Twitter faces an existential crisis

Twitter has announced its quarterly earnings and while the numbers were a bit better than expected Twitter now has to work out what the point of it is.

Jamie Davies

October 27, 2016

3 Min Read
Twitter faces an existential crisis

Twitter has announced its quarterly earnings and while the numbers were a bit better than expected Twitter now has to work out what the point of it is.

The company, which arguably normalized the social media medium for the internet age, has been having a bit of a tough time of it recently. Fresh off the heartbreak of not being able to find an acquirer, CEO Jack Dorsey put on a brave face to announce the company’s quarterly financial results, and to be honest, not bad.

The company posted quarterly revenue of $616 million, up 8% year-over-year, while average monthly active users (MAUs) were 317 million for the quarter, up 3% year-over-year. That’s 4 million new users, not bad for a platform most would assume is slowing down and becoming less appealing. Average daily active usage also increased by 7%, which was an acceleration from 5% and 3% in the previous two quarters. All-in-all, not bad, though it still isn’t profitable.

However, alongside the positive financial results, 9% of the workforce has been cut, according to Techcrunch. The sackings were in the sales, marketing and partnerships departments as the team aim to restructure the organization, and will cost the company between $10 million and $20 million in compensation. Whether this means Dorsey is intending the organization to remain on its own or if it is trying to make itself more attractive for another acquisition has not been made clear to date.

“We see a significant opportunity to increase growth as we continue to improve the core service,” said Dorsey. “We have a clear plan, and we’re making the necessary changes to ensure Twitter is positioned for long-term growth. The key drivers of future revenue growth are trending positive, and we remain confident in Twitter’s future.”

So the company is in an alright position now, despite the fact no-one wants to buy it, but where is the future growth and innovation coming from? There is a lot of promises but very little substance so far.

Twitter is often compared to Facebook for two reasons. Firstly, they both hit fame at the same time, and secondly they are the two most recognizable social media brands worldwide. However, the financial successes of the businesses could not be more different. There are several reasons for this, however Facebook may be recognized as a better advertising platform due to the variety of experiences which users can have. It’s a more engaging platform.

Twitter is great for unleashing a stream of consciousness or generic brand advertising, but Facebook offers chat, newsfeed, video streaming, vines, a marketplace, an alternative to websites, games and also other experiences. Facebook has released numerous innovations and has mounted serious challenges to alternative segment incumbents, Twitter looks like it has run out of ideas, and the current offering is fundamentally the same that was developed in 2006. There have been a couple of promises of video, but so far there would appear to be little success.

So Twitter has kept Wall Street happy for the moment will some healthy numbers, but this is far from a success story. There need to be some serious considerations to what Twitter’s current position is in the industry is, as well as the direction it wants to head is it is to meet the early promise. Looks like Dorsey has some serious thinking to do.

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