Contact: Scott Denne
Twitter’s biggest problem is that it fancies itself as the next (or at least the number two) Facebook. While Twitter is a substantial social network, its growth on that front has peaked and isn’t likely to come back in a big way. Instead of thinking of what it could be next, management seems focused on recapturing the growth of the past or, even more worrisome, turning to strategies that are best left to the largest Internet firms.
In its earnings call this week, the company emphasized what it perceives as Twitter’s strength: ‘Twitter is live.’ True, but ‘live’ isn’t a thing people are interested in. People care about live (something). As Twitter looks to invest its $3.5bn in cash, the company should leverage its strength in live commentary, live sharing and live video to build up communities and content around particular topics and interests. The core – and overly broad – platform should power a set of interest-driven media offerings, not be the main product itself. Commentary without context is unlikely to draw major brand advertisers to the platform. It could, however, draw them in with unique communities and the content to go along with them. Twitter has a perfect opportunity to build along those lines with its recent deal with the NFL to stream 10 games next season.
The amount of US monthly users on Twitter’s network has been flat for four consecutive quarters and international growth hasn’t fared much better. The company has been able to squeeze revenue growth out of a flat audience by developing its ad products. Those efforts are now losing momentum. Twitter reported revenue growth of 36% year over year, down from 48% in the previous quarter. It’s guidance for next quarter is flat.
This feels like a desperate situation. But it shouldn’t. Twitter is a media company that will shortly be larger (by revenue) than The New York Times. And it’s posting 36% growth – certainly unusual for a media company its size. The problem is that it doesn’t consider itself a media company. Management seems intent on scaling up the core platform as its top priority. It’s not likely to reignite the growth it saw in its early days – and it’s certainly unlikely to become the next Facebook, which is unfortunately the lens through which management views its potential.
Based on management comments, it appears the company is determined to invest in building out its ad-tech stack to become a one-stop shop for advertisers. Twitter simply doesn’t have the scale to accomplish this and lacks the ability to match identities across devices, which is becoming a core feature of Google and Facebook and a defining trend of digital advertising. And in video, the fastest-growing segment of digital advertising, the supply-side platforms and ad networks with the most scale have already been scooped up. Twitter’s strength lies in interest-driven data, rather than the demographic data that’s likely to continue to be the currency of video ad buys for at least a few more years.
