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Twitter Is Having Trouble Adding Users, but Learning to Make Money From Them

Expectations are everything, and Twitter has the rotten luck of having its expectations set by Facebook, its much-larger cousin atop the social media world. Twitter reported its first-ever quarterly earnings as a company on Wednesday, and by some measures they were quite good. The company brought in $243 million in revenue in the fourth quarter of last year, up 116 percent from the same period a year earlier, beating analyst expectations. If you omit a one-time payment of stock to its employees, the company reported income of $9.7 million. Still, its shares fell precipitously in after-hours trading, and were down more than 11 percent within an hour of the report.

The major reason seems to be concern about the rate at which Twitter is adding users—more slowly than investors would like. The company reported that it had 241 million monthly average users at yearend, coming in below what many analysts had expected. This was the fourth consecutive quarter the company’s user base grew more slowly than it had the quarter before. Also troubling is that the number of timeline views, a measure of how engaged people are with the service, declined this quarter, in the U.S. and abroad. Twitter said the drop was a result of changes in its product, and that timeline views were only one measure of engagement.