The Strategist

Twitter: The Story of Rise and Fall

01/26/2016 - 14:44

The funds accumulated in the accounts of Twitter would be enough to operate the company for more than 400 years, according to USA Today, citing the assessment of S&P Capital IQ.
As a result of the first three quarters of 2015, the company reported reserves of $ 3.5 billion. According to the calculations of S&P Capital IQ, Twitter has enough money to keep the company going during 412 years, if it keeps spending $ 8.5 million a year as in 2015.

For comparison, Apple's mid-2015 reserves amounted to $ 203 billion. According Atlantic’s estimates, this money will be enough to fill 93 Olympic swimming pools if converted in cash.

Meanwhile, the company's CEO Jack Dorsey has confirmed that four top managers are leaving the company. These are head of the Engineering Department, Product Director, Director of global media and Chief of Staff. In his report, Dorsey wrote that they "prefer to leave" microblogging. Media are still not sure whether these dismissals took place voluntarily or Dorsey is "cleaning" the ranks of subordinates, trying to optimize the company’s performance. This version is not unreasonable as each laid-off was recruited not by Dorsey but his predecessors as CEO - Evan Williams and Dick Costolo. And that's when they started having problems at Twitter.

One cannot exclude that people are fleeing en masse from the company, which is considered devoid of any prospects. Over the past year, Twitter’s shares fell 55 percent. This week, they again broke its own historical anti-record, which was 4 times lower than that just two years ago. The industry’s professionals are competing views on why the fall was so sharp and sensitive. That is, the company’s management cannot even present a clear cause of many of the basic problems.

In general, potential users still do not quite understand why they ever need Twitter. Initially, it was a kind of a fresh concept of "public SMS", when everybody had access to the short messages easily grouped by hashtags. At first, this model of development of awareness actually worked and seemed very promising.

For example, once an iconic or public event happened (i.e. street protests or natural disasters), one user got access to thousands of short comments within a few seconds, which allowed reconstruct the overall picture of what had happened. Twitter got flooded by millions of people who dreamt of their accounts’ promotion.

But then, the community, not without involvement of the social network’s management, began to build its own pecking order. This dramatically changed principle of content generation on Twitter. Now, thousands of messages are not concentrated into a flow of information. Instead, there are popular accounts and their readers. All the rest were transferred to the "information noise" category.

Moreover, it happened pretty fast. Here are statistics from 2009. Even then, 94 percent of all Twitter users had less than one hundred subscribers, and approximately half a percent of users had more than a thousand subscribers. There was an obvious imbalance between "readers" and "writers."

The microblogging service’s management further aggravated the situation by calling real celebrities into the virtual world. Pop stars, actors, news media, politicians finally captured Twitter’s audience and easily overshadowed all most popular microbloggers who couldn’t make it into vogue outside their accounts or repeat the phenomenon of "Live Journal" with its megapopular bloggers or YouTube, which superstars are just ordinary folks with webcams.

Leave alone simple user who, in fact, turned out to be irrelevant, and quickly got used to that everything they write is not interesting at all. At the same time, Facebook offers almost the same opportunity to communicate and express themselves, more even – each large twitter feed has a page in the largest social network and duplicates the information there.

Twitter’s management is desperately trying to save the situation, but so far, it only get worse. Jack Dorsey, for example, said that the initial 140 characters message is no longer sufficient and the format must be expanded to 10 thousand characters. However, the market has reacted to this by yet another collapse of stocks - investors do not believe that it will help. However, as soon as information about the possible purchase of Twitter by News Corporation of Rupert Murdoch leaked into the press, the quotations went up. Later, the rumors were not confirmed.

Still, no matter how bad things are going for Twitter, the social network should not be considered a lost cause. This is one of the largest and oldest Internet companies with a substantial margin of safety operating since 2006.

Dorsey has already announced plans for the future – just two people will perform duties of the four retired executives. In addition, the company hires a general director of marketing, what Twitter clearly underestimated previously. For example, the microblogging service released the latest promotional video already 3 years ago.