Is the service sustainable? New data makes you think
The Chicago Tribune today reports some interesting statistics regarding Twitter (see: "Twitter Quitters", 4/30/2009, by Steve Johnson). According to the story:
- 40% of users who sign up for one month will return for the next - previously, only 20-30% of users who signed up would return for the second month
In contrast, the article cites that other sites like Facebook and MySpace have retention rates in the 50-70% range.
A poor retention rate is an expensive and limiting issue for any site. Here's why - First, the costs required to acquire new users continues to rise. A site with great retention spends little to replace customers and only focuses on net new customers. A site with poor retention has to replace the old customers and get net new customers. These sites must work much, much harder to grow market penetration. Second, in the quest to get either replacement or net new customers, the company will exhaust the available customer base very quickly and, once exhausted, will reach the limit of its growth.
If Twitter's numbers are indeed akin to those that the Tribune reported, then growth will be an issue for this site.