in the count, otherwise this number would be closer to 320 million.) It should be noted, however, that Twitter enjoyed 2 million more users in the third quarter of last year.

First quarter revenue forecasts also failed to meet expectations with shares falling 2.5 percent. The average analyst projection for the first quarter was $627.6 million but it appears the company may only earn between $595 million and $610 million.

Twitter, of course, isn’t the only tech company to fall on hard times.

Netflix, Inc. (NASDAQ:NFLX), the best performing stock in last year’s S&P 500, recently fell 37 percent. Yahoo (NASDAQ:YHOO) dropped 39 percent, while LinkedIn Corp (NYSE:LNKD) fell 60 percent.

When the stocks of some of the biggest tech companies are plummeting, one question comes to mind: Has dot-com bubble 2.0 finally popped?

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.