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Monday, February 29, 2016

Twitter in twilight

I use Twitter a lot — more than Facebook, more than email, more than Feedly and RSS (still a good tool, by the way), and way more than LinkedIn. Twitter is my primary mechanism to gather information about the world and to follow interesting or funny people. I don't use hashtags; to me Twitter is all about a self-curated feed, the sources of which I review once a month. I'd be delighted if Twitter lasts forever in its current form.

Nevertheless, many people in Silicon Valley and Wall Street consider Twitter to be a failure. Some even predict its death. How can a company that has attracted 300 million users be in such disfavor?

Twitter's share price is far below the IPO price. This is a symptom not a cause, but it makes the investment community look bad. They don't like that, and they'll find someone to blame. The real problem is that Twitter's user base has flatlined at 300 million but the company's operating expenses are aimed at a much larger user base. In contrast, Facebook's user base continues to grow (now exceeding 1.5 billion).

Twitter has been extracting more revenue per user in the form of advertising and promoted tweets, but the gap between revenue and expenses remains very large. This cannot continue forever. Either the company triples its user base (difficult), cuts expenses to turn a profit on the user base that it has today (very difficult), or finds a way to generate even more revenue per user (incredibly difficult). No wonder the CEO's office at Twitter has been a revolving door!

I see a big difference between Twitter and Yahoo!, which fails to offer anything valuable and unique anymore. Yahoo! deserves to die, but not Twitter. That said, when it comes to the future of Twitter, "I've got a bad feeling about this."