All is not well in the land of Twitter. The microblogging network’s shares have sunk to an all-time low and that $US40 billion valuation has evaporated despite the fact that Twitter’s quarterly numbers aren’t all that dismal.
Twitter’s financial health is not in question. Its revenue is growing, it’s edging up towards profitability. But investors patently don’t care about that.
The only number that really counts is user growth and despite adding 14 million new monthly active users in the quarter, Twitter is not growing fast enough, revealing that it’s certainly not another Facebook.
But were investors naive in hoping that Twitter would follow the same trajectory as Facebook? Is the comparison between the two social networks valid?
Forrester Research analyst Tim Sheedy says that the comparison is valid in that they are both advertising platforms
“They are both ways for companies to reach customers and prospects. If you are going to invest in a network you want it to be as big as possible and you want to get a good response rate on it,” Sheedy says.
“Twitter is delivering neither of those things effectively for the moment.”
Facebook is no stranger to post-IPO blues but the core issue for Mark Zuckerberg’s baby was somewhat different.
The social network had a burgeoning user base but investors weren’t convinced that it could make money from going mobile. Twitter on the other hand has always been a mobile company but is struggling to sell its appeal to the masses.
Facebook has managed to prove its critics wrong, it’s mobile efforts are now making money. Twitter’s quest to crack the mainstream is proving to be a far knottier problem.
Chief executive Dick Costolo may want to believe that as a platform Twitter is “incredibly mainstream” but its growth rate would seem to suggest otherwise.
The following graph, sourced from Quartz , highlights Twitter’s growth year-on-year growth trajectory isn’t too flash.
So what’s holding Twitter back and more importantly, what can the social network can do instil confidence in the market that it’s here to stay for the long haul?
Forget about reach and engagement, Twitter’s key selling point is influence. But perhaps it’s time to reconsider just what that counts for because Twitter may have served as a fantastic echo chamber for a coterie of engaged users – sharing gossip, trading barbs, or just spouting their opinions – so far, but some are questioning whether that appeal is waning.
That’s the trouble with internet culture, one minute you are relevant the next minute you are not and Twitter has always been a unique beast inhabiting the social media ecosystem.
Twitter served as a sounding board of ideas, it amplified thoughts, opinions and connected like-minded users.
For some (media, politics, public relations and marketing) Twitter still remains an attractive broadcast platform but the challenge now is to make it just as attractive to the rest of the world.
The mainstream dilemma
It’s not a simple equation for Twitter because by trying to break out of the niche mould the company risks alienating its core user base, many of whom would loathe to see the platform turned into a Facebook clone.
But as Sheedy points out, investors put their money into Twitter with the expectation that it would become as mainstream as it rivals. And it’s this expectation that’s proving to be the biggest driver for why Twitter’s stock is floundering.
Another weakness, according to Sheedy, is that right now Twitter isn’t able to provide the same level of rich data to marketers when compared to its competition.
“If you are going to be a niche network, you have to be able to tell me what niches you are in and which segments of my customer or prospect base are on your platform,” he says.
“Twitter isn’t able to give that type of information that the market is after.” On that, unlike Facebook, Twitter is yet to publicly disclose how many active users it has in Australia.
It would be premature to write Twitter off just yet, so let’s put the MySpace comparisons away for the moment.
That sort of toxicity is still a long way away but Twitter does need to placate the market and kick starting confidence will need to leverage its strongest suit –influence – and figure out a way to not just turn into money but also make the platform indispensable for everybody.