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Can These Deals Significantly Drive Twitter’s User Growth?

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Is Twitter’s popularity falling?

Twitter (TWTR) managed to grow its user base by 3 million in 2Q16. However, investors expected a lot more from the company given its recent efforts to drive user growth. Twitter did witness improvement in engagement metrics and is optimistic about audience growth on its platform. However, given the company’s low uptake among youth, the possibility of re-acceleration in user growth seems dim.

The company’s user growth is stagnating, particularly in the domestic market as can be seen in the chart below. In 2Q16, international users rose by 4% YoY (year-over-year) to 247 million. However, in the United States (IVV), the number largely remained flat, unchanged over the past six quarters.

The growing popularity of rivals such as Facebook (FB), Instagram, and Snapchat is the primary reason for Twitter’s stagnating user base. Twitter’s total MAUs (monthly active users) came in at 313 million in 2Q16, up a mere 3% YoY.

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How has Twitter tried to drive user growth?

Twitter announced a series of changes to bring in new users and retain existing users by improving its core product. However, that failed to spur user growth. As stated earlier, the company did manage to improve engagement metrics. However, the efforts weren’t enough.

Twitter’s recent announcements, including live-streaming events, particularly sports and news, coupled with increased investments focused on making its platform more engaging, are likely to drive user growth. Twitter invested in SoundCloud, an online music streaming service. Moreover, the company entered live-streaming deals with the NFL, Pack-12 Networks, CBS (CBS) News, and Bloomberg media.

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