digital businesses

Twitter gets stung by an errant tweet but investors shouldn't write the company off

Twitter's stock took a tumble last week thanks to some bad PR and lower-than-expected results. But their business strategy is reassuring.

Twitter’s share price took an US$8 billion tumble after their results were leaked early, prior to market closure – ironically through a tweet. The social networking site posted results showing revenue had risen 74% to US$436m but it missed analysts’ expectations of US$456.2m. It has now lowered its 2015 full-year expectations.

 

But other financial indicators of Twitter’s performance are more positive and a closer look at the company’s business model shows investors should not be so spooked. Twitter’s adjusted income of earnings before interest, taxes, depreciation, and amortisation (EBITDA), for example, increased to US$104m, above the previous forecast range of US$89m to US$94m. And the company is employing a strategy that has a mix of building on its core offering, while keeping their service fresh through new innovations.

Keeping users and investors happy

On one level, Twitter’s business model is working. The social media platform is attracting more users than ever before. The number of monthly active users is up and breaking the 300m barrier for the first time. It also informs a large number of media reports. So there is room for optimism, in spite of its latest disappointing revenue figures.

But the company must convince advertisers and investors that its business model can deliver long-term value for them. This is done through a mix of keeping the active number of users high and finding ways to monetise its offering.

To do so, Twitter has a strategy that is in the right direction: strengthening its core offering, reducing barriers to consumption and delivering new apps and services. Advances across these three areas have helped Twitter deliver growth in its revenues and user-base: mobile, international, and ad engagements.

Staying relevant

Twitter is well-positioned to make the most of the growth in mobile users, as they have traditionally focused on the mobile experience. Overall, the number of monthly active users on Twitter has actually risen 18% year-on-year to 302m, compared to 288m in the previous quarter. Mobile users account for approximately 80% of these total monthly active users and international users (non-US) make up around 78% of these. From the 14m new users compared to the previous quarter, 11m were international.

Twitter has brought in a wave of new features as it looks to keep its offering relevant. These include “instant timeline” to speed up the sign-up process for new users, homepages that are accessible for logged-out users, private messaging and video sharing. These have helped Twitter freshen up the overall experience they deliver – and be relevant, particularly in new markets.

Video features highly in their efforts. It reflects the growing popularity of video sharing on rival social media platforms. And the launch of Periscope, its new live-streaming video app, is part of this. Twitter’s CEO, Dick Costolo, said it allows users to transport into interesting people’s lives and that it nicely fits with Twitter’s strategy: to give users the power to create and share ideas instantly, and without barriers.

Capitalising on their innovations

Advertisers are now learning how best to use Twitter’s toolkit more effectively to attract relevant audiences. And this is an area where Twitter has scope for further growth, as the number of advertisers they have on their books (60,000) is much lower than that of Facebook (2m) and Google (8m). Another key question is how appealing is Twitter to advertisers – in other words, not only having more advertisers involved but have them spend increasingly more compared to other social media platforms.

By making its partnerships with other platforms work, Twitter has potential to increase its value to advertisers. The company has entered recent partnerships with Flipboard, Yahoo! Japan, and Google – the latest meaning tweets will be integrated in Google search results. The more tweets come up in results across search platforms, the more Twitter’s relevance will increase, both for users and advertisers.

The partnership with Google could allow both firms to explore a potential takeover deal. And as Twitter’s business model keeps producing new, engaged users, and new innovations, the more it will be attractive to other firms.

New services, acquisitions and partnerships can take time to deliver results. And while they might keep users happy, the question is: are investors willing to give Twitter the time? The latest stock performance might suggest otherwise, but the company’s strategy is one worth investing in.

Meanwhile, Twitter’s management will be under pressure to deliver better results in the next two quarters and possibly consider takeover scenarios. Otherwise investors may start calling – or even tweeting – for a change at the top.

This article was originally published on The Conversation.


Support our journalism by subscribing to Scroll+ here. We welcome your comments at letters@scroll.in.
Sponsored Content BY 

Following a mountaineer as he reaches the summit of Mount Everest

Accounts from Vikas Dimri’s second attempt reveal the immense fortitude and strength needed to summit the Everest.

Vikas Dimri made a huge attempt last year to climb the Mount Everest. Fate had other plans. Thwarted by unfavourable weather at the last minute, he came so close and yet not close enough to say he was at the top. But that did not deter him. Vikas is back on the Everest trail now, and this time he’s sharing his experiences at every leg of the journey.

The Everest journey began from the Lukla airport, known for its dicey landing conditions. It reminded him of the failed expedition, but he still moved on to Namche Bazaar - the staging point for Everest expeditions - with a positive mind. Vikas let the wisdom of the mountains guide him as he battled doubt and memories of the previous expedition. In his words, the Everest taught him that, “To conquer our personal Everest, we need to drop all our unnecessary baggage, be it physical or mental or even emotional”.

Vikas used a ‘descent for ascent’ approach to acclimatise. In this approach, mountaineers gain altitude during the day, but descend to catch some sleep. Acclimatising to such high altitudes is crucial as the lack of adequate oxygen can cause dizziness, nausea, headache and even muscle death. As Vikas prepared to scale the riskiest part of the climb - the unstable and continuously melting Khumbhu ice fall - he pondered over his journey so far.

His brother’s diagnosis of a heart condition in his youth was a wakeup call for the rather sedentary Vikas, and that is when he started focusing on his health more. For the first time in his life, he began to appreciate the power of nutrition and experimented with different diets and supplements for their health benefits. His quest for better health also motivated him to take up hiking, marathon running, squash and, eventually, a summit of the Everest.

Back in the Himalayas, after a string of sleepless nights, Vikas and his team ascended to Camp 2 (6,500m) as planned, and then descended to Base Camp for the basic luxuries - hot shower, hot lunch and essential supplements. Back up at Camp 2, the weather played spoiler again as a jet stream - a fast-flowing, narrow air current - moved right over the mountain. Wisdom from the mountains helped Vikas maintain perspective as they were required to descend 15km to Pheriche Valley. He accepted that “strength lies not merely in chasing the big dream, but also in...accepting that things could go wrong.”

At Camp 4 (8,000m), famously known as the death zone, Vikas caught a clear glimpse of the summit – his dream standing rather tall in front of him.

It was the 18th of May 2018 and Vikas finally reached the top. The top of his Everest…the top of Mount Everest!

Watch the video below to see actual moments from Vikas’ climb.

Play

Vikas credits his strength to dedication, exercise and a healthy diet. He credits dietary supplements for helping him sustain himself in the inhuman conditions on Mount Everest. On heights like these where the oxygen supply drops to 1/3rd the levels on the ground, the body requires 3 times the regular blood volume to pump the requisite amount of oxygen. He, thus, doesn’t embark on an expedition without double checking his supplements and uses Livogen as an aid to maintain adequate amounts of iron in his blood.

Livogen is proud to have supported Vikas Dimri on his ambitious quest and salutes his spirit. To read more about the benefits of iron, see here. To read Vikas Dimri’s account of his expedition, click here.

This article was produced by the Scroll marketing team on behalf of Livogen and not by the Scroll editorial team.