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Social network overload may be setting in sooner than expected

The Exchange
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George Clooney won’t do it. Neither will Tina Fey, Julia Roberts or Daniel Craig. They’re among the most famous Twitter (TWTR) holdouts but a question for the entire social media industry is: Just how many more people want to invest the time to keep up?

“I could easily say something stupid, and I also don’t think you need to be that available,” Clooney told Variety this week. “God forbid, you take a sleeping pill and wake up and the sentences don’t even make sense. What a horrible idea.”

And it’s not just the rich and famous. There’s obviously a limit on the number of people who won’t get overloaded, fed up, even bored trying to keep up with all the tweets and posts flooding their computer, tablet and smartphone screens.

Investors got more signs this week of the possibly waning of interest in social networks.

On Wednesday, Twitter disclosed in its earnings report that growth slowed dramatically; its shares took a huge hit, dropping 24% the next day. LinkedIn (LNKD) and Yelp (YELP) followed, showing quarterly membership growing at ever-slower rates from prior quarters. And Facebook (FB) is famously having problems attracting the younger set. 

A big birthday

As Facebook celebrates its 10th birthday, the company and its social brethren may be reaching a saturation point in the United States. At the end of last year, 71% of online adults used Facebook, up from 67% at the end of 2012, according to a survey by the Pew Research Center. Growth at smaller networks was even more modest. Twitter usage climbed to 18% from 16%, and LinkedIn to 22% from 20%.

Overall, the use of social media by online adults hit 73%, up from 67% last year and just 47% five years ago. With nearly three-quarters of potential users already signed up, the social media trend seems to be entering a phase of slower growth.

Wall Street has long seen the social media cup as half full, focusing on user growth not profits and sending the stocks into the stratosphere. Profitless Twitter, for example, shot up from $26 at its November IPO to a high of almost $75 at the end of December. At the high, Twitter was valued at more 40 times its sales. More mature companies such as Microsoft (MSFT) and Apple (AAPL) trade at just three to four times their sales.

But Twitter's slowing growth has obviously spooked investors. The company said its active user base reached 241 million at the end of the fourth quarter, up only 4% from the previous quarter. That’s the slowest quarterly rate of increase Twitter has disclosed and less than half the rate of a year ago. Just in the United States, active users increased less than 2% to 54 million, one-third the growth rate of a year ago.

Facebook has also seen its quarterly growth in usership tail off.  Overall monthly active users increased just 3% in the fourth quarter from three months earlier and U.S. usership grew only 1%. A recent Pew Research report also found that only 10% of Facebook users update their status daily.

Of course, it’s no easy feat to predict when a fad or trend will top out or fade away. Forbes asked about “The end of Facebook” in 2011. This was clearly a bit premature. 

[See related: Facebook turns 10: The most important tech company of the past decade]

And the companies could continue to increase revenue rapidly as they attract more advertising dollars. Even with slowing audience growth, Facebook, for example, said its fourth quarter ad revenue jumped 76% from a year earlier, in part thanks to a 92% increase in ad rates. And its shares have been on a tear this year, up more than 13% in a volatile market. Twitter’s revenue more than doubled from a year earlier to $243 million.

In the end, maybe they don’t need Clooney or Fey.

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