Embattled Twitter Inc. (TWTR), which has been reeling from a decline in users and slow revenue growth, got slammed in a blog post on Stratechery.com that argued that the social network has stagnated when it comes to product development, which will have a negative impact on the company’s prospects over the long term.
According to Ben Thompson, the author and operator of Stratchery.com, Twitter has been, and will always be, handicapped by its initial idea, which transformed the way people around the globe connect and communicate. Even President Donald Trump is an avid user of the platform, calling out the media and making policy statements. But a great first idea resulted in Twitter stagnating when it comes to innovating, says Thompson.
“I think this actually gets to the problem with Twitter: the initial concept was so good, and so perfectly fit such a large market, that they never needed to go through the process of achieving product market fit. It just happened, and they’ve been riding that match for going on eight years,” wrote Thompson. “The problem, though, was that by skipping over the wrenching process of finding a market, Twitter still has no idea what their market actually is, and how they might expand it. Twitter is the company-equivalent of a lottery winner who never actually learns how to make money, and now they are starting to pay the price.” Thompson went on to argue that Twitter has been selling the same service it launched in 2006—live commentary, live connections and live conversations—with the only new product ideas mimicking the old way media and television workers. What’s more, Thomson says its “the worst sort of product thinking: simply doing what was done before, but digitally.” (See also: Weibo on Track to Surpass Twitter In Users.)
Lacking in the Innovation Department
At the same time that Twitter is lacking on the innovative front, competitor Facebook Inc. (FB) is surging thanks to its embracing mobile and its conclusion that advertisements are way more effective when they show up in users’ news feeds. “In-feed advertisements—just like Google’s search advertisements—are uniquely enabled by the Internet; it should come as no surprise that said uniqueness is strongly correlated with actually making money from advertising,” wroteThompson.
But is Twitter evolving? Thompson thinks not, pointing out that Twitter’s strategy with the recent Oscars telecast was to simply live-stream the awards show, similar to how it live-streamed NFL games and the presidential debates leading up to lection. “Twitter’s goal of owning ‘live’ could mean so much more: how might the product evolve if Twitter had the sort of product mindset found at companies like Amazon, Netflix, or Airbnb?” wrote Thomson.
The new blog comes on the heels of a dismal fourth quarter for Twitter. For the three months ended in December, Twitter reported adjusted earnings of 16 cents per share on revenue of $717 million, which beat Wall Street's expectations for earnings per share of 12 cents but missed revenue forecasts of $740.14 million, according to Thomson Reuters. Aside from missing on the top line, this amounts to less than 1% revenue growth, and even the beat on the bottom line translates to flat growth year over year. Twitter's revenue was hurt by weak advertising sales, totaling just $638 million, marking a slight year-over-year decline.