‘Twitter shares drop on faltering user growth,” said the headline last week. It turned out that the company had just released its last quarterly return for 2015. It had revenues of $710m (£490m) and a net loss of $90m, which means that – compared with the same quarter last year – revenue was up 90% and losses were down by 27%. If you know anything about technology companies, especially those with a global reach, this looks about par for the course: the company is on track to break even and reach eventual profit. Yet the technology babblesphere is full of fevered speculation about whether Twitter “has a future”. And the stock market, ever attentive to hysteria, marked the shares down accordingly.
Insofar as all this hullabaloo had any rational basis, it lay in the revelation that Twitter’s active user base had declined from 307 million monthly active users to 305 million. Viewed through the distorting prism of Wall Street and the tech commentariat, this is apparently a catastrophe. Why? Because it has stopped growing! “So Twitter user growth (excluding SMS) has now declined,” tweeted one excitable commentator. “Brutal.”
If there’s one thing Wall Street and the tech industry fears, it is the idea that something potentially profitable might peak or reach some kind of equilibrium point. Endless exponential growth is what investors seek. Whereas you or I might think that a company with more than 300 million regular users that pulls in $710m in revenues is doing OK, Wall Street sees it as a potential zombie.
At the root of the dissonance is the fact that Twitter is a public company. At its flotation in November 2013 it was valued at $32bn, a figure largely based on hopes (or fantasies) that it would keep modifying its service to attract mainstream users, that its advertising business would continue to grow at a phenomenal rate and that it would eventually be bigger than Facebook.
It didn’t do all these things, for various reasons, the most important of which is that it wasn’t (and isn’t) a “social networking” service in the Facebook sense. At the heart of the distinction is the fact that, whereas it is easy to give an answer to the question “What is Facebook?”, the answers for Twitter depend on who you ask. Technically, it’s a platform-independent micro-blogging service with a limit per post of 140 characters. For geeks, it’s a human-mediated RSS feed – that is to say, a way of plugging into the thought streams of people you choose to “follow”.
For celebrities, it’s a way to broadcast to fans. For journalists, it’s an efficient way of conveying breaking news from anywhere. For some people, it’s a combination of a giant phone book, a personal radio station and what used to be called a “party line” in the old days of telephony. For others, such as blogger Jeff Goins, it’s “the cheapest way to send an instant message to someone interested in you … the easiest mode of finding breaking news that’s relevant to you … the most effortless way to meet a celebrity. Twitter is not the main stage; it’s the backstage. What happens over coffee and face-to-face, while others are schmoozing and dropping business cards on tables.” And so on, ad infinitum.
When it first appeared, mainstream media used to ridicule Twitter as the place where sad people sent messages to other sad people about what they’d had for breakfast. But this kind of derision faded when the Arab spring got going. A guy who worked in the US state department at the time told me of a moment when a group of senior officials in Washington were gathered round a television screen showing a live feed from Tahrir Square in Cairo. Suddenly the camera zoomed in on a protester who was holding up a piece of cardboard on which were written some letters preceded by the hash symbol. “What’s that?” asked a baffled diplomat.
Nobody in the state department asks that kind of question any more. The Twitter hashtag has become part of everyday political discourse. It provides a way of collating multiple voices and perspectives on a particular event or topic. Sometimes it has also been a mechanism for coordinating collective action on the streets. But even then its role has been misunderstood. In 2010, for example, New Yorker writer Malcolm Gladwell wrote a dismissive article – “Small change: why the revolution will not be tweeted” – essentially arguing that tweeting is easy but real campaigning is hard and sometimes dangerous. He’s right, but still misses the point, which is that Twitter lowers what you might call the transaction costs of expressing a political opinion. And while most Twitter-based campaigns fizzle out, a few don’t and “go viral” with unpredictable – and unpredicted – consequences. Think of what happened after the shooting of Michael Brown in Ferguson, Missouri.
In a thought-provoking new book, Political Turbulence: How Social Media Shape Collective Action, Professor Helen Margetts and her colleagues at the Oxford Internet Institute provide empirical evidence that social media are starting to change our politics in ways not yet appreciated or understood. Platforms such as Twitter, they write, are providing “zero-touch co-ordination for micro-donations of time, effort, and money and are replacing organisations and institutions in some areas of political life. Indeed, organisations increasingly resemble social media platforms in the way they present themselves to the public, with facilities for commenting and encouraging the sharing of content.”
What this means is that Twitter is not just any old tech company. Its service has insinuated itself into our public life in ways that have been generally positive and sometimes vital (think of #blacklivesmatter). It’s living proof, in other words, that profit is not the same thing as social value. And we would really miss it if it were gone – which is more than can be said for, say, LinkedIn, to name one other tech outfit that is in deep trouble.
So the decisions that Jack Dorsey (the company’s co-founder and now its reinstated CEO) and his fellow executives make to address the challenges facing Twitter really matter. The big question is whether they will follow the Facebook template – continually modifying services to manipulate (and thereby “monetise”) existing users. There are already disturbing signs that this is the path Dorsey favours.
He has, for example, introduced Moments, a curated feed that supposedly makes it easier for users to follow major events and breaking news, but in fact seems to produce only banal streams of idiotic content that remind you of Reddit on Valium. And, taking a leaf from the Facebook playbook, users’ Twitter streams are now algorithmically determined, supposedly to tailor them more closely to their interests, but coincidentally also making it easier to aim ads at them.
If this is indeed an indicator of where Dorsey intends to take the company, the outlook is grim for several reasons. One: network effects mean that the social networking game is over: nobody is going to displace Facebook now, given its 1.45 billion users. Two: adopting the Facebook template essentially destroys the things about Twitter that made it unique and valuable to its users. And three: remember what happened to Yahoo, a company that tried and failed to ape a powerful adversary and is now accelerating towards zombie status?
There is an alternative, though. It involves bowing to reality, abandoning the quest for unattainable growth, taking the company private again – as Michael Dell did when his company needed radical reform – and changing the business model to one based on subscriptions or a mixture of advertising and subscriptions. This would reshape Twitter into a smaller, more focused operation that did a few things superbly well.
I’ve even invented a hashtag for it: #getyouracttogetherdorsey.