The problem with letting Twitter be Twitter is that Twitter took money on the promise of being something other that just Twitter.
Or to put it in analogy form. You give me $500,000 to buy you a Ferrari and I give you a Toyota Corolla.
You complain that I haven't held up my end of the bargain and I point out that the Corolla is a perfectly fine car that can get you from point a to point b and even has some strengths when compared to the Ferrari, so why are you complaining?
That's the point Twitter is at right now. They took the money to be something other than what they are right now. If Twitter wants to be just Twitter, that's fine, but you'll need to cut their 20 Billion market cap down to somewhere around a 3-4 Billion market cap, I don't have a model with me right now.
having said that, Twitter has some good things going for it.
- Mobile Advertising numbers are up Year over year
- Data licensing revenue is up
- monthly active users are up
IMHO, twitter just needs to shrink in size or find a way to really start growing revenue.
EDIT to the child comment, you are confusing revenue and earnings. There is a huge difference between the two:)
It's interesting to compare the investment amounts into Twitter vs Google. Very different trajectories in how things actually turned out.
(Boy would I love to see the 2011 Powerpoint deck shown to the Twitter investors in Round 7 & and Round 8 that convinced them to sink the additional $400 million & $300 million. It seems like there must have been some wildly optimistic projections in that presentation.)
Twitter Inc:
- +$1.0 billion from 8 rounds of funding pre-IPO [1]
- +$1.8 billion raised from IPO [2] (sold 13% of the company)
- ====
- +$2.8 billion total
- -$511 million loss[3] in first post-IPO quarterly report
Google Inc:
- +~$1 million from angel investors (including Andy Bechtolsheim's famous $100k check)
- + $25 million from Sequoia, KPCB
- + $1.9 billion raised from IPO (sold 8% of the company)
- +$66 million profit[4] in first post-IPO quarterly results (and would have been +$200 million if they didn't pay to settle Yahoo patents)
- +$$$ millions in growing profits in subsequent years as we all know now
It's pretty easy to get numbers that big when you're Twitter's size. Salary and overhead (taxes, rent, food) for 1000 employees is probably on the order of $300-400m/year, and
server costs for a high traffic site like Twitter is probably on the order of $100m/year.
Does Twitter have anything near 1000 employees? I wouldn't expect that.
I'd also expect the sever and trafic cost to scale from a "minimal" of around $100k a year in proportion with revenue. That is, I don't see how that's a good target for investiment money.
As a second thought, that makes some sense. Regional offices do localization, sales (with support), and legal adaptation mostly. Any company that wants to sell on several countries need such stuff.
More than a hundred employees for each office looks oversized, but not extremely so.
The only question yet open is if Twitter needed all this infrastructure to become a viable business, of if they could open smaller and grow into that size organically. But well, even if Twitter didn't need it, it's reasonable to imagine that some business would need it.
I guess my question of what a company could spend 1 billion of investment on is answered.
This, exactly. Twitter could "just be twitter" if they were private. They made the choice, though, to go public, and now they have to answer to shareholders, whose needs are quite different from the needs of their users. The fact that they're under a lot of fire for "not being a good enough investment" is a problem of their own creation.
totally evil enough for me to cal it evil.
or capitalism if you want. i do not care what the words are, it still transforms good products into shitty products for the benefit of a few individuals.
not saying something else is better, though. most things we came up with always end up evil due to the way humans pervert it, not due to the concept.
The saddest thing about Twitter's path is that the tool is so good, but if they don't fix the problem you just described (brilliantly btw), they can be doomed.
I think if something the size of twitter failed, the loss of trust in a similar service's sustainability would prevent a clone from seeing critical mass for a long time, if ever.
edit: why the downvote? If you disagree, let's talk about it.
I hear your point, but what becomes the goto place for live events on the internet? Does a company with an established brand (like Google) attempt to step in with its own clone service?
I just can't see this form going away. A public-by-default, one-to-many microblog service has proven to be valued by a substantial userbase.
I have to think that the "next Twitter" could disguise itself as a sufficiently fresh take in order to gain enough trust from enough users.
Joking aside, I wish there were some meaningful numbers around how many people (as a percentage of active user base) use it that way (live events) vs just seeing what their friends and/or favorite celebrities have to say.
$3Bn is still vastly overpriced. What's their P/E again? You can trade at a loss while you're flush with cash, but not forever, you have to grow your way out somehow...
You must think whatsapp acquisition is insane and fb ran by amateurs. The fact is Twitter is of great value to the likes of Google and fb, beyond simplistic pe ratios. In fact, pe is a very poor valuation tool for tech companies.
Twitter, in its current state, is a platform for power users.
Twitter is a field you put some stuff in, and that stuff displays to everyone who follows you. Disregarding scale, the premise is very, very simple.
