Why Twitter is struggling to add users

Jack Dorsey: Twitter shows best and worst of democracy
Jack Dorsey: Twitter shows best and worst of democracy

On any given day, President Trump may use Twitter to break news on policies, taunt North Korea's dictator, slam the media and react to countless cable news segments.

All eyes are on Twitter (TWTR) each day. And yet that attention is not translating into any sustained growth in Twitter's user base.

On Thursday, Twitter revealed it failed to add any new monthly active users during the June quarter. Worse still, its user base in the U.S. actually declined to 68 million from 70 million in the prior quarter.

The news sent Twitter's stock tumbling 13% in early trading Thursday and renewed concerns about whether Twitter has run out of room to grow.

For years, Twitter has struggled to attract people who feel the social network is overly confusing, or a hotbed for harassment. Many simply see no reason to tweet. The election of a tweeter-in-chief offered a glimmer of hope for a turnaround.

After several quarters of anemic growth, Twitter added nine million users during the first three months of this year. Twitter credited that strong performance to "news and political" activity on the social network, "particularly in the U.S." But the Trump effect was short-lived.

"The Trump bump was a one-time deal," says James Cakmak, an analyst who covers Twitter for Monness, Crespi, Hardt & Co.

Related: Why Trump's offensive tweets don't get him kicked off Twitter

On a conference call with analysts Thursday, Twitter execs chalked up the flat user numbers in part to seasonal trends. They did not mention politics.

Trump continues to make news with his tweets, but many choose to get that news from sources other than Twitter. They see the tweets on TV, covered by news sites and discussed on Facebook (FB).

Twitter, for all its public value, remains an unnatural or unnerving place for some to check the news.

"Twitter has this real conflicted image that it's full of neo-Nazi trolls and it's also a great place for breaking news," says Michael Pachter, an analyst with Wedbush. "For every Trump tweet, there's an Ed Sheeran," who recently quit Twitter over mean tweets.

Reddit, another social news site, has experienced a similar issue. It is frequently a source of news stories for media outlets, but suffers from harassment and a complicated design that keeps away certain users.

Twitter has tried to crack down on online harassment with new tools. It recently said users are experiencing "significantly less abuse" now than six months ago.

Twitter's shortcomings are particularly clear when compared to its rival, Facebook. The social network is less plagued by reports of harassment and offers clear incentives to join. It's a place to track friends, family and, increasingly, the news.

On Wednesday, Facebook reported topping two billion monthly users in the second quarter, an increase of 294 million from a year earlier. Or to put that another way: In one year, Facebook added nearly as many users as Twitter has in total.

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