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.”


LinkedIn and the cost of doing business in China

great wallA few weeks ago I covered the launch of LinkedIn in China. It’s been available in English there for a while now and has even managed to amass around 4 million users, I’m told, but this was a big deal because it could give the firm access to up to 140 million Chinese professionals.

That said, many questions remain unanswered about the move, and I’ve been doing a bit of digging to explore them.

The most important centre around exactly what LinkedIn will have to sacrifice to remain unblocked by the Great Firewall. We all know the likes of Facebook, Twitter and YouTube have been forbidden for years by China’s censorship apparatus, but is the cost of doing business there actually worth the potential damage to reputation and bottom line?

Well, CEO Jeff Weiner had this to say about the compromises it has had to make:

As a condition for operating in the country, the government of China imposes censorship requirements on internet platforms. LinkedIn strongly supports freedom of expression and fundamentally disagrees with government censorship. At the same time, we also believe that LinkedIn’s absence in China would deny Chinese professionals a means to connect with others on our global platform, thereby limiting the ability of individual Chinese citizens to pursue and realise the economic opportunities, dreams and rights most important to them.

To me this seems a little disingenuous. Would Chinese citizens’ lives really benefit so much from a local language version of LinkedIn, or is this all about the money?

“I think the CEO should be more upfront about what exactly he is talking about in this situation,” Charlie Smith, co-founder of anti-censorship body, told me. “What he means to say is that in order for them to get a business license to operate in China so that they can start to sell advertising and recruitment notices, the Chinese authorities insisted that they self-censor.”

The problem is we still don’t know exactly what LinkedIn has agreed to censor. Surely a pre-requisite for getting the green light from Beijing’s censors is having a plan on exactly what will be monitored, and how many resources will be spent on human censors, filtering technologies, etc? Well, LinkedIn told me the license is still pending, and so it can’t be more specific on the details.

But it gets more complicated. Will, as Smith asked me, the profiles of certain rights groups or individuals be removed by LinkedIn, if requested? What if a Chinese user wants to connect with a rights group or dissident outside China? One presumes the firm will have to create some kind of internal firewall between Chinese users and those outside the Chinternet. Aside from the cost to the bottom line, this has all the ingredients for a potential PR disaster.

“How are they going to ‘protect’ Chinese users from seeing content that is being posted by people outside of China that they are connected with? When this kind of censorship comes to light, many people will start testing the LinkedIn platform to see how far this censorship will go,” Smith argued.

“Most people only use LI when they are looking for a job, so I would imagine that many professionals, upon hearing about this complicit censorship, will simply leave the platform and use traditional job boards for their employment search.”

I also spoke to Lucy Purdon at rights group the Institute for Human Rights and Business, which urged more transparency from LinkedIn and encouraged the firm to reach out to the ICT industry and civil society as a member of the Global Network Initiative.

Purdon added:

LinkedIn should learn from the experience of other ICT companies operating in China, especially where government requests for user details present particular risks to users and conflict with the company’s commitment to respect internationally recognised human rights.

In the post-Snowden fallout, LinkedIn has filed legal challenges in the US, seeking permission to provide greater transparency of the number of national security requests they receive from the US government. Given that, at the very least we would expect LinkedIn to push for the greatest transparency in China and include requests from the Chinese government in their transparency reports, which provides a country by country breakdown. In addition, LinkedIn should consider expanding the categories to include censorship requests.

Now this is just the opinions of two organisations. But they’re valid ones and highlight the problems facing any social media or user-generated content-heavy company trying to do business inside China. It’ll be very interesting to see just how LinkedIn handles these issues as it expands its beta service behind the Great Firewall.

China ready to lift the Great Firewall. Maybe. In part of Shanghai

chinese flagReports emerged from China today that at first sight seem almost unbelievable: the Communist Party about to lift the Great Firewall and unblock access to Facebook, Twitter and a host of other banned sites.

Then the small print. If the anonymous government sources are speaking the truth, it will be only be relevant to Shanghai Free Trade Zone, a 28 sq km pilot project designed to encourage greater foreign investment in China and open its economy up to the international markets.

“In order to welcome foreign companies to invest and to let foreigners live and work happily in the free-trade zone, we must think about how we can make them feel like at home,” one government source told the South China Morning Post.

“If they can’t get onto Facebook or read The New York Times, they may naturally wonder how special the free-trade zone is compared with the rest of China.”

Now while that seems fair enough, the Communist Party isn’t known for its love of unfettered access to the internet – after all the free flow of information online is precisely the sort of thing which it knows will lead to its demise.

So what’s this all about? Well, a few things sprung to mind:

  • China is in the middle of one of the worst crack downs on online freedom anyone can remember, so don’t expect this localised liberalisation to spread anywhere else in the Middle Kingdom. The party is very much still for the suppression of any discussion it deems “harmful”.
  • Even if the Great Firewall is lifted in the Shanghai zone, doing so from a technical standpoint will take time, according to Forrester analyst Bryan Wang.

“The network within the free trade zone will exist something like an intranet, which is connected to the international backbone without going through the Great Wall firewall,” he told me. “Current infrastructure will not be enough to support the future development. China Telecom or Unicom will need to lay out new fibre in the free trade zone.”

  • The Party giveth and it taketh away. Nothing is confirmed yet, and until state-run media reprint the story, we can probably take it as just a rumour, possibly one designed to increase international publicity for the zone, which is a pet project of new premier Li Keqiang.

    The whole free trade zone itself is only a pilot, so we can expect Beijing to bring the Great Firewall crashing back down on the region if its censorship-free internet policy backfires.

On a side note, how will Hong Kong react to the free trade zone?

If the Shanghai pilot is successful, more of them could spring up across China, effectively stealing its thunder as the only truly outward facing, economically liberalised, online censorship-free region in the Middle Kingdom.

Although a free and unfettered internet may soon no longer be a differentiator for Honkers, however, it’s likely that its superior IP protection regime, rule of law and business friendly visa system will still tip the balance in its favour for most MNCs.