RIP Twitter. It's Walking Dead
Twitter is dead. Just push it over and start shoveling dirt on it.
This quarter should have been epic for Twitter Inc. The entire world's eyes were on Twitter, where candidates fought the most contentious US Presidential election in living memory.
And yet even with that big push, Twitter couldn't fly.
In earnings reported Thursday, Twitter said fourth-quarter revenue was $717 million, up a scant 1% year-over-ear. The company lost $167 million or $0.23 per diluted share, according to generally accepted accounting principles. Average monthly active users were 319 million for the quarter, essentially flat for the previous quarter's 317 million, and up a slim 4% year-over-year. Advertising revenue was $638 million, down slightly year-over-year.
Twitter has lost more than $1.5 billion total since it went public in late 2013. Fourth-quarter revenue was significantly short of analyst expectations. Metrics such as cost of revenue and revenue per user are going in the wrong directions, Reuters reports, adding: "With virtually no user growth, Twitter is spending more to generate less revenue per customer."
Twitter's stock was down about 4% Friday, trading at $15.72 mid-morning, after falling 12% on Thursday.
The Wall Street Journal sums it up with a headline that says it all: Even Donald Trump Can't Save Twitter.
Twitter can't make money. It can't attract users. And it's not making the kinds of fundamental changes necessary for prosperity.
Twitter is 2007 technology in a 2017 world. Twitter was initially designed to run on SMS. The service has layered on many features, embedding videos, images and links. But it's still fundamentally a service designed for 2007 feature phones.
Given Twitter's utter failure to capture mainstream usage and turn a profit, Twitter faces two possible outcomes:
Death: That's nearly certain. For Twitter, death will take the form of being sold at firesale prices to a big company. Google (Nasdaq: GOOG) and Facebook are obvious candidates. They'll continue to run Twitter as long as they can squeeze dimes out of it. But we won't see any further significant growth investment in Twitter. We saw this when Yahoo Inc. (Nasdaq: YHOO) acquired Tumblr.
Indeed, Wall Street analysts were once again speculating on Friday about a takeover. Twitter was already shopped around late last year, and failed to find buyers. But if you set the price low enough, it'll sell. (See Twitter Soars on Takeover Rumors – Reports and Will Amazon Buy Twitter?.)
Miracle: When you look at the lifespan of an innovative company like Twitter, you can expect it to follow a nearly inevitable arc: Meteoric rise in popularity and innovation, followed by stagnation, followed by a slow decline as the top management tries to turn the company around and fails, followed by a rapid death as investors suck all the cash out of the company and then discard the mummified husk.
But occasionally you have a miracle. Examples: Microsoft Corp. (Nasdaq: MSFT) today under Satya Nadella, Apple Inc. (Nasdaq: AAPL) after Steve Jobs's return, and IBM Corp. (NYSE: IBM) after Louis Gerstner took the CEO position in 1993. (See Nadella Promotion Ends Microsoft CEO Search.)
These leaders had the intelligence, charisma and courage to gut a company and rebuild it on its still-sound foundation.
That could happen with Twitter. Probably not. But I hope it does. I love Twitter.
To succeed, Twitter would have to leapfrog its competitors into something new.
I don't know what Twitter 2.0 looks like. But I know that if it happens, it'll be unpopular with pundits, just like Steve Jobs's candy-colored iMacs were 20 years ago.
Last year I suggested Twitter's cloud infrastructure could be used for real-time Internet of Things communications. The same real-time, low-latency communications required to send tweets around the world, in the right sequence, could be harnessed to let intelligent devices talk to each other. That's a completely different business from the one Twitter is in now. But we've seen that kind of pivot before, when retailer Amazon decided to go into the cloud business. It worked spectacularly well for Amazon, and could do the same for Twitter. (See Twitter's the Next Hypercloud Star (No Joke).)
Whether Twitter is dying or on the verge of a miracle, expect a complete change of top management. CEO and co-founder Jack Dorsey has had 16 months to turn the company around and failed. He'll be gone soon. Twitter's other founders have had a chance at the big chair and they failed too. These are all brilliant men who have accomplished something great here, but they haven't been able to turn a dollar from it so they're not the leadership Twitter needs now. The top management's replacements will either be visionaries who can give the company a future, or ruthless accountants, who will minimize the company's financial losses and position it for sale at a bargain price.
— Mitch Wagner, , Editor, Light Reading Enterprise Cloud