Twitter’s potentials and threats

What I know:

Just like this picture, Twitter has experienced huge ups and downs in the past one year. Some people bet huge on it, while some think Twitter is on the way to die. But this is the true fact that I know:

Typical advertisers are now shifting to digital marketing to engage better with customers, and the whole advertising landscape has changed dramatically since the invasion of Google, Facebook and Twitter. Advertisers spent $5.1 billion on social media advertising in 2013 and this number will climb to $14 billion in 2018. The biggest players in this market are Google and Facebook, which account for 46.8% and 21.7% market share in 2014. On the contrary, the market share of Twitter is only 2.6%. By looking at this overall number comparison, Twitter is definitely at disadvantage but there are definitely some other stories behind this

What I bet:

89% of revenue comes from Mobile for Twitter, compared to 76% of Facebook and 22% of Google. It is expected that the mobile spending will increase 50%, reaching $28.72 Billion in 2015. compared to only 8% growth rate of digital marketing. If that is true, on average, the mobile revenue will increase 50% without considering the user growth. If we take the average user growth in Q1 and Q2 ’15, the user growth will be 16%. In another word, the mobile revenue growth will be around 70% in the current and next year. At the same time, Twitter remains the top two positions of the preferred social media marketing platform. In terms of the source of revenue stream, the average YoY growth in US market is 64% while it is 112% for international market. This revenue stream difference is mainly driven by the growth of number of active users and the revenue per unit of advertising.

One important metric that is now missing from Twitter’s reports is revenue per thousand timeline views, which is a key metric to both measure user engagements and marketer’s confidence in effectiveness.

According to this graph, the Ad revenue/1000 timeline views growth in the US lags behind the international market. At the same time, the user growth comes mainly from international market. The question is how Twitter is going to take advantage of the rapid spread of social media power in international advertising market. The percentage of international customer of Twitter (78.6%) and Facebook (83.1%) is similar, but Facebook is generating 51% of its Ad Sales from international market, compared to around 36% of Twitter. In another word, Twitter has huge potential of growth in international market if it sets the right tone.

What I fear:

Although Twitter is the vanguard of social media advertising, new companies, like Pinterest, Instagram and Snapchat, are trying to get a decent share of this growing market. The core difference between Twitter and these intruders is that they focus almost exclusively on contents, like pictures and videos. According to some survey, experienced marketers rely more and more on Instagram and Pinterest because of better customer engagement. In another word, when the market keeps growing and becomes more competitive, marketers might rely more and more on these newcomers. In terms of user growth, as of September 2015, Pinterest has crossed 100 Million monthly active users and Instagram, surprisingly, 400 Million. It only took Instagram 3 years to cross 100 Million monthly active users while it took 5 years for Twitter. Another interesting metric is user engagement (ads that people have liked or commented). Instagram is around 40 times higher than Twitter. In another word, in terms of growth and user engagement, Twitter has already lagged behind its competitors. At the same time, Google is in the transition to be more mobile-oriented, which will add to the complexities of the whole industry landscape.

Another great concern comes from the advertisement revenue structure. Despite the lack of the support of data, Twitter depends heavily on mobile app installment. For example, around 69% ads revenue for Facebook come from install ads. The heavy dependence is the result of abundant marketing spending of tech firms. But if there is a shortage of VC funding, it will become a huge issue for Twitter.

What I hope:

Twitter should build a more centralized product. Twitter has a pool of awesome products, like Vine, Periscope and recently-launched Moments. These are new ways of engaging customers but they seem to be self-independent. Vine, as a video based contents provider, serves as a good foundation of future video-enriched platform. But the integration needs to be improved 100 times better. Periscope is an excellent example of live streaming from all around the world but the quality is still crappy and contents are not interesting enough now. Moments, like a traditional news aggregator, caters to a broader audience for interesting and immediate exposure to what is happening around the world. Unlike traditional news aggregator, it combines news, pictures and video in a very natural way. But for a user (like me!), the contents are not updated promptly and more tailored features have to be added.

Twitter should start diversifying its revenue source and composition. I am not saying that Twitter should not build a strong advertising business, but it should cater to a more broad group of business customers. Most of adds on Twitter are related to app promotions, which might not be sustainable in the long term. Instead, Twitter need to reach out to traditional companies, like Starbucks, Nike and etc. Twitter has the ability to transform its online data into monetary weapons, and it needs to prioritize that now.

All in all, I am still betting on Twitter because of its great potentials if we just look at pure numbers. At the same time, I do realize that there are huge threats from emerging competitors that Twitter has to address properly. And I know Twitter is already in fighting mode now!