Is Twitter's Bubble About to Burst?

Tuesday, 29th April was not a good day for Twitter. It shares fell by more than 11% after it released its figures for Q1 2014.What's making investors so jittery? Quite simply, a lack of growth.Twitter, which floated 6 months ago, first saw its shares take a plunge back in February when user growth in the last quarter of 2013 slowed to 3.8%. February also brought the news that Twitter “timeline views” – its equivalent of page views and a key measure for advertisers – had dropped for the first time to 148bn from 159bn.The figures reported just over a week ago weren't so bad. User growth improved in Q1 2014, albeit only increasing to 5.8%. And timeline views increased too - to 157bn - but remained below the peak levels of Q3 2013. However, investors fear that many don't find the platform easy to use and are abandoning it after signing up or don't have a clear understanding of why they should use it and aren't signing up in the first place.To give them credit, CEO Dick Costelo and the rest of his Twitter team haven't been slow to react to these concerns.In the 6 months since the IPO, they've overhauled the discovery features in the app to emphasize popular elements like conversations around TV, and made the medium more visual by allowing users to upload more than one photo per tweet. Moves are afoot to make video a larger part of the experience too - Twitter poached a top YouTube Executive back in March to make this happen.Most recently, last month they unveiled new designs for profile pages with more prominent lead images and the option to choose a top tweet to display - moves that many commentators felt were deliberate attempts to make Twitter look like its more popular rival Facebook.However, whilst user growth has been slowing, Twitter's innovations around advertising have seen revenues more than doubling year on year. In the past few months, Twitter has added greater targeting options to advertisers - including retargeting and the ability to include/exclude prospects in campaigns on the basis of email address, bio, follower counts and past tweets.On top of that, 15 new types of ads are due to be released in the coming months, including app install ads (ads that can be linked directly to the app stores), ads with an embedded one-click video player and live streaming ads. Click-to-Call and 'Shoppable' ads are rumoured to be amongst the new ad formats too.But growing rapidly revenues haven't been enough to placate investors. Twitter's valuation is based on predictions of future ad revenues and the hope that Twitter can become a social advertising powerhouse like Facebook. The signs are that Twitter is reaching maturity well before expected, and at less than 1/5 of the size of its larger rival. Not only that but other social platforms - most notably Instagram - are catching up fast.What does this mean for advertisers? Well, frankly those whose target audience aligns with Twitter's young, media-savvy users have no reasons for concern. They have no need for Twitter to broaden their fan base and they'll soon have even more advertising options at their disposal.In fact, it could be argued that if Twitter is too successful in broadening its fanbase the core user based could be diluted or even take flight as the nature of the medium changes - particularly if the moves to emulate Facebook become too pronounced. Investors may be grumbling but, as the advertising revenue figures show, advertisers are more than happy. If investors get the growth they want, that situation may well be reversed.Accelerating growth whilst not impacting the core user base or fundamental nature of the medium must be the objective of Twitter's top brass, but that's a difficult tightrope to walk.