Twitter Inc (TWTR): What Investors Must Know

need to knowTara Clarke: Twitter Inc (NYSE:TWTR) stock closed with a 24.56% plunge on Feb. 6, the day after it released earnings. Even though Twitter earnings beat Wall Street estimates, there were two troubling numbers that triggered last week’s TWTR stock sell-off.

The first was the company’s “timeline views.” Timeline views are a measure of user engagement. They measure how many times a Twitter user refreshes a page.

Twitter has said that ad revenue per timeline view is one of the “key metrics” it uses to appraise the health of its business. It tracks Twitter’s capacity to make money from that particular engagement.

Feb. 5’s Q4 earnings showed that timeline views fell 7% since the previous quarter to $148 billion. On a year-to-year basis, views were up 26%, but the pace substantially declined since Q3’s 50%.

The other number haunting Twitter right now is slowing user growth.

The company added 9 million users in the fourth quarter. That puts TWTR’s growth rate at 4% over the quarter – another notch in growth deceleration. TWTR saw highs of 10% in Q1 2013, then 7% in the Q2, and 6% in Q3.

Slow user growth greatly affects revenue collection on the ad segment – fewer users equals fewer ad clicks. And right now, Twitter has roughly one-fifth as many active users as rival Facebook (Nasdaq: FB).

Now the overhyped social media sweetheart thinks it can improve earnings problems with a face lift – and some of the changes look a lot like competitors Facebook and Google (Nasdaq:GOOG).

But here’s why that won’t work.

Twitter’s New Look Won’t Matter

Twitter attributed the bad numbers, at least in part, to a steep learning curve for the service – Chief Executive Officer Dick Costolo admitted after earnings that Twitter needs to become easier for new users to grasp. For instance, new users have to learn Twitter-specific vocabulary: how to follow a friend, how tweets differ from replies differ from direct messages, how to use hashtags, etc.

So Twitter is testing new features and designs with small, random pools of users right now to combat that problem, according to Mashable.

And the tweaks look an awful lot like Facebook and Google+ elements.

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