NOTE: See the important update to this story here.
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David Martin, Vice President, Primary Research, Nielsen Online
Oprah embarrassed herself on it with a stuck caps lock. That guy from Punk'd competed with "the most trusted name in news" for audience. A befuddled Jon Stewart shook his fist at it in anger. Let there be no doubt: Twitter has grown exponentially in the past few months with no small thanks to celebrity exposure. People are signing up in droves, and Twitter's unique audience is up over 100 percent in March. But despite the hockey-stick growth chart, Twitter faces an uphill battle in making sure these flocks of new users are enticed to return to the nest.
Currently, more than 60 percent of U.S. Twitter users fail to return the following month, or in other words, Twitter's audience retention rate, or the percentage of a given month's users who come back the following month, is currently about 40 percent. For most of the past 12 months, pre-Oprah, Twitter has languished below 30 percent retention.
To understand why this poses a problem for Twitter, check out the chart below. By plotting the minimum retention rates for different Internet audience sizes, it is clear that a retention rate of 40 percent will limit a site's growth to about a 10 percent reach figure. To be clear, a high retention rate doesn't guarantee a massive audience, but it is a prerequisite. There simply aren't enough new users to make up for defecting ones after a certain point.
Maybe we're jumping the gun. Twitter is still something of a fledgling, and surely some other sites that eventually lived up to Twitter-like hype suffered from poor retention in the early days. Compare it to the two heavily-touted behemoths of social networking when they were just starting out. Doing so below, we found that even when Facebook and MySpace were emerging networks like Twitter is now, their retention rates were twice as high. When they went through their explosive growth phases, that retention only went up, and both sit at nearly 70 percent today.
Twitter has enjoyed a nice ride over the last few months, but it will not be able to sustain its meteoric rise without establishing a higher level of user loyalty. Frankly, if Oprah can't accomplish that, I'm not sure who can.
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