What's going on?

Twitter has had its struggles, but on Wednesday its stock jumped 10% after it reported results showing better-than-expected user growth. (tweet this)

What does this mean?

Twitter added over 9 million users in the last quarter, which was 7 million more than expected! It wasn�t that long ago that Twitter was suffering from declining user numbers. But now its quarterly user growth is accelerating, jumping 7%, 11% and 14% in its latest three quarters.

Why should I care?

For the stock: Twitter�s ad revenue is still falling, but strong user growth is a sign that this might turn around.

Twitter�s stock took a hit in February when it posted a surprising decline in its ad revenue, despite improving user growth. That suggested that Twitter was struggling to monetize its users. This problem doesn�t appear to have been solved in the most recent quarter since revenue fell again (although the decline was less than was feared). However, better-than-expected user growth seems to have given investors more confidence, since it should eventually lead to higher total revenue from ads.

The bigger picture: It�s tough to turn around a struggling social media company.

Social media companies like Twitter are built on a network of users. Generally speaking, the more people that engage with the network, the more valuable it is � both to the users and to the advertisers (whose ads generate revenue for the social network). Therefore, a shrinking user base is particularly scary for a company like Twitter (just ask MySpace). If it can continue to attract more users, however, it could become a rare example of a successfully revived social media company.