Not a great day for Twitter. After the micro-blogging giant’s first quarter earnings report was leaked an hour earlier than expected, Twitter stock dropped by 6%, and finished the day down close to 20%. The losses were on the back of a less than spectacular earnings report, where Twitter reported revenue of $436m – around $20m below estimates. Twitter’s CEO Dick Costolo, in the company’s official release, said the gap was ‘due to lower-than-expected contribution from some of our newer direct response products’ – these would include some of Twitter’s latest product offerings, like changes to direct messaging, native video sharing, and live-streaming, via Periscope. Twitter’s report also outlined the areas where growth has been solid – but of more interest at this stage is what this result will mean for the future development of the Twitter platform, particularly when considering the rate at which they’ve been pushing out changes in the last few months.
Change is as good as…
Twitter is pushing out more changes, additions and updates than ever before. Senior Vice President of Product Kevin Weil was appointed in October 2014, and his leadership has seen a significant shift in momentum for Twitter products. Whereas once there were long delays in testing before rolling out, Weil appears to have streamlined the process – this is evident in the array of changes we’ve witnessed, from new advertising options to improved embedding options in order to spread the reach of the platform’s properties. While every platform change is approached with some scepticism – every platform has its traditionalists, overly protective of their cherished user-experience – most of these updates have been integrated and adopted well by the growing Twitter community. The latest move on this front was the recent unveiling of Twitter’s new home page for non-users, an attempt to entice more people to sign up and build its overall audience.
While these changes have gone well within the overall scheme of things, one concern stemming from the latest results is that the company will be under pressure to move even faster and seek more ways to monetize the platform. The last thing Twitter users want is to see it go the path of Facebook and start restricting reach in order to incentivize ad buy-up, but that’s invariably one element that could be considered. This is where the delicate balancing act has to be maintained – how do you incentivise new users, monetize the audience you already have, and at the same time, maintain harmony amongst your existing user-base? It’s a challenge facing every major platform, and one which is in stark view for Twitter today as it weathers the backlash resulting from its numbers.
Plenty to smile about
But it’s not all bad news. Twitter’s official report actually painted a fairly strong picture, with monthly active users up 18% and advertising revenue up 72% year-over-year. There’s little doubt the company is in a good position – it’s not as if people are turning away from the platform – it’s just not moving at the rate many (including Twitter itself) had hoped. But there’s a range of solid options coming up that may help the company turn the results in its favour very quickly. The recent growth of its new live-streaming company Periscope is a big positive, particularly the rate at which it’s increasing its market dominance over early-released rival Meerkat. The first element of Twitter’s deal with Google has been announced, with Promoted Tweets now available via Google’s Doubleclick ad platform. The Google deal, in itself, is loaded with potential and could see a significant boost in new users and user engagement, particularly if there’s an SEO value linked to tweets. There’s also the additional search functionality likely to be included as part of the partnership, and the subsequent ad options that would go along with that capability. Twitter’s overall picture looks good, despite this tremor in investor confidence. But tremors can cause lasting impacts, and it will be interesting to see what happens next.
The next battleground
One of the biggest user concerns stemming from unsteady results is the fear that the platforms will change, and the service they know and love will be impacted. Twitter is acutely aware of this, and over time they’ve shown their understanding of the value of user-experience by not making large scale changes and not balancing too far in favour of ad dollars or new users. An imperative on every listed company is the need to increase revenue, a need which always puts pressure on the way things are. But social media networks know that users can and will migrate, attention is the true currency of the social media industry. As such, I wouldn’t expect to see massive changes in user-experience, though I am looking forward to seeing what new products and options come about in the coming months – particularly as a result of the new deal with Google. One of the next big battlegrounds will be social search, an area Facebook is already pushing into with the refinement of Graph Search. The Twitter/Google partnership is likely to be their biggest competition on this front, and as social search becomes more important, as people look to validate more of their search queries via their social graphs and groups, the competition in that sector is will become significantly more intense. I, for one, am pretty interested to see where it goes.