In Twitter's defense, engagement isn't necessarily declining. Management said when it reported earnings that the daily active user to monthly active user ratio is similar to where it was last November. Twitter also said that searches, direct messages, favorites and re-tweets saw growth in the first quarter. Mahaney said the main question on investors' minds is whether Twitter is a one billion-user service, or a 300- to 400-million user service? "The company has kind of pitched itself as a billion-user business long term, but it's hard to see how they'll get there at the rate that they're growing," Mahaney said. "If they want to stick with this billion-person outlook, then they need to show that through product innovation they can make the service more compelling, more useful, more relevant to more people." Wooing Advertisers Wall Street is also watching is how successfully Twitter will be able to cater to advertisers, who contribute more than 90% of Twitter's revenue.