Seven years ago, Twitter was just a small, ragtag collection of hackers fighting over the basis premise of the company and struggling to keep the site from crashing every other day. Twitter has come a long way since then.The company is on track to bring in more than half a billion dollars in revenue this year. It hasmore than 230 million monthly active users worldwide and some 2,300 employees in offices in San Francisco, New York, London, Dublin and Sao Paulo. It navigated a smooth IPO in November (unlike another social network that shall remain nameless) and is now valued at around $30 billion.
Twitter has grown up, but the business still needs to mature. The social network has just more than 53 million monthly active users in the U.S., significantly less than Facebook and only about a fifth of the country's total number of Internet users. Global user growth has slowed dramatically, both on a quarter-over-quarter basis and year-over-year. And while revenue is on track to nearly double this year from 2012, the company is far from profitable. It reported a net loss of $79 million in 2012 and a loss of $133.9 million in the first nine months of this year.
On the product side, Twitter recently made significant changes to the user experience on mobile and desktop, emphasizing conversations and visual content in the stream. However, those changes were quickly criticized by many of Twitter's oldest and most active users. Behind the scenes, Twitter is still painfully hesitant about approving new features and
reportedly even considered killing off some of these recent changes shortly after their releases due to the negative reaction.
As Twitter begins its first full year as a public company, it will have to commit its resources to tackle these other issues — all while operating under the gaze of investors looking for Twitter to grow revenue and yes, turn a profit.
A Richer, Effortless Experience
Despite the initial uproar over Twitter's redesign, the social network will likely only become more visual and interactive in the coming year. That means more prominence for pictures, articles, TV clips, ecommerce features, you name it. Profile pages should expect a redesign to "
highlight more useful information," and direct messages — once a buried feature on the service — are becoming prominent and more visual thanks to a new option to send images.
These changes are intended to kill two birds — no pun intended, Twitter — with one stone: provide a more visual (valuable)platform for advertisers and boost user numbers and engagement. Just a few months ago, brand posts on Twitter were essentially just chunks of text with links or small images; now they look like full-fledged banner ads. Likewise, the Twitter feed increasingly resembles the News Feed on Facebook, which may help lower the bar for entry for users who are familiar with Facebook but still confused by Twitter."I definitely think we are going to see Twitter focusing on user acquisition, and develop ways to increase engagement with the existing user base and to attract new users," Clark Fredricksen, VP at eMarketer, told Mash. "Whether through partnerships with media, more engaging product enhancements like images in stream or other ways."
To that end, it's also likely Twitter will continue trying to explain exactly what Twitter is to new users. The company
updated its about page to better explain how the service works; it unveiled adedicated account in November that offers a guide to the social network, though it hasn't tweeted much of late. In the same vein, Twitter introduced several new accounts, including @magicrecsand @eventparrot, which automatically notify users about people to follow or breaking news, respectively. Through such accounts, even beginners may eventually be able to get as much out of Twitter as longtime users.
Advertising Beyond Twitter's Nest
The year Facebook went public, it went on a monetization bender. The social network introducedmobile ads, sponsored posts in the News Feed, paid messages — remember that? — and prompted users to pay $7 to promote their own posts. These efforts were as obvious as they were flawed: Facebook needed to show investors its revenue potential.
Instead, Twitter's focus in the coming year will likely be expanding on two of its ad tools. The first is selling native adson other apps outside the Twitter ecosystem, thanks to the recent acquisition of MoPub, a mobile ad exchange. By moving beyond its own network, Twitter should be able to promise advertisers a broader reach than they would get otherwise. "Right now," Blau said, "Facebook ads are only on Facebook, but Twitter is moving pretty fast to break that."Twitter, on the other hand, will probably be more cautious when it comes to introducing new revenue-generating products."Facebook tends to innovate very quickly. They tend to throw spaghetti at the wall and see what sticks," said Brian Blau, a social media analyst with Gartner. "Twitter is not as experimental."
The second big push, according to Fredricksen, will be to expand its self-service ad platform to more countries in order to spur international revenue growth. "One of the ways that Google and Facebook have seen huge increases in sales, particularly in foreign markets where they don't have sales teams necessarily, has been through their self-service tools," he said.
Beyond that, some speculate that the social network might eventually roll out more video ads through Vine or Twitter — or that they may introduce some new promoted product. Given how slowly Twitter moves, however, that might take a while.
Embracing the Second Screen
The T-word was dropped more than 40 times in the company's IPO paperwork. No, not Twitter.Television.
"By enhancing the activity related to their programming or event on Twitter, media outlets can drive tune-in and awareness of their original content, leveraging Twitter’s strength as a second screen for television programming," Twitter's team wrote in the S-1, essentially highlighting its pitch to marketers. The emphasis on television shouldn't be too surprising. Marketers spend $70 billion a year on television placements; Twitter (and Facebook) want a piece of that.
In recent months, Twitter has inked partnerships with CBS, BBC, A&E and others as part of the Twitter Amplify program to promote video clips like instant replays or exclusive behind-the-scenes shots that promote shows airing on television. Twitter has also supplied data to Nielsen to track engagement around shows on the social network, and Twitter has partnered with Comcast, Time Warner Cable and others to let subscribers view TV shows and movies via tweets.
"We expect Twitter to continue to develop partnerships with the media," Fredricksen said. "Partnerships in media are core to their Amplify program and their pitch to advertisers."
Given the importance of the second screen to Twitter's business, it seems likely television content will be featured more prominently in its app and on its website. As part of its redesign in November, Twitter introduced the option to see trending TV shows in the Discover tab, but these shows appeared far down on the page. We would expect to see this area receive higher placement in the coming months.
Acquisitions, Acquisitions, Acquisitions
With all the hype and speculation,
Much of that money will likely go toward helping Twitter continue to scale through new hires, infrastructure investments and, of course, acquisitions. It may not have the resources like Facebook or Google to bid billions of dollars on startups like Snapchat, but Blau expects to see Twitter buy up businesses in the second screen space as well as companies that focus on natural language processing and analytics.it's sometimes easy to forget the real reason companies like Twitter go public: to raise money. Twitter raised just more than $1.8 billion from its IPO, a large influx of money though much less than the $16 billion that Facebook raised in its public offering. The company also secured a $1 billion credit line shortly before the IPO.
"Twitter is going to be on an acquisition binge," Blau said, noting that Twitter had previously been on a pace of buying five or six companies a year. "I don't think their rate of acquisition is going to slow down ... I tend to think it will be slightly more weighted to the backend."
Profitable? Probably Not
Twitter is expected to generate
close to $1 billion in revenue next year as its ad products continue to mature. That marks impressive growth for the company, but it doesn't mean Twitter will achieve profitability.
Multiple
reports based on interviews with bankers and analysts suggest that Twitter will continue spending aggressively in 2014 to scale and compete with other major social networks. As a result, anyone waiting for Twitter to turn a profit may have to wait until 2015
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