May 19, 2014
With Twitter’s earnings coming out recently, there have been a lot of mixed reactions (okay, mostly negative) that have investors and the press running around like chickens with their heads cut off. The press speculates on Twitter’s long-term potential, while investors demand new growth plans and answers from Twitter.
For startups built on Twitter, this must feel like a toddler watching their teenage brother get scolded by his parents, with the brother saying “Mom, Dad you just don’t GET me. Gosh!”
Investors like categorizing things. Since Facebook was the first social network to hit it big, its benchmarks are considered the Holy Grail for any new social media company. Because Twitter also happens to be in the social media space, it gets pigeonholed against Facebook-style benchmarks. When these aren’t reached, panic ensues, without the consideration of whether these benchmarks are actually appropriate.
So yes, if sheer volume of users is THE key indicator and predictor of success, then Facebook seems like a great bet. Twitter might never reach the mass scale of Facebook in that sense. But quite frankly, that’s not a problem either. This doesn’t mean Twitter won’t reach the same, or more, revenue generation as Facebook. Measuring Twitter’s revenue potential against Facebook’s user growth sheds light on only one indicator of future success. It doesn’t take into account the social networks’ core strategic difference—open vs. closed content— and how this will play out in terms of revenue, and social media in general.
Open Data and Content
The core strategic difference between the Twitter and Facebook platforms is the openness of their data and content.
All of Facebook’s data is largely closed (i.e., most content is private, behind a Facebook log-in, and only visible to logged-in users). Therefore, most products built with Facebook must live within Facebook. For advertisers (the revenue driver for both platforms), this means that their advertisements and how consumers interact with them must always live within Facebook and nowhere else. This is limiting … very limiting.
Now take Twitter, where most of the data is open. Products can be built with Twitter outside of the core Twitter environment, meaning content reaches non-Twitter users. (Some have recently speculated that soon, non-Twitter users may be able to engage with even more Twitter content as well, without actually being logged in.) With Twitter’s recent push on advertising innovation, it would be safe to assume that non-Twitter users could engage with advertisements and advertising products as well on the platform. Or, engagement could take place on new platforms that use the open data to innovate in the Twitter ecosystem and expand the reach of Twitter’s content. This is a massive, unlimited audience– unlike Facebook.
Predicting Success for Twitter
User growth for Facebook and Twitter is traditionally measured by ‘logged-in user’ growth, and that is not the most important factor here to predict future success. Metrics that are good for one business may have little to do with another—something most of the commentators seem to have missed.
Instead, what the press and investors should be looking at is the potential for ecosystem growth, and how the platforms support the growth of both logged-in and non-logged-in users. This is how you can reach more people and raise the value proposition of those using your platform, both directly and indirectly. Twitter has a fantastic opportunity to leverage the openness of their platform to work in their favor. And as already discussed, the more eyeballs, the more revenue.
Combining the ecosystem advantage of Twitter with the right advertising suite, Twitter will win the revenue battle. That is, if Twitter can ignore the ‘Be More Like Faceboook’ mantra, because for them, that’s not the solution.
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