Twitter In A Corner - Facing Huge Challenges

Written by Robert Bacal |

It's easy to consider Twitter a success, particularly if you don't look at it as a business, but it's facing some critical issues and Catch-22's that may endanger its existence over the next 12 months. The fact that it has not turned a profit yet, and the business need to start providing return on investment for its investors, puts it in an awkward position. It's a position that other platforms will also face or are now facing.

The Commercialization Corner

Any business has to generate a) revenue, and b) profit. At least any business that isn't owned by Google. There are only a limited number of ways one can do these things, and they all involve commercializing the product or service you have. Twitter is moving to create revenue through the sale of advertising and seems to recognize that there is risk involved in doing so, thus it's easing into it.

The problem they face, though is not the common one of finding advertisers, at least not in this temporary era of social media hype and hope. It's this:

With 80% of user accounts abandoned, can Twitter afford to move away from it's social community roots in order to monetize its operation?

Can it hit the critical balancing point where it can maintain its user base, attract more users while using user eyeballs to generate money? It's unlikely. There is a point where the commercial use will drive social and community users out of the space, or to competitors, and that reality, or at least possibility limits the revenue potential.

At the same time, there is the issue of commercialization from third party sources who aren't paying anything for the free advertising they get from simply dumping tweets into the stream. They damage the user experience for those who are not there to buy things, the majority of users, and they don't drive any revenue at all for Twitter.

This is probably the critical issue for Twitter right now: To find a way of generating revenue that will not alienate future and present users, who after all, provide Twitter with a reason to exist.

Coupled with the limited features Twitter has to offer, and it's certainly at risk. Our prediction is it will be acquired, be absorbed or change completely in the next two years.

Finally, one interesting point. It may turn out that Twitter actually leaves the social media arena and becomes a search engine of sorts, something that has been hinted at in the past. We'll see. Perhaps that's what the recent annoucement about building its own data center means.