Twitter’s Slowing User Growth Is Impacting Its Ad Business: eMarketer

eMarketer says global social network ad spending will reach $25.14 billion in 2015, higher than the $23.68 forecast in April. But Twitter isn't growing

Twitter_CEO_Jack_Dorsey

Twitter, the 140-character social network which has been battling with slow user growth, that is in turn impacting its ad business, is going to face more challenges in the coming days. In a most recent round of estimates, eMarketer predicts lowered growth estimates for Twitter from April. Ad revenues are expected to increase by 61.8 percent this year to $2.03 billion, giving Twitter 8.1 percent market share among social networks. In April, the growth rate was pegged at 66.9 percent.

However, worldwide social network ad spending is accelerating even faster than expected. Global social network ad spending will reach $25.14 billion in 2015, higher than the $23.68 forecast in April.

Facebook that posted revenues of $4.04 billion in Q2 2015, is the reason for the growing spends in worldwide social ad networks. According to the expected findings, Facebook is set to capture $16.29 billion in ad revenues worldwide, a jump of 41.8% over 2014. This year, Facebook will take 64.8% of total social network ad spending worldwide.

Facebook’s ongoing user and revenue growth is also being backed by the positive growth of photo and video social network Instagram. Facebook had acquired Instagram last year for about $1 Billion. Instagram that now hosts more than 400 million monthly active users is expected to take in $600 million worldwide this year, accounting for 5% of Facebook’s worldwide mobile ad revenue this year. In 2016, eMarketer expects Instagram to make $1.48 billion in worldwide ad revenues, growing 149% over 2015.

On the contrary Twitter’s worldwide growth has been down since April. Twitter’s Q2 revenues reported to be $502 million were quite better than Q1. But the user growth problem is affecting eMarketer social network ad spendsTwitter’s ad business. The company reported 304 million monthly active users, up only 2 million since the first quarter.

The bigger bad news for Twitter is that US, which gets the company its maximum revenue, has been at a stand still with user growth. In its second quarter financial earnings statement, the social network had 65 million monthly active U.S. users – the exact same amount as last quarter.

Moreover Twitter’s Finance Chief Anthony Noto believes that the company’s user growth is not expected to rebound anytime soon. “We do not expect to see sustained meaningful growth in MAU until we start to reach the mass market. We expect that will take a considerable amount of time.”

Post that not only the air of Twitter’s IPO balloon is leaking, its core people are moving out too. Matters became worse for Twitter last month, when for the first time, shares of the embattled social media company dropped below $26—the pricing set during the company’s November 2013 initial public offering.

Facebook’s dominant growth will continue worldwide, expects eMarketer with revenue per user reaching  $48.76 this year in the US, higher than the $43.43 forecast in April. Worldwide, Facebook will capture $12.76 per user this year.

Meanwhile, Twitter will capture $7.75 per user in 2015. By 2016, eMarketer forecasts Twitter to capture $10.12 per user worldwide and $32.22 per user in the US. “Twitter’s slowing user growth is impacting its ad business,” said eMarketer principal analyst Debra Aho Williamson.

“Twitter has improved its ad targeting capabilities, and it still has a lock on real-time conversation. However, advertisers want to reach a mass audience and that’s harder to do on Twitter than on Facebook.”