Will the “Twitter Bird” Ever Fly?

Twitter is one of the great information distribution assets in the modern era. With 330 million monthly active users, if it were a country, Twitter would roughly be same size as the USA. If it were to close its doors, like many other loved platform brands, millions will be left stranded. Without a readily available alternative to do what Twitter does or the way it does it, people and institutions, including, but not limited to; Katy Perry, Justin Bieber, Mr. Barack Obama, Mr Donald Trump and not to mention CNN of course and all their followers will be left stranded.

In business strategy speak or more precisely, Michael Porter speak, the above phenomenon is called competitive advantage. In English, this means that a firm has found a way to solve a “high value” customer problem and/or to provide something that matters, that is also rare or not widely available, either in form, function or the way it is positioned. By all accounts, Twitter seems to be flying on this score.

Its 330 million MAU base means that during its 11 year history, Twitter has been adding MAU’s onto its installed base that is equivalent to the population of Ghana or Malaysia every year. This is no small feat. Granted, other behemoths such as FaceBook etc., have unmatched MAU bases. Whilst we recognise the competitive advantage as indicated above, we also recognise that delivering value is one part of the equation. The other part of the equation is ability to capture that value for the firm and for stockholders as well. On this front, the Twitter Bird does not seem to be flying.

The big question though is why is the “Twitter Bird” not flying as high commercially. Do not get us wrong, Twitter has shown a marked improvement in Q3 of 2017, posting a $21 million loss compared to $116 million loss in the previous quarter. Equally, its 5 yr trend line shows an almost 10 fold increase in its gross income and revenue base. Not withstanding the fact that Twitter seems to have been on an acquisition and investment spree as reflected in R&D, depreciation and amortisation expenses on its income statement, it still does not seem as though Twitter is flying high enough on this score, to spread its SG&A expenses over and leave some of its spread for profit.

What are the constraints that seem to be holding the “Twitter Bird” back. Firstly, at roughly 60% of net sales, Twitter’s gross margins seem to be in good shape, albeit lower than LinkedIn at roughly 85% of sales. Twitter’s operational efficiency however, needs to be looked at with a magnifying glass. As at FY ending 2016, almost 50 cents of every dollar of sales was used up supporting the core business.

In addition to operational efficiencies, Twitter needs to grow its top-line. The options in this regards are; 1) Sweat International MAU base. Currently, Twitter generates 89 US cents per MAU compared to $4.82 in the USA. 2) Twitter must investigate the possibility of charging a nominal subscription fee, $1 per annum adds $330 million onto the top-line. At a fundamental level though, Twitter must clearly define the game it is playing or its strategic narrative, the play-ground it is playing in as well as the playbook it should follow to win in the chosen playground (s). At present, Twitter seems to be straddling its focus on the following; 1) personal expression and conversation in real time; 2) content discovery, creation and distribution; 3) Periscope and; 4) data services.

Notes & References

  1. https://www.marketwatch.com/investing/stock/twtr/financials
  2. http://www.worldometers.info/world-population/population-by-country/
  3. https://amigobulls.com/stocks/TWTR/income-statement/annual?f=pg
  4. https://finance.yahoo.com/quote/TWTR/profile?p=TWTR

Notes About the Author: Kheepe Lawrence Moremi

Seasoned strategy & market facing professional with strong business acumen, operating experience and entrepreneurial flair. Former founder board member of the Marketing Association of South Africa, former founder marketing director of Brand South Africa, executive lead of customer strategy at Deloitte Digital, Advisor to the Board Chair of Eskom, head of strategy, innovation and marketing at FNB (a division of First Rand Bank), marketing manager at Nedbank, brand manager at African Bank and Procter & Gamble.

  • https://www.linkedin.com/in/kheepe-moremi-337a03/
  • http://whoswho.co.za/kheepe-moremi-829354
  • https://www.marketingawards.co.za/council/
  • https://www.youtube.com/watch?v=kGd3ZdgA1yY
  • https://www.fin24.com/Finweek/Advertising-and-marketing/Brand-SA-focus-shifts-20050920
  • https://www.iol.co.za/business-report/economy/brand-sa-worth-r380bn-says-marketing-council-754643
  • https://mybroadband.co.za/news/cellular/4092-fnb-launches-cellphone-business-banking.html
  • http://allafrica.com/stories/201308270985.html
  • http://www.the-esa.org/news/articles/-/south-africa-saves-energy-with-49m-campaign
  • https://www.mediaupdate.co.za/marketing/6807/masa-announces-new-board-of-directors

Academic Profile

  • Beta Gamma Sigma Lifetime member,
  • Executive MBA From Brown & IE Business School
  • Strategy & Innovation from Oxford

 

 

 

Advertisements