The difficulty stems from knowing who or what to follow.
It takes a long time to figure out who you want to follow, and Twitter doesn't have enough information about you to solve the cold start problem. I love Twitter because I'm constantly pruning my feed (and lists), and it's pretty great.
My mom joined Twitter, followed who Twitter recommended, got a bunch of generic PR accounts and celebrities, and doesn't use it anymore. Conversely, when she joined Facebook all of her friends and family started adding her. Her feed was now full of the people she loves (the value was already there), and she learned to become a fully participating user. That's why Facebook has 1.5B monthly active users (holy shit!).
She figured out how to use Facebook because the value was already there. She doesn't use Twitter because it's not. It's really that simple.
So Twitter goes public saying, "Look, there are all these people using Twitter already, we can fix this problem for people, then we'll grow way quickly!" They start curating for you, and it turns out it's not what you want, and no one cares. Wall Street is pissed that it's not growing quickly enough, and everyone starts freaking out.
What we're seeing is the freakout. Everyone trying to figure out how to "fix" Twitter. Everybody coming up with solutions. But no one has figured out the fundamental problem behind Twitter: You have to put a lot of effort in before you get any value out. There are only so many people in the world willing to do that. It will still grow, but it may not be rocketship growth. If you're private that's OK, but if you're public and you're not growing quickly enough you're going to get a lot of shit.
Sorry for the plug, but this is exactly how http://svven.com can help. New user tweets a couple of links - gets other people that tweeted same links - and also the other links they tweeted. How's this for a solution?
This reminds me again of a problem I'm seeing on the Web. Every time a social network springs up, it seeks to "connect users" and "build communities." And every time it reaches critical mass, it tries to use its users as a product to be sold to advertisers. The only exception is Wikipedia, which the author of this article brings up, but as Wikipedia is more of a collaborative content platform than a social network I'll just relegate that to a tangential concern.
Is it not possible to create a social network where the product is the social network? Perhaps not. App.net attempted this, and wasn't able to generate enough money to both keep the lights on and pay its employees.
As someone who once founded a company that published game books, I'm acutely aware of the fact that people are rarely willing to buy content in this age of free information. So what, then, would make them willing to pay to be a part of a social network?
I don't understand why there can't be a social network that simply charges its biggest beneficiaries.
That is, make it free for every user until that user reaches a certain level of influence. That way, you can grow without charging anything and then charge those who a) value it the most and b) have the money & reason to pay to sustain their influence.
Why can't Twitter create a pricing model for everyone with over 1m followers?
Why can't Facebook keep its service free for consumers but charge organizations?
The massive power of huge social followings (organic reach--without ads) is worth so much but valued at ZERO by social networks. I think it's a huge missed opportunity that is resulting in diminished value for everyone.
It's like peering. If you're that popular, Twitter is providing significant value to you, but you're also providing a lot of value to Twitter by being a reason for people to use the service (i.e. to read your tweets). Katy Perry needs Twitter a whole lot less than Twitter needs Katy Perry. Plus, not everyone popular on Twitter has a lot of money - a recent counterexample is Edward Snowden.
Yeah but I'm sure Katy Perry gets enough out of the service to pay it $10k a year. For example.
Total revenue would be lower, yes, but that should be matched by cost-cutting. These companies' head-counts are bloated compared to the services they offer.
I know there's a lot more to Twitter than the simplistic short-messaging system it seems to be from the outside (speed, scaling, etc)...but does it really need over 4,000 people to run it? I highly doubt it.
Yeah but that's a very risky move. If even 50% of the power users pay, then twitter still loses 50% of it's key content, which costs it users, which then means the remaining power users are less interested in paying and so on.
This is the wrong way round. Charging people to be popular on twitter would turn it into an advertising platform and drive away the most interesting grassroots users. The benefit flows from the popular 'content creators' to the people who follow but aren't themselves followed.
My own preferred model for charging would be the transferrable 'premium' account: essentially a visible flag on the account that anyone can pay for, like reddit gold. Encourage people to pay for accounts that they enjoy following.
Twitter could actually charge people to have their accounts Verified(assuming they are using their real names).
If that idea is successful, they could let verified users limit their twitstream to show only Verified users.
Then, perhaps, you might stop seeing most of the random crap posted by trolls, who can mob you today, even if they don't follow you and you don't follow them.
Yes, fair point. At the moment, "verified" means you are the real Donald Trump, or whoever, not a parody account. What would you be verifying if it wasn't an identifiable name (real name, stage name, etc)?
Under what I was suggesting, you would still be able to follow whoever you liked, whether verified or not. However, you would be able to block all the unverified users....
I was trying to say that organizations should be charged to be a part of Facebook, period. Whether they choose to advertise or not.
In a perfect world, there wouldn't be any advertising on Facebook. Just billions of people using it for free, subsidized by companies that pay to be on it.
