Why Twitter Is Falling Today

NEW YORK (TheStreet) - Twitter (TWTR) released its annual report on Thursday and the market responded negatively to it today. Twitter closed down 2.4% at $53.53.

Most troubling for investors was the news that Twitter lowered its advertising asking price by 18% over the final three months of 2013. This decline marked the seventh quarter in a row that the social media Web site has lowered its ad pricing.

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Ad engagement on the site, users actually clicking on ads, was up 74% in the final quarter compared with the three months prior. This bump reassures advertisers that their products are hitting their targets.

Twitter still makes most of its money from ad sales. In the final quarter of last year the company saw those sales more than double to $220 million compared to the third quarter.

User growth was also up 9%. While the growth is a good sign, the rate of growth has been steadily slowing down. Twitter faces major competition from Facebook (FB) and the Facebook owned photo and media sharing site Instagram.

Twitter sees its cheaper rate as a positive as it allows smaller and medium sized businesses to advertise on the site.

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