What is Going on with Twitter?!

July 8, 2016

Twitter’s official launch in July of 2006 was met with mild enthusiasm. Facebook had established dominance and set the standard for what many envisioned “social media” to look like.

However, at the South by Southwest Festival the next year, Twitter was formally introduced to its lifeblood: techies, bloggers, and the media.

That moment marked the beginning of the platform’s rapid ascent to the top tier of social media sites. Twitter became the place for users to discuss world events in real time, interact with celebrities and politicians, and it even gave us the glory that was Weinergate.

Twitter introduced the word “hashtag” into our collective vernacular and gave Millennials a safe haven from their parents, who had discovered how to use Facebook.

Yet, in the past months, there have been a number of “fortune tellers” ready to sign Twitter’s death certificate.

What could have caused the newest pillar of the social media world to crumble so quickly?

Revenue

Twitter had a reasonably successful stock launch in November 2013.

Its IPO was valued at $ 26, however by the closing bell had reached $ 44.90.

Two short months later Twitter stock reached $ 64.50… and then began a downward spiral, from which it has been unable to recover. Last month, analysts at MoffettNathanson sent a strong message to investors by downgrading Twitter’s stocks from “neutral” to “sell”.

They cited stagnation on the platform, with “too little, too late” innovations and murky plans on how to stabilize the company, stating “hope is not an option”.

Similarly, Twitter’s valuation has become a source of consternation.

It’s quick expansion resulted in a $ 40 billion valuation in 2013. Cut to three years later, and the company is now estimated to be worth approximately $ 10.3 billion.

Such stark financial troubles have placed Twitter’s value lower than that of newer social competitors Snapchat and Pinterest.

Stagnation

After Twitter’s mainstream debut at SXSW in 2007, the platform boasted rapid growth in the years that followed.

High profile users such as Ashton Kutcher, Roger Ebert, and Oprah saw Twitter’s potential in the early days and used their influence to grow out the user base. Soon, politicians like President Obama and media outlets such as the New York Times were following suit, lending additional credibility to Twitter’s new found strength in the market.

By last year, Twitter had amassed roughly 300 million active monthly followers. That’s great news; however, that number has stayed roughly the same to current day. In the social media game, stagnation is not solid ground on which to stand.

In fact, Twitter has now been surpassed by Facebook’s Instagram and its 400 million monthly users and new rising star Snapchat’s 150 million daily users.

Visual Content

Twitter’s popularity hinged largely on the features that differentiated it from the rest of the social media competition, namely Facebook.

And while for years this structure ensured continued growth, Twitter executives put their heads in the sand as the social media landscape began to evolve.

Demand for visual content has allowed Snapchat and Instagram to gain steam, leaving Twitter behind. And although Twitter successfully launched Vine and acquired Periscope, those apps alone are not enough to survive.

Now the platform finds itself hurrying to play catch up with its rivals.

It recently acquired Magic Pony Technology, a London-based company that specializes in photo analysis and data collection, as well as photo enhancement. This is the third data collection company that Twitter has purchased since 2014, lending to the theory that Twitter is attempting to beef up its analytical capabilities in order to strengthen its marketing insights.

Twitter is struggling to stay competitive in the fight for advertiser dollars. Instagram recently overtook Twitter in advertising funds and Snapchat is right on their heels.

The purchase will also improve the quality of photos and videos shot on mobile devices, tailored for Vine and Periscope but also trying to catch up to competitors that have already begun capitalizing on the visual content bandwagon.

Twitter also announced that users on the platform will soon be able to add stickers to photos.

While this doesn’t sound incredibly groundbreaking, it is an attempt to rival Snapchat’s filter appeal. However, Facebook has introduced filters almost identical to those on Snapchat onto its Facebook Live platform that make Twitter’s stickers seem like child’s play.

Twitter also announced a video length extension from 30 seconds to 140 seconds in an homage to its 140 character limit. While these changes may excite Twitter’s existing user base, it’s hard to image it will be enough to entice new users into joining.

Internal and Financial Confusion

Nothing inspires more doubt in a company’s sustainability than having a revolving door of employees.

Jack Dorsey, the co-creator of Twitter, was famously ousted as CEO in 2008 due to his financial extravagances and gross mismanagement.

He was brought back as interim CEO and eventually permanent CEO last year after then-CEO Dick Costolo very publicly resigned.

Other employee exits were also worrying:

• Only months later after Costolo’s resignation, four of the ten top Twitter executives announced they’d be leaving the company.
• Then just this May, the head of media and commerce and well as the head of business development announced their departure.
• While the moves signaled the new CEO’s willingness to make changes in order to turn Twitter around, the staffing exodus left investors and Wall Street shaking their heads.

In addition to the resignation of top executives, Dorsey decided to lay off 336 workers, roughly 8% of all staff, in an attempt to virtually wipe out Twitter’s commerce department.

The action brought confusion to shareholders as just one month before, Twitter partnered with online payments company Stripe to launch the “Buy” button.

Stripe had designed a program that integrated into social media apps and allowed customers to purchase items directly from a retailer on the platform.

While the technology is still in place for retailers to utilize the “Buy” button, the decision to walk away less than a month into the launch showcased Twitter as a company that did not have a clear idea of where it wants to go moving forward.

Twitter is also dogged by the places its time and money are being allocated.

Following a botched acquisition attempt two years ago, Twitter recently invested $ 70 million into Soundcloud.

Soundcloud is facing similar financial issues and recently announced that they would need additional funding in order to stay afloat.

Twitter’s $ 70 million stake would make sense for the platform if some type of partnership could be brokered between it and Soundcloud, which boasts an impressive 175 million monthly active users. However, Jack Dorsey refused to comment on the specifics of the funding and what that type of investment would yield for existing Twitter users.

It’s also unclear how this expenditure would be helpful in securing the new users Twitter desperately needs.

IMA’s Twitter Report Card

It’s too early to know if Twitter has done irreparable damage to its reputation while trying to find its footing in a dramatically changing social media landscape.

The negativity that surrounds Twitter is somewhat misguided as the platform still maintains high usage compared to its competitors. Financially, however, the company is bleeding.

There are, of course, some bright spots within Twitter’s attempted facelift.

It was announced that Twitter spent $ 10 million to begin live streaming Thursday Night Football games this football season, having beat out the likes of Verizon, Facebook, and Amazon for the rights. NFL Football has a huge built-in fanbase that, if all goes to plan, would give Twitter a boost in new users.

Another advantage to streaming these games comes in the form of advertising revenue.

Twitter is hoping to earn $ 50 million in advertising packages that will run during the games, translating into a robust profit for the company.

In addition to the loosening of length restrictions on video content, Dorsey announced changes to the strict 140 character limit earlier this year.

Content such as video uploads, .gif attachments, and polls previously counted against the 140 character restriction.

Future updates of the platform will remove these restrictions, allowing users more creativity with their visual posts.

That said, Twitter does appear to have peaked.

In the social media game, stagnation is not safe ground on which to be standing.

Dorsey seems to be hoping for a magic wand that will calm the nerves of investors and spark excitement among new and existing users. Without stabilization and a clear plan for the immediate future, Twitter’s fate looks strikingly similar to that of LinkedIn.

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