Twitter’s not having a good week.
On Wednesday the social media site posted fourth-quarter revenue and profit that outstripped analyst expectations. But there was also disappointing news in Twitter’s first earnings report as a public company: a startling drop in user growth and engagement — the time people spend with Twitter’s services. On Thursday, the company’s stock was down more than 20 percent in midday trading to $51.89 a share.
Investors are wary that Twitter seems to have hit a wall in its natural growth and now has to work much harder to keep the users it has and attract more. The company is taking note.
“We simply need to make Twitter a better Twitter,” chief executive Dick Costolo said on the company’s earnings call Thursday.
But what will a “better Twitter” look like? The company is already taking steps that show how it may be thinking about its future.
Advertising: Twitter has become a strong new outlet for advertisers looking to create conversations with their customers and to generate buzz. The site’s on-the-spot ads and ongoing contests are aimed at building a community around a brand. But it hasn’t been proven that there’s a good return on investment for those ad products, and some advertisers still see the network as more of an experiment than a main channel.
For example, Twitter became an ad star last year with Oreo’s timely Super Bowl tweet that commented on the in-game blackout. But this year’s game didn’t produce a similar hit — perhaps because the game was not as exciting — and the only company tweets that drew significant attention were from JC Penney’s deliberately misspelled tweets to promote its Olympic-themed mittens.
Partnerships: Another route is to focus heavily on partnerships that can make the most of Twitter’s biggest asset: data. On Thursday, the company announced that it’s giving research organizations free access to some of its information in “Data Grants.” But Twitter knows that combing through that data can add a lot of monetary value, as well. (That hasn’t escaped other companies’ notice: Apple bought Twitter analytics firm Topsy last year.)
In recent weeks, Twitter has announced high-profile collaborations with CNN and the music industry firm 300 Entertainment to help professionals filter its firehose of information for useful nuggets. The social network has also partnered with Nielsen to measure the volume and tone of television talk on Twitter during live broadcasts.
E-commerce: Then there’s this intriguing idea: using Twitter as an e-commerce platform. As Re/code said in a report last month, Twitter is reportedly getting ready to launch a service called “Twitter Commerce” that would allow users to buy things straight from the service, via official company tweets. Re/code’s Mike Isaac and Jason Del Rey said that the firm appears to be partnering with at least one e-commerce firm, Fancy, to add another revenue stream to its books. The report said that all payments would be handled within Twitter’s own app and that users may be able to track packages within the Twitter app, too.
Twitter has toyed with commerce options in the past, but none have taken hold — however, users may feel more comfortable buying by tweet now than they did in Twitter’s earlier days. Twitter did not immediately respond to a request for comment on the reported service, which Re/code says has no specific launch date.
Of course, all of these ventures rely heavily on the company being able to keep a large swath of the population interested in its products. And Twitter will have to work quickly to come up with a good plan against competitors, such as Facebook, with its millions more users. In advertisers’ eyes, Facebook, Twitter, LinkedIn, Pinterest and other social media companies may have their specialities, but they are all going for the same general audience of Internet users.
"There is a limit to the amount of advertising dollars available,” said Larry Chiagouris, professor of marketing at Pace University’s Lubin School of Business in New York. “And as more social media platforms come on stream and seek advertising support for their business, they will be fighting for their share of market, and each one is likely to end up with a smaller share over time.”
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