Partners at Green Square, Corporate Finance Advisors to the media and marketing sector, cast their eyes over the latest industry deals and look ahead to the next tranche of acquisitions.
Where does the time go? I ask because I was staggered to learn that Twitter is 10 years old.
First of all, those 10 years have just flown by. And although a decade isn’t long in geological terms, in the world of marcomms and technology it’s an age. And that passing decade proves just how rapidly new channels or platforms establish themselves in the general consciousness. Even as a not especially heavy user of the platform, I find the thought of life without Twitter inconceivable.
It’s there, and always will be… or will it?
Now I’m not suggesting Twitter – which some commentators have been describing as “troubled” – is doomed, but it is at a crossroads and I must admit to finding Twitter a bit of an enigma, full of contradictions, its pluses balanced by minuses and vice-versa.
It is obviously very successful, and is the best-known (if perhaps not the most-used) social media site after Facebook and a hugely effective way of sourcing and disseminating news, yet at the same time, it’s also terrible. The 140 character limit allows for headlines only, with no chance of nuance, subtlety or analysis – and nuance is often vital when reporting the news.
The character limit, however, is also the site’s biggest strength. It defines how users engage with the platform – with quickly sent, very brief statements conducive to live, ‘in-the-moment’ commentary. Thanks to the near-ubiquity of smartphones, it’s possible for anyone with one of these devices and a Twitter account to “micro-blog” live from events as they unfold.
But again, Twitter isn’t just used for reporting momentous events. It’s also used to report on meaningless crap, disseminate small talk, cat videos, pointless photos and selfies, ugly rumours…
Twitter is good at bringing people together, for sharing stuff, yet it also has a dark side. If you want to bully, or spread libel, threats or worse, it’s a great place to do your dirty work. And you might find you get away with it, too. Twitter has had a bad rap in recent years over so-called 'trolls', but that is in many ways the least of its problems; far more serious is its use as a propaganda tool by some pretty despicable extremist organisations.
The main thing about Twitter, however, is that it looks in far worse shape than it did when co-founder Biz Stone sent the first tweet a decade ago; indeed, it’s in far worse shape than when it floated back in November 2013. The IPO price was about $26 and shares peaked at $76; at the time of writing, they are $16.26. Worse still, it has lost many millions of users and is having trouble finding new ones. People are wandering away, abandoning their feeds. Sometimes they flounce out, sometimes a high-profile user (Stephen Fry last month springs to mind) will resign or delete their account in protest against something, or out of fear or intimidation.
Mostly though, they get bored and just cease engaging with the platform over time. I suspect that there are a lot of 'dead' or inactive Twitter accounts out there (in fact, according to one analyst I spoke to recently, there may be as many as 500 million registered users who have not logged in the past six months, making them, in advertising terms, 'non users'). And Twopcharts, a company that analyses Twitter traffic, estimated in 2014 that 44 per cent of all Twitter users made an account and then abandoned the platform, never using their new accounts. The tracking company also claimed that out of all the accounts that have sent tweets, about 550 million, 43 per cent of those sent their last tweet more than a year ago.
Twitter’s monthly active user base currently stands at about 320 million, which is quite impressive as of itself, and bigger than say Pinterest or LinkedIn’s numbers, but puny compared to Facebook’s 1.4 billion or YouTube’s one billion regular users. And according to a report published last year by the FT, only 36 per cent of users logged in daily, compared with 70 per cent on Facebook.
There are some upsides, but as always seems to be the case with Twitter, there’s an equal and opposite downside. Unlike many digital darlings, Twitter isn’t a money black hole. Income last year was a not insubstantial $2.2bn. But one wonders why it isn’t making much, much more. After all, Twitter is an advertiser’s wet dream, because it is the perfect platform for the 'dual screen' generation – those people who like to tweet about programmes they’re watching on TV. A double edged campaign incorporating both TV and social media, and hooking up with the attractive young (18 to 34-year-old) Gen Y/millennial demographic would be of great interest to a number of brands.
Yet Twitter cannot take advantage of the two-screen generation. Because one – and I was quite surprised to learn this – only 24 per cent of users are actually millennials; and two, because users do not have to use real names (as they have to with Facebook) and are not particularly revealing about themselves, it is quite difficult to target them with ads, so it’s not as attractive a channel as Facebook.
