Recently, Twitter was discussed in many publications, but unfortunately for the company, it was not attention that any entrepreneur would like to see. The articles with titles such as “The end of Twitter” or “Why Twitter’s Dying” for sure attracted not only my attention.
These publications might be a herald of the company’s end, or an exaggeration that could be an impulse for the company to bounce back. For this reason, I decided to verify and confirm if the company’s situation is really that bad, and created a SWOT analysis for Twitter.
In 2006, Jack Dorsey sent the first Tweet on March 21. Seven years later, in 2013, Twitter was one of the ten most-visited websites and has been described as “the SMS of the Internet”.
And even though ten years later, Twitter now has more than 500 million users, of which more than 305 million are active, dark clouds are gathering above the company. Twitter now faces a major user base growth problem which is getting worse. The company reported negative growth of monthly active users for Q4 of 2015 which compared to Q3 of 2015 are two million lower.
At the same time, Twitter generated $710 million in revenue during Q4 of 2015, compared to $479 million during the same quarter a year before. On a non-adjusted basis, the company generated net earnings of $114.6 million, or $0.16 per share, compared to $79 million and $0.12 per share a year ago.
Although these numbers do not look too bad, the Twitter’s stock price is falling after the social media company’s revenue forecast for the current quarter missed analysts’ expectations and fell to an all-time low. The company was valued at just more than $10 billion when the markets closed February 8th — down from a 2013 high of $40 billion. That is less than the total valuation of Pinterest ($11 billion) and Snapchat ($16 billion).
Meanwhile, four top executives left Twitter last month, including the directors of engineering, product development, human resources, and media. Only 5 of the 13 Twitter execs that made presentations at the November 2014 Analyst Day remained in the company.
Moreover, during the last few years Twitter’s, workforce ballooned to more than four thousand people, but this did not help to improve their sloppy product updates. Facebook, on the other hand, has about nine thousand employees and will make more than two billion dollars in profit this year (almost 20 times higher profit with only twice as much employees). This is why Jack Dorsey, one of Twitter’s co-founders, who came back to the company in October 2015, announced an 8% reduction in Twitter’s workforce just two weeks after his return.
The goal of Twitter’s founder is simple: make the application to become the first thing everyone in the world checks to start their day, and the first thing people turn to when they want to share ideas, commentary, or simply see what’s happening.
However, the line for customers’ attention is pretty long, the first place being held by Facebook, but also services such as Snapchat, Instagram, and the messaging applications, which all have news feeds of their own and are competing for the first place among users.
Unfortunately, Twitter has been losing the battle with competition; and other social media channels are moving ahead with their number of users and faster growth. The main reason for this situation might be Twitter’s major weakness — problems with focused product development.
Improving product development
Recently Twitter’s users created the #RIPTwitter hashtag as a reaction to gossip that the company would be replacing its reverse chronological feed with an algorithmic timeline similar to one used by Facebook. Paradoxically, Twitter, by applying this change to its product would ruin its biggest asset and advantage over competitors — a role of leader among services focused on sharing and discovering news online in real time (even live-streamed during events).
The turmoil concerning the algorithm’s introduction is even more surprising when we consider the company’s new product called Moments, which was created to present the most talked-about stories of the day in a new section of the application.
Moments is a magazine-like view of Twitter that works even if you have never followed a single person. I can easily imagine that the algorithms used in Moments could also filter the most popular tweets of followed users without changing the original feed which could create additional value for the users.
However, to attract new customers and to convince the loyal ones to use the new app, Twitter needs to improve its product user experience. Moments not only is not consistent with Twitter’s design — it actually looks like an entirely different product. When we compare it to the perfectly synchronized Facebook profiles, feeds or pages, there is, without a doubt, room for improvement.
Every day, people share hundreds of millions of tweets, and among them are things which you cannot experience anywhere except on Twitter. On Twitter you can find conversations between world leaders and celebrities, citizens reporting events, the hottest news and more, but unfortunately, also a growing wave of harassment and abuse among users and massive promotion of terrorist ideology.
The ease of creating new accounts, in which users do not need to register their names has its side effects. When you add it to the extensive popularity of Twitter, it is no surprise that the platform was the first choice for ISIS propagandists. To avoid bad press and to keep users’ interest the company needs to continue blocking abusive accounts and to expand further the mechanisms that support verification of reliable sources and inappropriate content. Without valuable content, the goal to become the primary source of real-time news might be unattainable.
In the few months since Dorsey returned, Twitter introduced the Moments application, added polls to tweets, replaced its star-shaped “favorite” icon with a heart-shaped icon called “like” and rolled out a “buy” button. These changes were probably steps in the right direction, but neither of them resolved any of the company’s issues.
Jack Dorsey faces now not only problems with the lowest stock price ever and a wave of negative reactions of Twitter’s loyal users, but also, he might have difficulties with finding high profile people willing to join the company.
And the CEO, for whom running Twitter isn’t the only job (he is also the chief executive of the online payments firm Square), definitely needs a good and reliable team, which will find the answer to potential users’ dilemma: what exactly do we need Twitter for?
Without this answer, Twitter’s survival may be in question.