State of Twitter: Outpacing Facebook's Revenue Growth

Twitter recently released its Q4 and 2013 annual report detailing the state of Twitter, from user adoption to revenue. How are things in the land of 140 character updates? Before we dig into the numbers, a bit of clarification about how Wall Street works versus reality. Wall Street's quarterly expectations have little bearing on the reality of a business. When you hear that a stock doesn't meet expectations, it doesn't mean that the business is necessarily unsound. What it means is that Wall Street investors didn't make as much money as they wanted to or didn't see the performance metrics they expected. Here's a simple analogy. In a football game, you have a score.In the regular world, a winning football team is the team that scores 1 or more points more than the opposing team. Whether it's a blowout or a squeaker, a win is a win. If Wall Street rated football games, investors would specify what they expected the final score to be, possibly regardless of the outcome of the game. To use the recent Super Bowl, Wall Street investors would set an expectation of 50 points scored by the Seattle Seahawks. They would classify the result of the Super Bowl as a loss for Seattle because Seattle only earned 43 points, despite Seattle's obvious win over the Denver Broncos. Be aware of the distinction between a real life win and a Wall Street win when you read investing news. Now, onto Twitter:

• Twitter now stands at 241 million monthly active users
• Twitter's monthly active user growth for 4Q2013 was 4%
• Twitter is approaching $0.91 revenue per active user

In terms of growth rates, Twitter's growth rate has decidedly slowed down, but it still is ahead of Facebook (logically, since Facebook dominates so much of the social media landscape). What remains to be seen is whether Twitter can get back above 10% quarter over quarter growth:

If it can't, if it can't reverse the trend of declining growth, then investors might have something to be concerned about, but Twitter's audience growth numbers have been considerably more volatile than Facebook's.In terms of revenue, Twitter is showing handy growth there, with a 44% quarter-over-quarter growth in revenue:

Twitter has consistently stayed ahead of Facebook's ad revenue growth rates, which should be reassuring to investors. Seeing quarter-over-quarter growth rates of 21%, 26%, and 44% show's Twitter's ability to increasingly monetize its audience effectively:

What's really interesting is when you put Facebook's revenue per user next to Twitter's revenue per user:

Seen in this light, Facebook and Twitter appear to be growing at relatively consistent rates. When you put the two growth rates of revenue per user together, this is indeed what you see, with a simple correlation coefficient of 0.85.

This indicates that Facebook and Twitter are growing their revenue base per user at almost identical growth rates. That raises the interesting question: just how much overlap is there between Facebook's and Twitter's audiences, that the aggregated financial growth looks so similar? Chances are, given the strong correlations between Facebook's audience growth rates and Twitter's audience growth rates, there's a fair amount of overlap.What does all of this data mean for you as a marketer or public relations professional?The strong correlations between the advertising growth rates and the audience growth rates for Facebook and Twitter also indicates they may have similar audiences. If you're participating on Facebook, chances are you need to be on Twitter, and vice versa. While your content can and should be different for each network, to ensure maximum visibility in your social media outreach to your audience, you'll want to be in both places.Looking ahead, investors are unhappy with Twitter's rate of audience growth, which means they'll need to change their focus a bit from aggressively chasing revenue to adding new audiences in addition to revenue growth. They have to get new people signing up. That means bigger audiences for brands and marketers who are currently engaging on Twitter (if they can execute on an audience growth plan). It also means the advertising reach for paid media will continue to grow. On the flip side, as we have seen with Facebook recently forcing brands to pay-to-play, it also means that buying advertising on Twitter will become more important if Twitter wants to eventually reach parity with Facebook's revenue per user. We imagine that's something investors will likely pressure them to do in upcoming quarters after they resolve the audience growth problem. One other thing to consider on this front is CEO Dick Costolo's commentary that "better quality" timeline views are important. Recall and consider that Facebook's Newsfeed algorithm has been tweaked multiple times to provide "better quality" experiences, at the expense of brand Pages' organic visibility. It's not unreasonable to postulate that Twitter could go this route as well, addressing a better quality experience but forcing brands to pay up.Ultimately, this means paid media, earned media, and owned media can no longer afford to be in organizational silos, at least from a social media perspective. Your advertising, marketing, and public relations teams/agencies will need to work together closely to generate the results you're looking for.Christopher S. PennVice President, Marketing Technology[cta]