Breakingviews - Twitter’s future looks like its underwhelming past

The shadows of people holding mobile phones are cast onto a backdrop projected with the Twitter logo in this illustration picture taken in Warsaw September 27, 2013. REUTERS/Kacper Pempel

NEW YORK (Reuters Breakingviews) - For such a disruptive company, Twitter changes surprisingly slowly. From a user’s perspective, the $60 billion social network looks much like it did when co-founder Jack Dorsey took the dramatic step of doubling tweets to 280 characters over three years ago. Now Dorsey wants to expand Twitter’s revenue by stepping up innovation, but his track record of reinvention is not great.

Dorsey is blunt about why the social media network has failed to soar: “We’re slow, we are not innovative and we are not trusted.” Over the past 10 years, an investor in Twitter would have made around 5% a year in share price gains. Facebook and Alphabet, the parent of search engine Google, have managed a 20% shareholder return over the same time period. Facebook’s market capitalization is around 12 times the size of Twitter’s; Alphabet’s is 23 times as big.

Twitter’s new plan to double revenue to over $7 billion by 2023 could close the gap a little. It involves buying or adapting the best of the rest. One example is Spaces, an audio message board that apes recent upstart Clubhouse. Revue, one of the 20 or so deals Twitter has done in the last three years, is a cross between Medium and newsletter platform Substack. Fleets are tweets that vanish in 24 hours, a bit like the disappearing messages of Snap’s flagship product, Snapchat.

Silicon Valley is rife with copycats. Facebook borrowed Snapchat’s rapidly-expiring stories and applied them to Instagram, which it bought in 2012 after the photo-sharing network started to gain popularity. Twitter though hasn’t been anywhere near as successful. Its acquisition of Vine, a short-form video platform, for an undisclosed sum in 2012 proved a failure. Twitter shut it down around four years later as look-alike service TikTok took off. Twitter’s revenue grew just 7% last year, while Facebook’s increased 21%.

The purpose of all of this, in Twitter’s case, is advertising. Dorsey wants 315 million daily active users by 2023, up 64% from last year, to bring in a bigger slice of what Twitter sees as a $150 billion click-here-to-buy-now ad market. Currently, it has less than 3%. And Snap is estimated to overtake Twitter’s average revenue per user domestically by 2025, according to estimates from MoffettNathanson. Twitter may try to revamp itself, but one thing it can’t change is that it’s small, and late.


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