Twitter's Identity Crisis Gets in the Way of a Sale
The past few weeks of revelations about Donald Trump should convince you of the utility of Twitter’s platform. It is the new news ticker, the way information gets spread at the speed of light by the fastest typists.
But that’s merely the networked and mobile technology. If you want to know how valuable the company is, you must ignore the utility of the social network and delve into the revenue numbers behind the platform. That exercise helps to explain why Twitter, which has put itself up for sale, hasn’t found a buyer yet.
Lots of theories have been floated about this issue, but the answer is simple: Twitter doesn’t have enough users, and each of the users it does have generate relatively little revenue compared with other social networks, as the table below shows:
Company Market value per user / Revenue per user
LinkedIn $243.85 $32.41
Facebook $216.33 $12.96
Angie’s List $170.64 $103.08
Twitter $45.11 $7.99
Yelp $19.25 $3.80
Source: USA Today
On top of it, Twitter’s user growth has stalled, as my Bloomberg View colleague Justin Fox wrote earlier this week. And it’s never turned a profit. Is it any wonder no one has been willing to pony up the $15 billion or so that some investors see as the selling price?
But I am more interested in the structural issues underlying the company. Twitter has multiple problems with its platform that must be solved in order restore growth. The big ones are increasing its user base and then making money off them.
According to Statista, Twitter has 313 million monthly active users. I suspect that much of that is bots and fake click-farm accounts. Search for “buy Twitter followers,” and you will see that for $10, you can purchase 1,000 followers. (For the record, I never have, but I have seen others do it, and it is dishonest and bad form). My wild guess is that there are perhaps 100 million actual flesh and blood human beings on Twitter.
Second, Twitter still hasn’t hit upon a good way to profit from the users it has. You can try to sell that audience to advertisers, which as Yahoo! can tell you isn’t necessarily all that easy to do -- Alphabet, formerly Google, and Facebook notwithstanding. Alternatively, Chief Executive Officer Jack Dorsey needs to crunch the massive data stream Twitter users do generate, create unique analytics and business intelligence from it. Maybe it can sell this to hedge funds, corporate marketers, car companies and so on. They do some of this now, but not in what seems to be an especially productive or lucrative way.
Third, unlike Facebook and LinkedIn, Twitter hasn’t found a foolproof way to deal with trolls. These are the bullies, spammers, racists, misogynists, antisemites and other jerks that have transformed Twitter into a blood sport. Trolls can turn the user experience into a nightmare, as any number of high-profile cases should confirm.
Troll defenders couch this as a First Amendment issue, but it is nothing of the sort. No one is preventing the trolls from setting up a blog and venting to their hearts content. It’s the tragedy of the commons writ large -- that is, if it actually were the commons and not owned by anyone. But it is commercial property owned by its investors. Twitter has created a community, and it has no obligation to let anyone come in, free ride on what it has built and burn the place down. Trolls and spammers and racists, as I discussed when I killed the comments on my own blog, don’t have the right to come to my cocktail party and insult me or my guests.
A few solutions suggest themselves:
Unless and until management finds a way to rein in or ban the most aggressive and offensive users, Twitter will continue chasing away lots of potential customers. This has to be a top priority for the company, because it desperately needs to expand its user base.
Maybe a more refined set of protocols to verify user identity will reduce the excesses. Funny how much better people behave when they can’t maintain anonymity. The challenge, of course, is doing this in developed markets like the U.S. while protecting the identity of users in countries with repressive regimes, where anonymity is the only way citizens can avoid government retaliation.
Twitter has yet to resolve exactly what it is -- a utility-like town square or a commercial enterprise. The sooner it figures out what it wants to be when it grows up, the better off its shareholders -- and its community of users -- will be.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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