Why Twitter Is Vital and Struggling at Same Time: QuickTake Q&ABy
At any given moment, millions of people around the globe are using Twitter to share news and opinions, gossip and jokes. At least some are also debating Twitter’s fate. It’s the social media giant that nobody wants to buy and the favored communication tool of U.S. President Donald Trump. How can a company be such a success and failure at the same time?
1. In what way is Twitter struggling?
Being liked by the president doesn’t translate into money. Its fourth-quarter revenue of $717 million fell short of the $740 million average analyst estimate, according to data compiled by Bloomberg. Sales growth was 1 percent, way down from 48 percent a year earlier. As fewer people join -- Twitter added 2 million new users, bringing the total number of people who log in monthly to 319 million -- Twitter has had trouble wooing advertising dollars.
2. Wasn’t 2016 a big year for Twitter because of Trump?
It was a big year for the company name to be in the news. Tweeting was the medium of choice for Trump the candidate, and despite predictions to the contrary, he’s continued to rely on it as president. But Trump’s Twitter-focused campaign had no noticeable impact on user growth or time spent on the site, according to Twitter executives. Though Trump makes waves around the globe with his tweets, his audience of 24.3 million followers is only about one-fourth the size of Justin Bieber’s.
3. What’s the problem?
Getting started on Twitter takes some work. Not everyone wants to go through the trouble of curating a list of strangers and media organizations to follow, and some people can’t quite imagine what to use Twitter for. If you’re not a celebrity, politician, journalist or sports figure, you might not have much you want to say, or people who want to hear it. Twitter’s monthly active user number has hovered around 300 million for the last couple of years. Twitter may never be as big (or as rich) as Facebook, which had 1.86 billion monthly users in the fourth quarter.
4. And that translates to revenue?
Right. If the audience is limited, the advertising opportunities are, too. Advertisers wonder why they should be increasing their budgets on Twitter if there aren’t many new people to sell to. Investors pay a premium for tech company stocks because of their rapid growth. Twitter’s slowed dramatically, so it no longer deserves the kind of a valuation multiple that a Facebook or Amazon would get.
5. What is Twitter doing about that?
To appeal to those without accounts, Twitter now streams live television, so there’s a reason to visit even if you don’t care what the Kardashians are saying about their makeup. Via Twitter you can watch an NFL game or a live news broadcast, even Bloomberg’s. That opens up new advertising opportunities.
6. What else can Twitter do?
It needs a vision of what its product should be. The company has struggled to demonstrate that it has a strong thesis; even more troubling, it keeps losing key executives. Twitter has changed its head of product once a year on average for the last six years. It got a new (old) CEO at the end of 2015, co-founder Jack Dorsey, who leads Twitter while simultaneously holding the CEO job at Square Inc., a digital-payment company. After his top executives left, he started soliciting recommendations from the community.
7. Will Twitter be sold?
Many analysts expect it will, eventually. Its search for a potential buyer failed in the fourth quarter of 2016, forcing Dorsey to focus on reaching profitability as an independent business. During an informal 2015 sales process, three potential suitors -- Salesforce.com Inc., Walt Disney Co. and Google -- emerged. None ultimately decided to bid. Twitter was expensive, given the limits to its growth potential, and it carried a lot of baggage, like problems with harassment and abuse. The company is preparing to go it alone, cutting 9 percent of its staff and announcing a plan to pursue profitability. But some analysts think its already-pummeled stock is still overvalued -- and that slow revenue growth could turn into revenue decline this year.
The Reference Shelf
- Twitter says it has new ways to combat abusive tweeters.
- It’s also showing improvement in diversifying its workforce.
- Mexican currency traders have had enough of Trump’s tweets.
- An analysis of Dorsey’s progress, one year into his role.
- A story on Twitter finally working to combat harassment.
- A QuickTake Q&A on fake news and why it’s more of a Facebook problem.
- Why Disney didn’t bid for Twitter.
- Twitter’s plight in four charts, before sale talks ended.