Sponsored tweets are one way forward, but they are limited, and given consumer resistance to unwanted advertising, may prove to be a short-term fix only.
But let’s not be too quick to write Twitter off. The Oscars last month showed the platform off at its best – it generated 3.7bn impressions on 24m tweets over the 7.5 hours the ceremony was televised. That’s compared to 3.3bn in 2014 over the course of 48 hours – clearly reaching way more people than pure user figures imply. That’s a whole load of potential ad viewers that the advertising industry now knows just love entertainment shows.
But, as mentioned above, it’s difficult to know much more about these potential ad viewers than that they’re interested (in this case) in movies, celebs and entertainment, and that they like red carpet walks… but that’s not a lot to go on. If those people were on Facebook, advertisers would know much, much more.
And this is Twitter’s problem. It is not really a social media platform at all, it is a broadcaster.
I say this because it’s actually a very small group that creates the content that everyone else wants to see. Of course you can bring more people to that party, but many – as many as two-thirds of existing users today – will just be lurkers waiting for Kim K to post another bum shot or for Justin Bieber to make his next gaffe.
Rather than its hundreds of millions of users all contributing, Twitter has been captured by journalists, wannabe journalists, celebs, plus a few brands and news organisations. The vast majority of users seem to be passive (apart from passing on or sharing) consumers of other people’s content.
One of the big dreams of more utopian social media pioneers was to make everyone into a creator or curator. In the case of Twitter, this hasn’t really happened – there is something oddly “old media” about it.
The big danger for the company is that people will start wandering off elsewhere once the 'power users' with tens of millions of followers stop tweeting retweetable stuff, or the millions of users with followers numbered in the tens or hundreds just get bored or turn to the next big thing.
So, will Twitter still be around in 2026? Almost certainly. But I’m not sure it will still be the micro-blogging site it is today.
And I’m not sure it will be independent. With a current market cap of just $11.8bn, it is but chicken feed for a tech giant like Google, Apple, Facebook or even Amazon. What any of these behemoths would actually do with Twitter should they buy it is another matter.
In terms of buyers, I would imagine that Facebook or Google would be the most likely, but Apple has always struggled to build a social network (remember Ping?) and there are possible synergies between Twitter and its music streaming services, as well as the iOS ecosystem. And it owns the Twitter analytics firm, Topsy Labs.
Facebook might like the idea of a broadcaster (which, as I said earlier, I think Twitter actually is) and the possible integration between Twitter and Facebook but Facebook CEO Mark Zuckerberg doesn’t like companies that aren’t growing – and Twitter’s current and future growth might be too slow or small for him.
Amazon seems completely unlikely, but there are other, leftfield (and less wealthy), candidates to swallow Twitter. Mobile network Verizon, which already owns AOL, has the necessary experience in mobile and may want to expand its media and ad technology assets, which Twitter could well help with. Another is News Corp, although the company’s record with big tech acquisitions – MySpace comes to mind – has not been good. Microsoft owns Skype, knows that its traditional market (retail software) is in decline and may be looking to move into new markets – but its record in mobile has been undistinguished at best, and it’s obvious the company knows little about the market. IBM might be interested in acquiring Twitter to get its hands on the data, or one of the fast-growing companies from India or the Far East could surprise us all.
But my money is that in a decade’s time Twitter will be a Google company. The Mountain View boys’ social network, Google+, hasn’t done very much and Brin and Page may prefer to replace it with a platform that has already built up over 300 million users. And Google has a good record of allowing acquisitions to run independently – as YouTube has done, and independence is something Twitter would need to retain in order to keep the power users on board. Even better, Google knows ads better than anyone. If anyone can find a way to leverage ad revenue from the platform, it’s these guys.
If Page and Brin were to put in a bid, it might be sooner rather than later: the stock price is probably near the bottom (if it tanks much more, buyers might start wondering – unfairly in my view – whether the company has any future), investors will be looking for a saviour and buyers will be looking for a bargain.
But who can tell? This is all speculation. As we’ve seen, 10 years is a long time in tech (even if it does fly by) and predictions are notoriously difficult to make. Whatever happens, it’s going to be fascinating. Isn’t it always?
Tony Walford is a partner at Green Square, corporate finance advisors to the media and marketing sector
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