Why is Twitter still losing money?
A recent article in the BBC chronicles the continual decline of Twitter. Why can't Twitter make money? I have written about Twitter before - here, and here, and here, and here. The long and short of it is this: You can have a wildly popular product and still go bankrupt if you can't figure out how to make money from it. Popularity doesn't equate to profitability - in any business.
A lot of people read tweets - in the media - but few actually use the service. The media loves twitter, and celebrities and politicians love to tweet. We hear about other people's tweets, but few of us regular folks have the time or inclination to follow people on twitter or worry about trending hashtags.
The rest of us, if we are aware of a tweet, it is only because we heard about it in the news. And usually when a tweet is in the news, it isn't good news. Twitter has a reputation of being the site where people get into hot water or end careers. You never read about a child being rescued from a well thanks to a well-timed tweet. You never hear about a flood victim being saved from drowning thanks to Twitter. All you hear about is bad things happening as the result of Twitter. It is a negative thing, really.
A lot of people thought that Donald Trump using twitter so much (infamously) would boost up the stock price as the number of users would increase. But again, two aspects of twitter predominate - we read about tweets in the news, not on twitter itself. There was no mass movement to join the service and read Trump-tweets in real-time. And when we read these tweets in the news, it isn't "Gee, President Trump said something significant in 140 characters!" but rather, "Can you believe what asinine thing the President just said?" Again, nothing good comes out of Twitter, but a lot of bad does.
Even his own staff wishes he would just stop tweeting.
And as I have noted before, this negative aspect of Twitter is embedded into it. Since Tweets are only 140 characters long, it is far too easy to truncate an idea to the point where it loses all meaning and is easily misconstrued. It caters to the "sound bite" mentality - and nothing ever good came of sound bites, either. Plus, the casualness of the service encourages people to put down ideas that they probably should keep to themselves. It is too easy to Tweet at 3AM while sitting on the john, as Trump as aptly illustrated.
Longer format media tends to force the writer to think more before they hit "publish". The negative aspects of Facebook are related to the same problem - people tossing off quick status updates without thinking about how they will be interpreted. Sometimes, our brief thoughts and comments are best kept to ourselves.
So most folks don't use Twitter. And since we don't use it, we don't see the ads. And since we don't see the ads, Twitter doesn't make money. You see the problem here. The service is popular, with a certain group of people, such as celebrities, journalists, and politicians. These are not even the people you want to see the ads. You want the plebes to look at the ads, as they are the highly suggestible depressed "consumers" who will buy your crap. Donald Trump, tweeting on the toilet in the wee hours of the morning, isn't likely to respond to an ad placed on Twitter.
And then there is the dirty halo effect. Since so many bad things happen on Twitter, who would want to advertise on it? Do you want your ad appearing right in the middle of a tweet battle between a white supremacist and someone on the Left? Do you want your ad in the middle of a Trump tweet stream? Is this how you want to position your company?
Further, since Twitter is not a contemplative site, the amount of time people spend looking at 140 character messages is brief. They are going to be less likely to linger and click on ads on the site. Blogs and Facebook at least engage the user for a longer period of time. Even YouTube has a longer attention span. Brief snatches of contact online are hard to use as a marketing platform.
How do you fix this? I am not sure you can. And that is the conundrum of social networking today. It is possible to have a social network that has lots of users but loses money - lots of money. And there may not be a way to make money from it.
Twitter either has to keep "innovating" to develop new features for Twitter, or cut costs to the bone to make money from the existing model. The problem with the former is that if you start tweaking Twitter, you change what it is, and could destroy it. If you made the tweets longer than 140 characters, it isn't Twitter anymore, but something else. If you start adding features, it may distract from the underlying concept and drive users away.
Ask MySpace about this - when you play with the interface, you play with fire. People will walk away in droves once you destroy the magic.
The second option Twitter is already trying - laying off staff and tightening their belts. These dot.com type companies are notorious for having sloppy overhead - engaging in social engineering by offering huge salaries and benefits to attract the "brightest" people who can run servers and write HTML. But once the service is up and running, do you really need to spend so much money on "talent"?
And therein lies the conundrum. If they strip overhead to the bone and maybe show a profit, they forego any opportunity to develop the service over time, and Twitter could become moribund. You really don't envy the people who started this - they are successful without success, popular but not profitable, with no way out of this trap.
It is a trap, too. You see, the Internet is littered with the skeletons of the "next big thing!" that took off like a rocket, exploded, and then crashed to the ground. AOL, Myspace, Webshots, and so forth and so on. We like to think things like Facebook, Twitter, Reddit, and so on are "institutions" who have reached a critical mass and will go on forever. But "forever" on the Internet can be measured in years, maybe months, but not often in decades.
It may very well be that Twitter isn't able to figure out how to make money at this, or if they do, by the time they do, people have moved on to "the next big thing!" on the Internet. Because let's face it, there is no real barrier to entry for a service like Twitter (or Facebook for that matter). To succeed you only need achieve that critical mass of popularity, which is based on elusive criteria to say the least. Why people flocked to Facebook and abandoned MySpace is the subject of more than one Master's thesis, I am sure.
I don't envy the people running Twitter. They have an enigma on their hands!