The massive and painful Twitter pivot

Watching live events and talk about it while it unfolds

Wonder why Twitter shares are down 80% from their highs. It’s because the company is changing its business.

Here is what Twitter was 2013:

“Twitter is a platform for public-self expression and conversation in real time.”

Here is what Twitter is today (from the most recent shareholder letter):

“Whether it’s breaking news, entertainment, sports, or other everyday topics, seeing what’s happening and watching live events unfold with the conversations around them; that’s the power of Twitter”.

The focus on live video and conversation is new. Twitter showed it’s hand last June when it bought Magic Pony, a British machine learning startup that enables live streaming of video in high quality to any device. The key to Magic Pony is a technology which allows video to be rendered in high quality on your phone even if the stream is not good. Magic Pony is using pattern recognition and statistical analysis to guess what the video should look like even if the actual stream is bad. Let’s say you want to send a video live about your skiing down a steep hill. Let’s assume your stream gets bad because the receiver is in the New York subway. Magic Pony takes the corrupted stream and guesses how the full quality stream should look like and renders it to you.

This bet shows that Twitter is serious about live streaming. Combined with live conversation this could become a big business. Twitter is trying to solve the problem of high quality live streaming with live conversation at scale to any device. This is a big problem for a big market.

Why is Twitter doing this?

First, because it’s a great opportunity.

Second, because the legacy business is not working anymore. Competition is stiff in the social advertising space and Twitter is loosing to Instagram, Facebook and others.

In Silicon Valley pivoting is used as a another term for F#@ up. The previous crew under Dick Costolo has F#@ up the Twitter business and it was going nowhere.

It’s really a shame what happened under Costolo. Because of pressure to make money and go public Twitter became a short term lemon squeeze business. Just generate revenue and forget about longterm strategy. Well, competition caught up and the Twitter product became increasingly irrelevant.

New CEO Jack Dorsey is doing the right thing. He is pivoting. Twitter is going from real time conversation at scale, to real time video stream with conversation at scale. That is a huge change. Watching something is very different and conversing while watching is new and feels fresh. In addition to that the real time stream on mobile is a problem to be solved. It’s still very difficult to provide high quality experiences. Just imagine how somebody like Comcast or Time Warner Cable will feel about a business that has solved the real time video streaming problem.

Twitter has a big chance to make it big and become something relevant again. Even more relevant than Google or Facebook. If Dorsey succeeds Twitter will become the place to watch real time events unfold. Either scripted events like sports games, political rallies etc. or unscripted haphazard events like a hurricane or wild fire. Anything happening in real time and worth watching could be on Twitter and Twitter could become the place to watch this and converse about it.

I can imagine a future where the verb Twitter means to watch a live video stream. “So, should we watch the Seahawks game on TV or should we Twitter it?”

Conversing and watching is a very social thing. So far, it’s confined to the living room. Twitter can change this. It’s a big bet and currently Wall Street doesn’t understand or doesn’t want to value any of this.

In the meantime the legacy business is not very good. That’s why Twitter shares have collapsed.

However, it’s perfectly possible that pivots work. Just ask Apple.