Twitter Boss Costolo Fights to Calm Investors Spooked by Shrinking Growth

Twitter CEO Dick Costolo rolled out the time-honored promise of his company "doubling down" to reserve shrinking user growth which, despite making a small profit in the third quarter, has spooked investors, wiping almost 18% off its share price.

Investors were unsettled by Twitter adding just nine million users between October and December - the slowest quarterly growth since Q4 2010, taking the total to 241 million. The number of Twitter timeline views also fell, for the first time, from 159 billion to 148 billion.

Their unease forced the company's share price down 17.9% to $54.16 in after hours trading; all eyes will be on the TWTR ticker when the opening bell sounds later today.

Twitter earned a profit

Twitter posted revenue of $243 million (£149m) for the quarter - its first as a public company - which is up 11% from the same three month period last year and ahead of analyst estimates of $218m. Overall, a $511m loss was reported, but excluding one-off costs like stock compensation following its stock market debut in November, Twitter earned a profit of almost $10m.

"We are doubling down in 2014 to accelerate the growth of our core user base," Costolo said as he was questioned by investors over the dwindling user growth. "We have a very clear road map across a number of dimensions that we will use to drive interaction and engagement and make it easier for a broader audience to get Twitter, to understand Twitter more quickly."

There were warning signs earlier in the day that Twitter's fairytale debut on the New York Stock Exchange would not last. Cantor Fitzgerald analysts gave the company a "sell" recommendation, stating its share price of $66.32 as "excessive," adding it sees "more downside than upside short-term."

A company divorced from its valuation

A similar warning to bullish investors came from Eric Chemi writing for Bloomberg's Businessweek, who said: "The stock performance of a newly listed public company during its first three months tells you basically zero about what happens in the future."

Morgan Stanley's Scott Devitt took a similarly reserved stance, rating Twitter as "underperform."

Upon hearing the results, Morningstar equity analyst Rick Summer told Time: "[Investors] have unbelievably outsized expectations for the firm. The company is performing well, but the valuation is really divorced from how the company's doing."

Changes planned by Costolo to encourage more user engagement this year include presenting conversations in a way that is easier to follow, making it easier for mobile users to sign up and connect with friends - and perhaps most interestingly, plans to begin organising tweets by topic rather than strictly in chronological order.