November 8, 2016Published by: Sam Keefe

Why it’s too early to write off Twitter

Twitter is going through a bit of a rough patch at the moment but the same can’t be said about its Chinese competitor Weibo. As job cuts start to filter through amid a rumoured sale, why are things on the up for Weibo and slightly less rosy for Twitter when they essentially do the same thing?

At a last count, Twitter had just shy of 320 million monthly active users as of June 2016 whereas Weibo has significantly less - around 280 million. But here’s where things start to get interesting. Twitter’s user base has grown around 3% YoY. Compare that to Weibo - 33% over the same period. And when you start to look at the financials, you really start to see a difference.

Both businesses make money by and large, through ad revenue. In Q2 2016, Weibo’s revenue was $147 million which is relatively small compared to Twitter’s reported revenues of $602 million for the same period. But again, the YoY growth is remarkable. Weibo’s 45% and Twitter’s only 20%. Whilst it might be too early to say Twitter has hit the skids completely, it’s easy to see the struggles. It’s Chinese counterpart has formed a very large shadow over it.

Why the sudden success for Weibo? Live streaming. Live streaming was only very recently introduced into Weibo and is currently the hottest new trend in China which might explain the huge spike in ad revenue. Nearly 45% increase to be specific.

So what’s next for Twitter? A company that at it’s peak had an IPO valuation of around $40 billion but now has seen its share price shot to pieces. A lack of buyer (Disney, Google and Microsoft all rumoured to have been tempted) along with flagging YoY growth has seen current market price fall to around the $12 billion mark, a huge decline.

But it’s not all doom and gloom for Twitter. Last years acquisition of Periscope certainly gives some insights into the direction the company is going. It only takes a very quick glance on Facebook or to see the huge growth in Snapchat to see that a business model for live, socially distributed video is the way the world is going. Twitter is no different. It has deals in place with the NFL to stream games and only last week, streamed the Melbourne Cup. Those examples are merely a dip of the toe in what could be an ocean of opportunity for Twitter. What’s to say for example, the General Election couldn’t be live streamed on Twitter rather than TV? Or the British Grand Prix? Or the next X Factor final? Streaming sports is big business but even that’s taking a hit. The hit could well be a blip, but it could also be the start of a new trend in how live content is consumed which is where Twitter could capitalise. And it’s not just top tier sports that could be streamed. There is every opportunity for lower-tier/niche sports to utilise Twitter as a live streaming platform to deliver the content its fans. It makes a lot of sense particularly when you factor in the traditional television, as the predominant medium for live TV, is dying a slow death.

Twitter’s in a bit of a rough patch and the success of Weibo is probably not helping but there’s opportunity out there. It just needs to get its business model right.

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