It says something about the extraordinary scale of social platforms when a technology behemoth with 302m active users every month can be seen as failing to achieve its potential.
In after-hours trading following the sudden announcement on Thursday, Twitter stock briefly fluttered up 8% higher. It was a reflection of the uneasy feelings from investors towards a man who fell under their increased and ultimately poisonous scrutiny as he navigated the social networking firm through its public offering in November 2013, having been CEO since he took over from Evan Williams in October 2010.
Despite being a very different product serving a very different audience, Twitter is often compared to Facebook – and often unfavourably. Therein lies an identity crisis of sorts.
For Twitter’s investors the concern was less about user numbers than the growth and aggressiveness of the company’s online advertising. While Costolo was popular with many staffers for bringing structure and co-ordination to a chaotic young company, and took it to a market capitalisation of $23.4bn, he also oversaw the process of risk and uncertainty in pushing towards a brand new space.
Costolo and Jack Dorsey, who now takes over as interim CEO, have both insisted that the move was not connected to Twitter’s recent financial results – which saw those user numbers grow just 4.86% – so much as a decision made purely by Costolo himself, as a capstone to discussions that had been going on since last autumn.
Right now Twitter is in danger of becoming a niche product: it is beloved by journalists (guilty) and marketers, yet viewed with confusion by mainstream consumers.
Where the selective friendship groups of Facebook make sense (to varying degrees), Twitter’s public face can be more intimidating. On the other hand, the 140-character simplicity of Twitter’s platform and the potential to be the “civic square” of popular debate offers just as much value and, usually, less flatulent conversations.
In an era of endless feeds and the digital burden of email and obligatory posts from friends, Twitter’s brevity and ambience is a welcome change; what you miss is just missed – not mourned, nor added to a tedious, ever-increasing pile like email.
But in focusing its business Twitter has made some strategic decisions, such as closing off access to selected third parties – Instagram at one point, Meerkat at another, and earlier to a wider stream of third-party developers. Twitter was under pressure to protect its valuable audience and its scale, and in doing so cut off the community that helped it grow.
All of which left many users and especially those investors wondering: who is Twitter for? How does it distinguish itself against Facebook? And how can it expand its service while remaining simple and accessible?
Twitter accounts for 1.6% of the critical US digital advertising market – a market worth $50.73bn – compared with Facebook’s 7.6%. Twitter accounts for 3.6% of US mobile internet ads to Facebook’s 18.5%. And in mobile display ads Twitter has a 7% market share compared to 36.7% for Facebook, according to eMarketer.
On user numbers alone – Twitter has 302m monthly active users to Facebook’s 1.44bn – the share of ad market doesn’t seem so surprising. Yet it’s the slowing down of growth that has concerned investors: Twitter’s monthly active user numbers have fallen 30% from 2013 to 2015, and by 2019 growth – a critical indicator of future potential revenues – is heading for a slowdown to 6%.
For a young public company those numbers are sounding more and more like a death knell. For investors, Twitter’s plans – and Costolo carried the can for this – have not confidently set out its future. Chris Sacca, a major investor, wrote an insightful essay on the company’s challenges: “Twitter has failed to meet its own stated user growth expectations and has not been able to take advantage of the massive number of users who have signed up for accounts and then not come back. Shortcomings in the direct response advertising category have resulted in the company coming in below the financial community’s quarterly estimates.
“In the wake of this Twitter’s efforts to convince the investing community of the opportunity ahead fell flat. Consequently the stock is trading near a six-month low, well below its IPO closing day price, and the company is suffering through a seemingly endless negative press cycle.”
But he says Twitter “has boldness in its bone” and that it can improve by making the service easier for new users, more supportive for users intimidated by the site, and by making it feel less lonely.
This article was written by Jemima Kiss, for theguardian.com on Friday 12th June 2015 00.56 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010