Twitter was on the up and up when it went public in 2013 but since then the returns haven’t been as staggering as anyone would have hoped. What happened?
At a valuation of over $10 billion and initial public offering at $26 dollars a share, Twitter pushed out its IPO at a time when they wanted to compete with other tech giants instead of being bought by one. Twitter’s share price reached a high of $70, but has since cratered and is languishing at around $16 a share.
At the time of the IPO, Twitter had about 240 million users. Growing this number was their top priority in terms of eventually being profitable. Grow the user base and then use the revenue strategies already in place to make money off them. These strategies included sponsored tweets, in-stream video advertising and charging for access to valuable data.
Stagnating User Base
Unfortunately, the idea to make money off a growing user base hasn’t come to fruition because the user base hasn’t grown.
The growth in the number of monthly active users has completely stagnated. Before the IPO, Twitter was growing its user base at double-digit rates every quarter. Since then the growth rate has come down drastically. Over the last two years the average growth rate per quarter has been about 1%.
From the first quarter of 2016 to the second quarter, Twitter’s base grew from 310 million users to 313 million. Advertisers aren’t spending the money that Twitter had hoped and their shares are down. Also, Twitter is yet to record a profit.
Who are the newcomers?
This is where the story gets interesting. The new platforms that have shown big growth, Pinterest, Instagram, and Snapchat (we could also include the now defunct Vine) are all picture sharing platforms.
Have people given up on “140 characters or less”? Are people over words? Maybe we’re actually just rekindling with our past. We grow up sharing experiences through visuals. Grainy VHS tapes of your sister’s 1996 dance recital, or slideshows of your parents’ honeymoon in Trinidad & Tobago.
None of what these new social media brands are doing is new, per se, they’re just allowing us to be who we are naturally.
The Twitter decline might not be all down to what Twitter is doing but more on what everyone else is doing. Picture sharing platforms are simply the latest trend.
Twitter is certainly trying to expand themselves though. They’ve struck deals with the NFL, MLB and NBA to broadcast live sporting events. Live news is also on the horizon.
Maybe Twitter’s future is that of the new-age TV network? Twitter has always been about “what’s happening” rather than the “shared experiences” platform of Instagram, Snapchat and others. Twitter could expand on their foundations rather than trying to be something they aren’t.
Reports of Twitters Death have been Greatly Exaggerated
To think that Twitter is dead in the water (RIP Vine) would be premature. With over 300 million users, this is still a mega social media platform. The landscape of social media is changing but Twitter is still holding on. In 2013, Twitter was behind only Facebook in terms of monthly active users.
At the time both Google+ and LinkedIn claimed to have more users, but their definition of what constitutes a monthly active user is wonky and their numbers are highly inflated. Fast forward a few years and Twitter has dropped, but only to third place behind Facebook and Instagram. Snapchat, Pinterest, and LinkedIn are all snapping at Twitter’s heels but so far they’ve managed to keep daylight between them and the rest of the pack.
Change, however, might be necessary to compete with the young picture sharing apps that are spreading like wildfire. Beyond that it’s time for Twitter to clean up their business model and start making some money.