Twitter could be considered a success story; a 140 character platform became a phenomenon for a short time, where everyone tweeted and even broke news at its height, and had a successful IPO. But now, even with an active user base of 313 million sending 500 million tweets a day, along with millions of minutes in video, the company no longer has the growth to support its valuation, and the business is still not profitable. In this year, where investors are placing a premium on profitablilty, it became difficult to see how the company could survive.
The company hasn’t been lax about developing new services. Most recently, Twitter signed a deal with the NFL to stream its games live on its platform, and also started to consider changing its iconic 140 characters to a long form publishing platform. However, it hasn’t been able to achieve the same growth due to alternative platforms, including Instagram, Snapchat, and, of course, Facebook.
Twitter is now actively exploring strategic alternatives (i.e. getting acquired), and the companies that are rumored to be in the running are Disney, Alphabet, and Salesforce. Each company has their own different reasons for acquiring Twitter, so it’ll be interesting to see if and/or when the company would be acquired and at what price.
However, there is a question here that hasn’t been asked; are Twitter’s struggles unique, or is it a company model issue? Twitter is not the first, and won’t be the last, to become wildly popular in the social media space, only to struggle for user retention in a few years. MySpace was huge in the 2000s, only to be sold for a fraction of its peak value. LinkedIn suffered a huge drop in value before it was acquired by Microsoft. Facebook is the obvious exception to this; the company has continued to grow in value; it has been able to effectively monetize its users’ information through its proprietary ad network. Instagram and Snapchat are still too early to tell.
The ability to attract users is fundamentally different than the ability to monetize on these users. Silicon Valley is well known for creating amazing business models from solving a specific problem (i.e. Airbnb and renting out your place), but without a healthy acquisitive environment, it’s hard to these companies to turn a profit. Alphabet is probably the best example of a collection of businesses that aren’t profitable; it still makes money primarily from its search and ad services despite investing in a social media network, having the most popular video service in the world, probably the most prolific email services, and the list goes on and on.
Twitter will stop being its own entity one way or another. The question is, which company will go the same way?