With 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.”
Still, it’s always good learning about new areas of technology, so here’s what I have surmised over the past few days:
- Sony and Microsoft rule the roost. Nintendo will never gain parity as long as its selection of third party titles is so poor.
- Sony’s PS4 won 2014, but Xbox One hit back in the last two months of the year thanks to discounted pricing
- Both of the big boys have copied each other’s strategy at times; in engaging with the gamer geek and “bedroom coder” community and in trying to tie up exclusive third party title deals.
- There’s pretty much nothing to separate the two hardware wise, which is why there’ll be some increasingly aggressive deal-making going on with third party developers in the coming years.
- As IDC Retail Insights head of Europe, Spencer Izard, told me, there are only two things gamers really care about: “how many of your friends are using my console and am I getting the best content.”
- The future will eventually shift towards online downloads, although not until there’s a critical mass of users. Only then will the console giants feel they can take retailers on and undercut them on price with downloads.
- In developing regions this shift will take far longer, as broadband infrastructure simply isn’t up to the hefty downloads necessary.
- However, last year actually saw “a significant increase” in spending on digital transactions for games, according to IHS head of games, Piers Harding-Rolls. “Part of this is to do with the early adopters who are currently very active digitally on the latest consoles, part of this is to do with the day and date release of new releases alongside boxed product in the retail channels and part of it is to do with the ability to use more efficient monetisation models in the digital space,” he told me. “In this context we have seen more open ended spending opportunities emerge on consoles during the last few years driving up monetisation.”
- The rise of smartphone and tablet-based gaming represents a real challenge to the console players
- In China, like Korea, Sony and Microsoft have just been too late to make a difference. The market is either swamped with pirated clones or dominated by PC gaming. Regulators will also be hard to please in terms of software content.
And there you have it. All you need to know about console-based gaming in a few media friendly sound bites.
It’s shaping up to be an exciting 2015 for those in the space as these platform players look to differentiate in an increasingly crowded market, while the telecoms operators struggle to recoup the cash they’re losing from decreased SMS and voice call revenue.
Canalys analyst Jessica Kwee was quick to point out the pressure these traditional telecoms players are under.
“SMS/texting in the traditional sense has been impacted greatly, especially as people see more value in messaging apps – as in many cases they are considered ‘free’ as they are part of the data plans,” she told me via email.
“Plus, messaging apps are also more flexible and can handle more than traditional texting – no character limits, and on opposite spectrum, you don’t feel obliged to try to use up the character limit either, so it’s easier to text something very short and quick. Also, there’s the ability to communicate in groups, send pictures, videos, voice notes, emoticons, etc.”
However, there are some opportunities for operators.
“People will increasingly rely on an always-on connection and not be able to just rely on wi-fi at home or at work, as they will want to be connected all the time,” Kwee explained. “So even though it is much more difficult to get people to spend a lot of money on expensive data plans, especially in price-conscious markets, it could be a compelling alternative where telecoms provide cheaper data plans to exclusively use such apps.”
Frost&Sullivan principal analyst, Naveen Mishra, added that adoption of mobile messaging apps has soared over the past 12-18 months thanks to their added functionality and free price tag.
“Increasing smartphone penetration and growing internet adoption is driving this usage. Emerging markets like India, are growing extremely fast, both in terms of adoption and usage,” he told me.
“Between May 2014 and Oct 2014, WhatsApp’s monthly active users grew from 50 million to 70 million, which is 10% of the total user base. The next 3-5 years are also looking very promising, as key emerging markets have large opportunities of growth. In India alone, there are over 930 million mobile subscriptions out of which only 70 million are current WhatsApp users.”
As for the various market players, success will come down largely to innovating with new features.
“All the OTT application companies are constantly trying to innovate, however the success of the application largely depends on the value a new feature brings in,” he said.
“Line has tied up with LG Electronics, where through its chat session, LG appliances can be activated and controlled. On the other hand, WhatsApp is working on a voice calling service, which is expected to be launched in early 2015.”
The Chinese SAR has a huge appetite for net TV – you just have to get onto an MTR, visit a dim sum restaurant or try and get past a local ambling on the pavement whilst staring at their phablet, to realise that.
The former colony also has an ideal set-up – 4G is commonplace; the locals are pretty tech-savvy early adopter types relative to the rest of Asia; and broadband penetration is amongst the highest in the world.
Yet thus far it still doesn’t have its own online TV service. Hongkongers have to get their content from mainland China or further afield to satisfy their lust for internet telly.
Local entrepreneur Ricky Wong tried his best with HKTV but hit a brick wall in the form of a government shamelessly protecting the vested interests of the region’s incumbent broadcasters.
It’s a shame because this model of broadcasting, whilst probably never fully replacing traditional modes, will definitely come to play a major part in our content consuming lives over the next decade.
Gartner’s Terick Chiu explained to me that it’s not just the online TV players and content producers who stand to benefit.
“In their efforts to drive engagement with consumers, both incumbents and new entrants are likely to invest in the technology of second-screen applications. These applications are built on top of automatic content recognition (ACR) technologies, which enable an application to detect content metadata — usually contained in a digital watermark — and synchronise the application with the on-screen programming,” he said.
“For service providers and advertisers, these second-screen apps will become an important element of the future of TV, given their ability to provide an ongoing stream of information about consumer preferences and interests. These apps also enable a form of e-commerce or ‘embedded merchandising’, which links a viewer to products/services that are featured in video programming”.
IDC’s Greg Ireland, meanwhile, argued that internet TV would “usher in a new wave of competition” in the broadcast industry – which should spell good news for viewers.
“One item to watch is how these services, or other new services, emerge as ‘true’ competitors to traditional pay TV,” he told me. “That is, will any begin to license linear content and offer a pay TV service of live and on-demand content entirely over the internet?”
It’s going to happen sooner or later in Hong Kong, as around the world, so the government might as well get out of the way and let it happen now.