That is pretty much equivalent. Those organizations would join Facebook for some reason. And that reason is to reach consumers. FB would end up giving orgs more powerful ways to promote Pages and then you end up with essentially ads.
But Facebook is free for consumers and costs for organizations. The reach is not valued zero at all, I have no idea what are you talking about, you just described the way FB works.
Without paying it's impossible to get your message out to your page fans, it doesn't work that way for long time anymore.
MetaFilter charges a membership fee, though they rely on ad revenue to keep it running. And it has to be pointed out that it was pretty close to shutting down last year (ad revenue was way down).
Answer: Many of these businesses are trying to monetize two-sided networks.[1] It's a much more scalable economic model than just selling a product (what you are describing) and works well for the big guys like Facebook and Google.
> what, then, would make them willing to pay to be a part of a social network?
At minimum it has to be free to get started, with the payment happening later as an add-on or up-sell. App.net put the payment up front, you couldn't use it until you paid, with the (predictable) result that nobody used it.
The model to look at is probably the tawdry world of "free-to-play" gaming on mobile, sadly.
App.net added a free tier in February 2013, and hit 100,000 users just two months later. By the end of 2014 they said that renewals were so low the site would be put in maintenance mode. So people are willing to pay for something, just not what App.net turned out to be. Or, they are willing to pay a little but not enough to actually afford the developers.
So I read the Ello manifesto - I like it. So I clicked the button that says "I Agree" [I am not the product]. And what happens? I get a bevy of links to share my sentiment on every major social network - the same ones they just pointed out are all about selling my usage and posting habits.
I don't know if this is deliberate irony or just something that wasn't thought through very well...
I think the point is that users can choose to share on ad networks if the desire or not. I often share stuff to Twitter. However, at its core, Ello itself is ad-tech-free. It's an oasis where I can relax and never worry about targeted ads, tracking or deteriorating UX because of ad tech. The team seams to really care about this and has been transparent and responsive in my experience.
I've seen some people on HN commenting on how the "responsibility" of funding R&D seems to be shifting (somewhat) from the public to the private sector. Surely this varies by industry (aerospace and defense is still hugely gov't funded) but it seems to be an increasing trend in the education, consumer goods, and healthcare sectors at least.
Twitter is not very profitable, but it is useful. Try to make it profitable w/ ads and dumb changes to a service that was fine without it, and you'll make it less useful. It's like taking a park and putting billboards on all the trees.
It would be interesting to see some sort of cost/benefit analysis from the gov perspective on whether or not to subsidize a public service like Twitter. We must do it for the large public energy companies we subsidize, why not for a network that (ostensibly) adds value to people's lives in a more abstract sort of way? If there was a compelling argument for putting our tax money towards Twitter rather than the DoD/NSA budget, I would at least be interested in hearing it.
Unless we start to think longer term about investing (50-100 years, not 5-10), we will be missing out on a ton of great products and services that investors shoot down with silly short-term monetization schemes.
I'd prefer to see public money go to projects that are more "ethically pure" than twitter like Wikipedia or a open source projects like Linux or one of the BSDs. If twitter receives public support we're protecting inefficiency -- it is already a profitable private company with a strong product -- if they can't figure out how to make it more relevant to future proof their growth then it deserves to fail -- another will take its place.
"It would be interesting to see some sort of cost/benefit analysis from the gov perspective on whether or not to subsidize a public service like Twitter."
If you're going to think like a government (well... a good one anyhow), you shouldn't be thinking about Twitter. You should be thinking about the category of things it represents. Is that category in trouble? Goodness gracious no, it's all but in a Cambrian explosion.
There's no compelling reason to subsidize the category in general, and even less reason to subsidize Twitter specifically.
Arguably the correct move is to definitively kill Twitter and show that "get really big, have vague hopes to show ads someday" is not a viable business plan, instead of it being in an indeterminate limbo.
Subsidies are not just for services that benefit the public. They are used to both fund capital-intensive industries that our country relies on and to make our energy generation competitive globally. To compare the energy industry to a single company like Twitter, which provides a product that is not needed in any sense is pretty far-reaching. Energy utilities provide regulated returns that are very consistent. Who knows when Twitter won't be cool anymore.
I definitely understand the fact that it's probably disappointing (?) to investors, but I'm confused when I hear it's dying. It's THE way to get realtime news on just about anything. It's my first go-to for sports, news, politics, even tech. The author hits it on the head; the 'vast confusion' of the timeline is kind of why I use it (and maybe why others do too).
not sure that the 'vast confusion' is why people use it..
I think that this confusion is more the reason why adoption and retention are not that great. Besides this, I think Twitter is the most valuable social network to date, you just have to hack your way around it to make it useful.
