For Twitter, a billion isn’t cooler
Investors beat up on Twitter when its user numbers slowed, but it’s an interesting business with 240 million users, and its potential is just beginning. Here’s why.
As a social media platform, Twitter is the raconteur who lights up the party. As a publicly traded stock, Twitter is the livewire who bounces between raging on the dance floor and crying in the bathroom. Last week saw Twitter in runny mascara and spilt vodka mode, as questions about user growth and engagement rates caused the stock price to plummet by a quarter in one day.
It’s exciting to watch the stock price play out, but it’s more enlightening to look at the living business behind the valuation. Because Twitter can be an interesting business whether its user base is topping out, or whether it’s on a Facebook-like trajectory to a billion users. In both cases, its potential for making money is just beginning.
Let’s go look at the latest drama and then let’s look beyond it.
The latest drama — slow growth and falling engagement
Twitter’s monthly active user base grew to 241 million in the last three months of 2013, up 3.8% on the previous quarter. Leave aside the fact that the platform found nine million new users in just 13 weeks; that feels slow and small to investors who compare it to Facebook with its 1.23 billion users.
Twitter measures engagement by timeline views: the number of times users either open Twitter or refresh the page to see new tweets. This figure actually slipped in the last quarter of 2013, down from 685 refreshes a month to 613 times a month.
WTF — why the fall?
We know that, as platforms mature, they attract less active users. Facebook passed the billion-user mark thanks to older users. Only 3% of its users were over 55 back in 2009; last year 22% were in that older age group. There just aren’t a billion socially-obsessed, web-enabled teens and millennials out there. But Twitter’s new crop of users can’t account for the net fall in timeline views. 241 million viewers times 613 timeline views is more than ten billion fewer than 232 million users times 685 timeline views.
Despite the figures, it’s hard to believe that Twitter has become less worth refreshing. Has the platform really become less interesting?
The party is still on Twitter
If you want to see a platform becoming less interesting, look to Facebook. FB’s stock price took a hit after a survey showed that young people no longer regard it as their most important social network. That’s the biggest fear for any platform: if people lose interest then they drift away and the business dies.
That’s a legitimate fear for Facebook, because it doesn’t encourage the most interesting content. Once everyone is on the site, the content will be as interesting as the average life: more baby pictures and kvetches about the day’s commute. The billionth user made Facebook bigger but no more interesting.
This isn’t happening on Twitter. If FB is a mother’s meeting, Twitter is an open mic night. People who flourish on Twitter are learning to get more interesting. They’re bringing their A-game. People with more than 10 million followers on Twitter include Bill Gates, Beyoncé and the New York Times. Microsoft’s Satya Nadella dusted off his Twitter account when he became CEO, because that’s what the world’s significant people do when they want to share what’s important.
The stars of Twitter, from Rihanna to Stephen Fry, are the people who put the most into it. Twitter is a more interesting place than Facebook, and with the mainstreaming of Facebook, it’s going to become more apparent.
The Twitter premium
Not all media channels are equal. Advertisers pay more to reach Economist readers than to reach US Weekly users, because Economist readers are more affluent. Twitter could be a premium property as well. Users are disproportionately likely to be young, college educated and earning over $75,000 a year.
Even if Twitter is topping out at the 240 million mark, there’s a good case that it will become the Internet’s premium social platform. Maybe there aren’t a billion witty news junkies out in the world, but most of the witty news junkies are on Twitter.
The undervalued Tweeter
The past year has seen advertisers getting real about viral content. Yes, stuff spreads on social platforms, but most people don’t share content, and the stuff that spreads tends to have a helping hand of paid-for placement. Good branded content on Facebook tends to have about a 1% engagement rate; that is, around one in a hundred fans of popular brands either like or share anything that the brand posts to FB.
Even Buzzfeed advises that people find its content through exposure more than through sharing.
The same will begin to apply to promoted tweets. The topical wit that brands are learning to use on Twitter is only beginning to get the paid-for support of a promoted Tweet. Twitter’s $220 million 2013 advertising revenue works out to just 91 cents per user. (Facebook made $7 billion in advertising revenue last year, or $5.69 for each of its 1.23 billion MAUs.) If we believe that Twitter’s users are smart, affluent and engaged, they’re worth paying to reach.
Twitter’s next business is popularity insights
Twitter’s other source of revenue is user data.
Twitter’s user data isn’t just valuable for targeting campaigns.
Because it covers what people share, Twitter data teaches us about how stuff becomes popular. Twitter estimates that 40% of Tweets posted in the UK during primetime are about TV shows. Twitter holds more data on media popularity than Gallup or Nielsen. Advertisers dropped maybe half a billion dollars around this years Superbowl. Think what those advertisers, or Fox and the NFL, would pay for a complete understanding of the 24 million Tweets sent around the game.
Twitter makes just nine per cent of its revenue from data services. It’s leaving the revenue on the table for third parties to package and analyze, which feels like a lost opportunity.
If data is the new oil, Twitter is pricing it more like canola than truffle.
A new welcome mat
My contention is that, while Twitter has great growth potential, it won’t find a full billion new super-users. Are one in six of the people you know deeply informed and gloriously quotable? No? How about one in six of the world’s entire population?
But if the platform is going to multiply its user base, it will need to make itself more accessible to new people.
What if newbies could search people to follow by area of authority, as you can on Klout?
What if the desktop and tablet versions of Twitter offered an overview around each trending topics, not just the hashtag, as Ezra Klein’s Project X news site promises to do?
What if mobile users could toggle between topics?
What if Twitter talked to the public about the great things that happen on the platform, as Google does so powerfully with Chrome?
Too much of the potential usefulness and appeal of Twitter sits outside Twitter itself, and the brand needs to take responsibility for its future here.
Waiting for Twitter to achieve Facebook’s scale, and punishing it when it doesn’t, completely misunderstands Twitter’s potential. Twitter’s urgent wit and comment is already valuable to the most valuable people, and should become more valuable to more people.
