The question always comes up in about the same way whenever I have a new client seeking social media advice.
Client: “I don’t get Twitter. Can you explain it to me?”
Me: “It’s like a personalized news ticker and public chatroom.”
Client: “That’s it? That’s all there is to it? Why is there all the hype?”
At this point, we have less dialogue and more handwaving. People who aren’t on twitter already don’t “get it” and will probably never become users. That’s reflected in their falling growth rate, down to 4% each quarter. And it’s starting to show up in their stock price now that the six month lockup period is over, allowing insiders a chance to sell. It’s below $33 a share, down 25% from the first day of the IPO last November. It’s worth about $19B total, about the same as Facebook’s tab to buy WhatsApp.
Is Twitter dead? No, MySpace and AOL are still around – but that’s where it’s headed at this rate.
The problem with Twitter is two-fold – it doesn’t offer users an awful lot of functionality, and it doesn’t have a strong built-in revenue model. It has yet to break even, so it doesn’t even have a P/E ratio. Advertising revenue has jumped dramatically, to $226M in 1Q14, up 125% over 1Q13. But to reach profitability they have to do that again. That’s the main reason much of the focus is on their user base and its growth.
Twitter also doesn’t have much of a user base anymore, despite constant hype on that other dying medium, television. Despite the constant use of #IrrelevantHashtags on nearly everything, twitter’s monthly user base is 255M people. That sounds like a lot, but it’s half of the Google+ base of 540M and insignificant next to Facebook’s 1.2B. It’s pretty similar to Tumblr’s 214M monthly users. Not only is their user base smaller, people are using it much less.
Business Insider reports on usage of social media sites, logging not just visits but the time spent on the site. Their results are given in the chart included here. Twitter is not only beat soundly by Facebook, with 1/7th the time spent using it, it’s about half of Instagram. It’s much more similar to Snapchat than anything else.
None of the statistics for Twitter come close to justifying even its much reduced market cap, meaning the stock could fall further. A major turnaround is going to occur before the stock goes anywhere but down. If you apply the 1/7 of Facebook as a guide to the ultimate revenue that they might hope to achieve and a guide to where the stock might go, Twitter is probably priced about right at this lower valuation.
How might Twitter acquire new users, or at least encourage the ones they have to use it more often? I think it’s already a lost cause. I base this on the simple fact that every direct message in my twitter list right now tells me how I can gain hundreds or thousands of twitter followers – and nothing else. Estimates are that about 10% of all accounts are fake, which is to say robotically generated to be sold at a going rate of around $17-20 per thousand.
The correct answer for my clients who ask what the deal is on twitter might well be, “To gain as many followers as possible in some kind of contest.” Any regular user, such as myself, knows that Twitter has become very spammy lately and has little actual user content. Its user base is more likely to fall than grow.
If Twitter is dead, you can only guess what might happen to Klout, which is largely based on Twitter.
Does this mean that Twitter will go away? Given that they are losing money, and probably will continue to lose money, they will have to find a way to keep the servers running in order to survive. MySpace has found a way to do it, and it hasn’t been touted on teevee or any other medium for at least 10 years.
The correct answer for anyone who asks me what Twitter is for is what comes after the logical explanations and handwaving is done. You need to be on Twitter because it’s an absolute baseline for establishing any kind of cool / savvy / hipness / et cetera. Think of it like a business card – without one, you’re not really a professional.
If you want anything more than that, it’s a way to keep score. So the question for Wall Street is, “Do you think that $19B is a high price to maintain a scoring system for the hipouisie?” Yeah. It’s going down. And no amount of handwaving by me or anyone else is going to help Twitter.
Note: In the interest of disclosure, my own twitter account has about 13.6k followers, apparently 95% of which are real. I’ve never paid for followers, and I honestly don’t know where they all came from. I’ve been on it since May 2007, which is to say as long as Barataria has been around.
Because they’re losing money means they’re dead? While I agree with you and think something needs to change, I’m not so sure it’s going anywhere. Fake or Real followers, there are a lot of people of a lot of influence on Twitter giving their opinions and influence. Twitter is largely ingrained in to our Television and advertising experiences. On top of that, Amazon now lets you add things to your cart with a hashtag on Twitter. Hmm I wonder if Twitter gets a cut of those sales. Anyway, great read none the less.
On second read, I’m pretty hard on Twitter here. But I do think something is going to have to change. They’re losing money AND not growing, which is a serious problem. That they have just a shade more monthly users than Tumblr is not where they want to be. The hype has them positioned as one of the top social media sites, but Instagram is beating them in user time and Snapchat is close on their heels.
They aren’t dead, and they will not die – nothing really dies (except pets.com, but that was different). I frankly expect something to change first. We’ll see how foolish I look in a year, so bookmark the post. 🙂
I think you forgot dogpile.com too
I haven’t heard of dogpile in years! It’s still around. 🙂
I never got twitter no matter how much you tried to get me into it. Its impossible to hold a conversation and you are bombarded by requests from people I have no idea how they found me. It may be good for some people but it is not anything like the hype. I don’t understand how it got so popular but I suspect its only a big deal to some people. 250 million against how many people with internet access?
There are about 3B internet users, so 250M is about 8,3%. In the US, there are 268 internet users and 23M twitter users, a similar number. It’s not a big market share by any measure.
Count me as one who never got twitter. It looks to me like high school kids trying to show each other up.
At its worst, yes, it is. It can be more and has been.
Eh, isn’t that the fate of just about every social networking site? Not just AOL or MySpace — remember Geocities? Friendster? Classmates.com?
Which makes the IPO’s for Twitter & Facebook (or the run up to it) all the more mind-boggling to me. That is some kind of short-term memory loss, right there.
There really is a long list of “the hottest thang” turning bad, isn’t there? You could almost add Yahoo. to the list, IMHO. It might be cool to have the top sites by traffic for each year since 1995. I’ll see if I can get that.
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