Twitter’s numbers have been dismal, and that lackluster performance will force them to change their business model and start acting like a news organization. Twitter reported 48.3% revenue growth over a year ago, with a loss of $90.2 million, and 0% user growth, with 320 million logging into Twitter every fiscal quarter. Because future profits based on active user growth are everything in the tech world, Twitter is going to have a hard time justifying their valuation given the large current operating loss.
Twitter is experimenting with some changes to the timeline, intended to filter the endless stream of Tweets, and give prominence to the paid advertiser. A well curated news feed will provide much more value to the consumer and advertiser. This is an obvious move that Facebook implemented years ago. There was a difficult but short adjustment period for users, but ultimately the news feed displays what users find most interesting.
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This move is just the beginning. Now, Twitter needs to change their business concept, and should start acting like a news organization. The value in Twitter is not as a social network, but as a user generated, interactive media outlet. Silicon Valley programmers are very capable of writing the algorithms to customize the stream of Tweets to the individual so that it easily conveys the most valuable content.
Local, trusted, and entertaining tweets, from prominent or personal favorite accounts should appear on the top of the timeline, when they are relevant, not necessarily in chronological order. As it has been, most of the important information gets lost in endless stream of nonsense and incomprehensible 140 character Twitter talk.
People want to know pertinent information, and that usually starts with what is going on around them. Twitter has the ability through Wi-Fi networks, GPS, and cellular data to narrow down the news to what is local. This has a lot of value to consumers. Consider Berkshire Hathaway has been buying up local newspapers because consumers are still willing to pay for this type of information. Twitter users don’t have to Tweet to be engaged with the service. This is how Twitter will gain broader appeal and resume user growth.
Advertising on Twitter could also use some work. The advertiser platform is complicated, the results are obscure, and interactions are probably overpriced. There are seven options for campaigns and ten ways to target users. This is good for advertising agencies that spend all day with the Twitter advertising platform, but a large market of small business and personal accounts would be better served by clicking once to promote a Tweet, or their account, and trust that Twitter can provide the best Return On Investment (ROI).
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As Facebook is growing their network with Instagram, Twitter will grow theirs with Vine and Periscope. However, now that Instagram offers videos, and all video entertainment is now consumed on-demand, Twitter’s two add-on platforms will not have the same high growth.
Twitter is so valuable in media now it is almost a public utility, but as a business it must pivot to become a personalized media aggregator, creating a whole new type of service that will have broad appeal, and better serve all users.
Matt Bucklin writes about business, economics and politics. He is a entrepreneur, has worked in multiple start-ups, and is the founder of Quit Co.