Twitter’s Value
And how to optimize UX to drive further engagement
This post will discuss Twitter’s post-IPO financial history, examine suitable buyers for the company, and suggest UX opportunities for future growth.
Around three years ago — on September 12, 2013, Twitter announced that it had filed papers with the SEC and put forth its plan to go public. At the time, the long term prospect for the company looked bright, they had exponential growth in their user base and daily activity metrics––major key for any tech company.
In order to avoid the IPO fiasco experienced by Facebook, Twitter announced its plan for listing on the NYSE rather then the NASDAQ.
Following their release to subscribing investors at $26 a share, during the morning of their IPO, Twitter’s stock opened at $45.10, peaked at $50.09 a share, and closed at $44.90, slightly below the opening price. No investor who bought the stock that morning and held on to the end of the day came out ahead. As a result,
Twitter’s IPO was largely considered a failure.
The Twitter IPO filing states that “200,000,000+ monthly active users” access Twitter and “500,000,000+ tweets per day” were posted. Today, Twitter has ~320,000,000 monthly active users — a smaller then expected increase from its pre-IPO baseline.
It is important to note the slowdown that has occured in the post-Q1 2015 era for Twitter. In addition, it seems as if the growth average volume of tweets has sown over time (see data listed by Statistic Brain).
Thus we find, despite the similarities of the two companies– as an equity holder, you’d be much better off holding Facebook then Twitter over the last 3 years:
Why has Facebook’s share price increased while Twitter’s has decreased? It seems that their revenue has shown a greater increase over time when compared to their capital expenditure — this should be a good sign for investors.
However, while Twitter has shown increase in revenue relative to capital expenditures, they have failed to achieve a positive profit margin since their IPO. This stands in stark contrast to Facebook, which has been able to consistently derive a return since IPO. Even Amazon, notorious for its small to nonexistent profit margin, stands in stark contrast to Twitter.
Finally, at the time of IPO, Twitter had a comparatively smaller user base then Facebook. Despite this, many parallels between the two companies existed. For example: both companies both companies benefited from strong network effects associated with exponential user growth, and have revenue models structured around advertisements (and were thus reliant on daily user activity).
Thus, while overall userbase growth has seemingly reached an inflection point and slown for both companies:
Facebook, has succeeded in doing a better job at deriving revenue from its userbase then Twitter:
Finally, without taking these potential suitors into consideration, what could Twitter do itself to improve its user experience and cultivate new avenues for growth?
Suggestion 1: Hyperlocalized newsfeed
I could easily see how the inclusion of a hyperlocalized newsfeed — where tweets published by public accounts within a local geographic radius–could be a boon to user engagement and increase adoption. This feature could be largely compared to what Yik-Yak offers (especially in its 3.0 iteration), and could work to strengthen Twitter’s image as a democratic platform that allows a diversity of voices to be heard.
I personally doubt Twitters effectiveness as a ‘message platform’ (especially when compared to recent strides made by iMessage and FB Messenger). It seems that the main use case for the feature is for spam and abuse purposes. An inclusion of a hyperlocalized offering could be labeled as a ‘discover feed’ and could be rolled out carefully as an AB test against the ‘Moments’ and ‘Messages’ UX elements. It would allow users to put their finger on the pulse of their community while finding new people to follow — thus increasing the app’s overall lure and engagement.
Suggestion 2: Build an integrated and dedicated native app to stream live events on Smart TV’s
Twitter has recently begun to stream NFL games and is also scheduled to livestream tonight’s Presidential debates. Live events are a huge market, and are also one of the last stronghold’s of the cable industry. Twitter could eat this market up by becoming the ‘de-facto’ application for live events on Smart TV’s and on Internet-TV devices like Apple TV, Amazon Fire, Chromecast, Roku, etc.
Suggestion 3: Monetarily incentivize engagement through creation of Twitter ‘app coin’
The release of a ‘Twitter Blockchain’ with a dedicated app coin would provide a monetary incentive for increased user engagement. In building this app (or alt-) coin, Twitter could take a nod from Steemit. If they could manage an ICO (initial coin offering) while simultaneously maintaining their position as a public, shareholder-based company — they would be the first to simultaneously operate in the centralized, and decentralized spheres.
A rational, homo economicus might say,
“I receive Social Media utility AND earn spendable, digital currency? Count me in.”
In this paradigm, the future of Twitter may lie outside of Twitter, and instead within a competing platform built around Bitcoin or a specialized Appcoin.
Marc Andreesen, founder of Netscape, Venture Capitalist, and Twitter power user has recently left the platform at this rather volatile point in the company’s history.
Some speculate that Marc Andreesen himself may be the buyer — through his VC firm A16Z.
However, I believe that it is more likely that he may be preparing to migrate to a decentralized platform built around the 21.co architecture (which he has funded). Or the truth could be a blend of these conjectures — he may be the one buying the platform and preparing to migrate it to a decentralized platform.
For a more thorough analysis of the decentralized, Steemit model — check out our previous post Understanding Steemit — The blockchain based social media network
All graphs and visualizations courtesy AlphaHat platform.
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