Is Twitter Slipping or Regrouping?

Taken as a whole, 2009 was a great year for Twitter. The white-hot social media site approached a membership of 58 million registered users, each revealing life details in bite-sized increments of 140 characters or less. It struck data licensing deals with Google (GOOG) and Microsoft (MSFT) to help them with their real-time search ambitions. And, it fostered an ecosystem of independent application developers that fueled its growth, turning Twitter into a genuine community.Yet, 2009 wasn't a whole: It came in parts. The parts that came at the beginning of the year were more favorable than those that followed, leading social media spectators to suspect that the micro-blogging service reached its peak, according to a CNN report.

Beginning A Downward Slide?

According to data from Web analytics company compete, Twitter attracted approximately 22 million visitors in December 2009, which was pretty much unchanged from June levels. From its best month, August, the visitor metric fell by 770,000.

It's too early to tell if Twitter is beginning a downward slide. After all, the site is still relatively young, and there are plenty of strategic levers that can be pulled to jump-start growth again. But, it's clear that the increase in users -- and users' personal networks -- has made the nature of Twitter engagement a bit unwieldy, which has a tendency to turn people off.

Web analyst firm HubSpot estimates that the average Twitter user now has 300 followers -- compared to 70 in July -- and follows 170, a substantial increase from 45 in the middle of the year. And, users are tweeting more, with the average output growing from 120 in July to 420. Nonetheless, active Twitter users do feel that there's something in the air, and even growing usage numbers don't capture it.

'A Victim Of Its Own Success'?

Andrew Lipsman, an analyst at comScore (SCOR), tells CNN, "Maybe Twitter was a victim of its own success." He adds, "It grew so quickly that it isn't meeting its own expectations." Also, he suggests that weak results in the second half of 2009 may be the result of an unfair comparison to the company's meteoric rise in the first half of the year. In March alone, traffic shot up 131%. From 2.6 million visitors at the beginning of January 2009, the service grew to 17 million by the end of April.

Even if Lipsman's assessment is correct, and the second half of 2009 was obscured by the period of rapid growth that preceded it, Twitter still has a challenge in front of it. The company has declared publicly its mission to generate revenue in 2009 and has committed to a business model based on advertising. To do this, of course, it will have to attract more of its user base to in order to maximize ad revenue relative to its user base. The most recent estimates put the portion of Twitter's user community hitting the website at 30%.

Twitter has implemented several measures to increase activity on, including enhanced list functionality, streamlined retweeting and the ability for multiple users to tweet on behalf of another. So far, these methods don't seem to have driven much of a result, though it's still early.

Expressed Interest In Acquisitions

Twitter could bypass its reliance on traffic to its website through acquisitions, which it has expressed an interest in making this year. If it were to snap up companies in its ecosystem (as it did with Summize in 2008), it could serve ads onto smartphones and other devices through acquired Twitter applications. This would unlock substantial amounts of Twitter traffic and increase the revenue potential of the company substantially. Also, it would provide an alternative growth metric to the basic analytics available for the website.

Whether the temporary stagnation in Twitter growth is indicative of a softer future remains to be seen, especially as recent features are evaluated and adopted by the market and new ones are introduced. More important, though, is how effectively the young company pushes through the situation it currently faces. If it has grand dreams, it will need to be able to weather uncertainty and emerge on a growth trajectory. And, as it gets larger, the consequences of periodic struggles will be greater.

This is not just a test of Twitter's ability to continue to grow -- it's a test of its strength and maturity. In the coming months, we'll see how the social media company responds.
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