If 320 million Twitter users are not enough, what is enough?
For those who regularly use Twitter, the real fear is not that the company will be sold off, but that it may actually fix its problems, turning the service into something very different
Twitter will report its earnings on February 10 after the final bell rings on Wall Street and no one is expecting good news. The question is what will be the bad news: slowing user growth, or a bottom line that is bleeding red ink?
For some reason, investors are concerned about Twitter’s ability to grow its user base. They see Facebook with its over billion users and Apple is an install base of one billion devices and think this is where Twitter should be, as well. Instead, Twitter only has 320 million users. Only 320 million.
The New York Times only has 1.1 million Sunday print subscribers and Starbucks only has 21,366 retail stores. So if Twitter only has 320 million users then how many is enough?
(And isn’t this exactly the trap that the magazine industry is falling into, believing that growing their audiences without any idea of how to monetize that audience is the answer to their problems?)
To help grow Twitter, management is looking to kill off Twitter, make is something other than what it is, a quick and easy way to convey news and information – emphasis on quick and easy. A user only can type 140 characters in any public tweet – which is both limiting and the social media tool’s very best feature. Recently Twitter took down this limit for private tweets – but then again that is not tweeting, that is messaging, a very different thing.
The problem with Twitter is that it is a business. That may sound obvious, but it lies at the root of the problem, doesn’t it? Most of our forms of communications are done through businesses, even if they are considered public utilities. The telephone is a business, one expected to generate a profit. AT&T makes millions in profits, and who likes AT&T? Our emails go through ISPs and other companies, each of which is usually accused by their customers of greed and bad customer service. Who likes Comcast? Even Google’s public image has gone from feisty start-up to greedy corporate monster.
Twitter’s problem is simple to understand: its only real path to profits was to grow and then be sold. No other path was baked into the product. Without this resolution, Twitter will forever have to evolve and introduce new monetary schemes, each of which will change the product into something else.
At this point, only a sale to a megacorporation with the deep pockets to buy and audience would satisfy investors. But Twitter’s market cap is over $11 billion (though that is far below its peak of nearly $40 billion). But its revenue is just over $2 billion a year.
No one is going to buy Twitter at this point, and so we remain playing this game where each quarter the CEO of the company, now co-founder Jack Dorsey, is asked what the company is doing to grow its user base. The thing is, however, that it is growth that makes Twitter’s P&L so red. Dorsey could say “we plan on not growing” and instead begin to breakeven. But investors, who liked the company more when its market cap was so high, would absolutely hate the idea, wouldn’t they?