>The company’s revenue merely doubled last year, to $1.4 billion. Only 300 million people use Twitter every month. Apparently that isn’t enough.
Nope, because there no profit to be found. Twitter is to old a company to not make any money. Investors either need to stock increase in value or be paid a dividend, otherwise why invest?
Letting Twitter be Twitter clearly isn't making the investors any money, so of cause there's going to be suggestions to changes. At this point I think they should wait to see what Jack Dorsey does to be honest, and the article is written before he became permanent CEO.
MySpace wasn't a zombie while it was at the height of it's popularity. All zombies were once alive. I'm not arguing that it won't be a zombie, but that it currently isn't.
In what way is yahoo a zombie? Yahoo offers many products that are very competitive in their respective spaces (as well as having a 33 billion market cap)
They didn't scale too far, they set expectations too high (for investors) creating the perception of a struggling $20B company, when they are really a thriving $5B company.
I think this is it I think. Just investors who made a bad investment, more or less they are just going to have to deal with it, and take their loss.
Twitter doesn't have a means to increase its profitability by 500% over the next couple years. It will probably be fine in the sense that it will probably remain 'minor'-ly profitable and probably remain at its current size for quite a while... I think its hard to replace in that, to replace twitter you more or less have to duplicate it exactly. Its really that simple a service...
This is exactly it. Twitter should not have gone public, or at least nowhere near the valuation it received. You don't take in a lot of investor money without having a fully fleshed-out plan on how exactly you intend to put it to good use. Twitter's IPO was not based on logic and proven methods for growth. It was a bunch of people jumping on a bandwagon hoping that Twitter was going to be the next major player in the social media bubble.
Small and medium-sized businesses should be raking in investments to accomplish a single specific and realistically obtainable goal at a time. Large businesses who haven't yet found a way to be profitable aren't going to magically find a solution to all their problems by experimenting with dozens or hundreds of new ideas at high cost, with the desperate hope that one of the ideas will randomly catch and save the business. That approach is pure gambling, and so far the gamble does not appear to be paying off.
I honestly can't imagine what people who invested in Twitter expected to see happen. I figure that with Twitter being the next most recognized name in social media after Facebook, people simply imagined that nothing could go wrong. "Everyone knows about Twitter" does not translate as "everyone uses or will want to use Twitter".
Twitter is a fantastic tool for searching. If you want some information that's immediate or location based, such as if there's a Verizon FiOS outage, or a parade that you're trying to figure out the theme of (common in NYC), then Twitter is your go-to resource.
"I am 'on' Twitter (odd phrase). I’m not on Facebook; I don’t like the caged environment, with marketers and algorithms absorbing my information and distracting people with shiny objects."
I don't think the problem is that Twitter needs to re-invent itself or change what they are. It serves a purpose, some people use it well, and some people find value in it. Almost everyone who does see that value says exactly the same thing - curate your own feed, and it becomes a good tool.
But then those same people say it is about teaching everyone else to do it the same way. But I am not sure that is true. Not everyone wants to see content in the same way. Just like not everyone read newspapers or watched TV news when they were dominant, people will have their own preferences. So the assumption that the market for Twitter is "Everyone on the internet." is flawed.
It seems to me that Twitter has simply reached its market capacity. Their growth curve has flattened. But they have significant revenue. They need to stop trying to change the product to grow their market, and start simplifying their internal processes and decreasing costs. They need to serve their existing market even better, while spending less money.
If they can do that, then they will move into the black, and start operating like a non-startup, which is not such a bad thing for a company that has been around for almost 10 years.
Twitter would do itself and its users much good if it focused on making its core service work better. Three example areas screaming for improvement: Search, discovery, and alternatives to timeline-based views
Twitter has certainly carved out a nice niche--I love real-time information from important people, news sources, etc. They will be around for a long time.
Even so, I can't imagine them becoming more profitable any time soon. Still a short if I had to guess (which I typically try to avoid).
Yeah it doesn't really mean anything. Being a benefit corporation doesn't obligate the company to do materially reduce profits and in any case the company can choose to stop being a benefit corporation at any time.
Or to put it in analogy form. You give me $500,000 to buy you a Ferrari and I give you a Toyota Corolla.
You complain that I haven't held up my end of the bargain and I point out that the Corolla is a perfectly fine car that can get you from point a to point b and even has some strengths when compared to the Ferrari, so why are you complaining?
That's the point Twitter is at right now. They took the money to be something other than what they are right now. If Twitter wants to be just Twitter, that's fine, but you'll need to cut their 20 Billion market cap down to somewhere around a 3-4 Billion market cap, I don't have a model with me right now.
having said that, Twitter has some good things going for it.
IMHO, twitter just needs to shrink in size or find a way to really start growing revenue.EDIT to the child comment, you are confusing revenue and earnings. There is a huge difference between the two:)