Is this the beginning of the end for Twitter?

twitter logoWith the long-time-coming resignation of CEO Dick Costolo, the continued lack of profitability and the reported slowdown in growth of monthly active users (MAUs), there’s been a lot of talk recently about the decline of Twitter. So is the firm just treading water until it’s acquired, or does it still have fight in its belly?

These are some of the questions I’ve been asking a range of social media analysts of late for an upcoming feature for IT Pro in Hong Kong. The answers were surprisingly positive for the firm. And I can summarise them thus:

  • The firm certainly made mistakes in the past, by failing to develop a revenue generating business model early enough. It hasn’t helped that several founders have had fingers in other start-up pies
  • It’s still true that outside of marketers and media types, not many people use or “get” the service
  • It’s been slow too to offer big brands a genuinely rich ad engagement platform to get their teeth into
  • Its failure to tackle the problem of online abuse and trolling on the platform continues to concern many people
  • It’s never managed to come up with an effective plan to challenge rival messaging products like Whatsapp, or photo-based social networks, like Instagram
  • In Asia things are even tougher, given the strong local rivals, the need to localise in so many different flavours and its exclusion from a market of 6-700 million internet users (yes, that one)

“The problems with Twitter right now are around its growth. Today Twitter’s user base isn’t growing as fast as the company would like, and compared to the other major social networks the growth of Twitter’s user base isn’t at all comparable and could be classified as slow,” Gartner research director, Brian Blau, told me.

“It’s clear that Costolo has to take some of the responsibility as he has been at the helm of the company for long enough to leave a lasting imprint. Given that the CEO has resigned at this point it’s clear that there’s some amount of responsibility that he is taking for the situation that the company is in today.”

However, the company can still turn things around, according to Ovum principal analyst, Pamela Clark-Dickson.

For one, it added 50 million MAUs from Q1 2014 to the same time this year – an 18%v increase – and its revenues went up by 74% to $436m, with ad revenues growing 71% to $388m, she told me. Quarterly losses have also been reduced from $511mn in Q4 2013 to $162.4mn in Q1 2015.  

It’s therefore still too early to write off the Silicon Valley poster child, she said.

“I think that Twitter has a solid financial base on which to build, but I think that in 2015 the company does need to focus on growing its user base into new markets/demographics, and it needs to continue to provide its brand partners with the tools and data that they need to increase their engagement with Twitter users,” Dickson-Clark added.

“If Twitter can’t successfully execute on these two key requirements, then user growth will continue to dwindle, and brands will turn elsewhere. And at that point, Twitter may become an acquisition target for another company that has the vision and the resources to revitalize Twitter’s business and bring it back to growth.”