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Is The Twitter Business Model In Trouble?

Twitter is an enigma. It is a social media company that doesn’t believe it belongs in the social networking genre and Twitter CEO, Dick Costolo insists that the company isn’t a “social network.”Is There Trouble @Twitter

Most outside observers of Twitter think it’s for “Twits” despite its propensity for attracting its fair share of high level media attention and celebrities and politicians. The issue for Twitter is that most people don’t “get it” and its secret marketing power is distracted by its perceived superficiality displayed by the public noise about Twitter.

It has 220 million users and it’s still struggling to monetise its brand and traffic. There have been three CEO’s exchanging chairs (and desks) since 2008, with Jack Dorsey removed in 2008 as its CEO to be replaced by the co- founder Evan Williams followed recently by Dick Costolo.

Twitter’s Challenges

When he took over as CEO in 2008, Williams faced huge challenges. The company had just 20 employees, almost entirely engineers, and during the first six months of his tenure, Twitter jumped from 5 million registered accounts to 71.3 million. The service was becoming more than just a venue for idle chatter, a fact driven home when, in 2009, the government put in a call to Williams to ask him to delay maintenance on the service so that Iranian voters could protest the election. A recent Fortune Magazine article on Twitter argues that

  • Twitters growth has levelled off during the last 12 months according to Comscore
  • U.S. users are spending less time on the site (down from an average of 14 minutes  per month to just over 12 minutes)
  • 47% of those who have Twitter accounts are no longer active
  • Twitter users are allowed to have multiple accounts
  • Slowing growth in the U.S. market is an important indicator of the company’s health — the U.S. is the biggest ad market and vital to Twitter’s moneymaking plans and Twitters US growth is static
  • It is only generating revenue of  $45 million (Facebook is generating $1.86 billon)
  • Twitter needs to get its act together or risk losing buzz, potential ad revenue, and its bright future too.
  • Less than 25% of users generate 90% of worldwide Tweets
  • The founders basically turned Twitter over to its users — initially a bunch of techie early adopters. The result was a bit of anarchy
  • Twitter needs to figure out what it wants to be when it grows up

The article also mentions that Google offered $2 billion for Twitter  and Facebook offered as much as $10 billion but apparently the board of Twitter voted unanimously to reject both offers.

Twitter’s “Blue Sky”

It appears that a lot of cash in the bank (Twitter has raised $360 million from heavyweights such as Jeff Bezos and Kleiner Perkins)  and the promise of a larger pay check in the future has created a boardroom that only sees blue sky (remember Microsoft once offered to pay $44.6 billion for Yahoo. Today Yahoo is valued at half that)

Biz Stone’s response to all this?

Twitter is an important company and it’s under scrutiny from journalists—this is exactly how it’s supposed to work

The reality is that Twitter is still getting press, when it stops getting attention you know it is indeed in trouble.

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Image by scipion50

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