As the longest overseas social media platform after Facebook (and its sub-products) for a long time (not counting TikTok for the time being), Twitter has always puzzled me.
What I do n’t understand is why, today, it has become the overseas mobile Internet infrastructure, but its commercial value has not been widely recognized? So much so that Facebook, which has been on the market for only a year, has now quadrupled its market value, while Twitter ’s stock price is still below the issue price.
This is by no means the simple conclusion of “Social Network Winner Take All”.
A few months ago, a professor at the Stern School of Business at New York University as a mini shareholder really couldn’t stand it anymore. He wrote a statement denouncing Twitter’s current CEO. He was not as good as the American leader in contributing to the company.
After all, if you buy and hold after the president who is good at “ruling the country on Twitter” came to power, today you can gain 60%.
Not long ago, a heavy news about Twitter spread in Silicon Valley. A well-known hedge fund couldn’t bear the “inaction” of Twitter CEO Jack Dorsey, and decided to buy a certain amount of stock to gain the right to speak, pushing the board to remove him.
Twitter ’s market value performance over the years has been completely unsatisfactory to shareholders. How did this happen? There may be three reasons: wrong decision of commercialization path, unfavorable investment and merger and acquisition, and negative slack in product innovation.
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The hedge fund that recently came out of the muddy water is called Elliott Management, with an asset management scale of more than 10 billion US dollars. It has won many financial battles such as Peruvian sovereign bond defaults, Argentina’s national debt defaults, and Lehman Bank bankruptcy.
At the helm is Paul Singer, a very savvy and tough boss on Wall Street at the moment. He recently followed Twitter and holds nearly 4% of the company’s shares, so he tried to promote the current CEO. replace.
They put forward the following three reasons:
1) The company’s stock price is not performing well. Since Jack became CEO in July 2015, the company’s stock price has fallen 6.2%, while Facebook’s stock price has risen 121% over the same period;
2) Slow progress in product innovation. In horizontal comparison, Facebook has made several large acquisitions, and its sub-products have copied the story from the story, and Snapchat, as the most dynamic social product, has always been popular with young people.
Only Twitter, for a long time, has not had any major product innovations. It has just buried itself in optimizing core services and constantly tossing information flow. User size, engagement, and ad inventory have not skyrocketed, and management seems indifferent to this;
3) Jack himself is not focused enough. His reasons for not being a Twitter CEO include but are not limited to: he is already the CEO of Square, another company with a market value of 10 billion, and he is suspected of distracting his energy; he shows a strong interest in “inappropriate” blockchain and cryptocurrencies. Suspected of “doing nothing”; once said that he would stay in Africa for several months and work remotely in 2020;
Of course, the most realistic and direct reason may be that Twitter has always been a potential hunting target for radical investors.
It does not have a system with different rights, and the current CEO Jack is not a company soul like Facebook ’s Xiaozha and Snapchat ’s Ivan and has a large number of stocks and core speaking rights. Therefore, Twitter is difficult to resist this possible malicious acquisition.
But this is only the current situation. As for why it is today, we need to go back to Twitter’s longer history.
Twitter’s Wild Journey
”Social Networking” has helped the world understand Facebook and Zuckerberg to a great extent. Twitter also has benchmarking works, but it is a book. Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal, translated in Chinese-“Incubating Twitter: A Wild Journey from Wild to IPO”.
The two main characters in the book, Evan Williams and Jack Dorsey, are the co-founders of Twitter and have been CEOs (currently Evan belongs to the opposition party). It pointedly pointed out a key issue of Twitter’s early days: the two people who can determine the company’s direction are completely two categories.
Evan is a natural entrepreneur, relatively pragmatic, and became famous after founding Blogger and acquired by Google. He firmly believes that everyone should have their own blog, so as to quickly and easily share with others and the world around them.
Because of falling in love with Jack, Evan was later forced to leave Twitter. Turned around and founded Medium, a content platform that may be the most similar to the WeChat public platform in the English world, providing elegant writing and reading experience.
Blogger, Twitter, Medium, these inherited his consistent builder ideas and love for the Internet.
As early as 1994, Evan made the following inference:
” The Internet is a complex system of “three things.” These three things are: computer, information and people. There is a connection between computers, and so do information and people. Follow is a connection, Like is a connection. “
If the Internet can flourish in the future, what are the core principles to follow? His answer was convenience.
”On the Internet, there are two ways to facilitate people: faster and simpler. The problem the Internet has to solve is to save people from waiting and thinking.”
This idea drove him to develop Blogger in partnership with friends, the world’s first tools dedicated to blogging. Evan insisted on a point:
“Study a human desire, preferably a need that has existed for thousands of years, and then use technology to reduce the steps needed to achieve that desire.”
Later Twitter and Medium were the same.
Unlike Evan’s “always entrepreneurial” temperament, Jack is more energetic, young and literary. Jack has other ideas about “what exactly is Twitter”.
He hopes that this product is about self-expression rather than sharing with others and the world around him.
Because of internal disputes and unhappiness with Evan, Jack also left Twitter. After seeing Facebook founder Xiao Zha, he found that he could not get to the ideal position, so he traveled around. Later, I made a mobile payment product, Square, which is larger than Twitter today, with a market value of about 30 billion US dollars.
From a lot of public reports and real stories, Jack is a candid and lovely person. He was firmly opposed to things he did not like, such as political advertisements, so Twitter resolutely announced that this type of advertising is blocked, in stark contrast to Facebook.
Although the starting point is different, there is no doubt that Evan and Jack’s help on Twitter’s initial product is huge.
Looking at it now, the turning point that led to the decision-making mistakes in Twitter’s commercialization path lies in the permissions of the platform’s API interface.
When Twitter was founded, its API was extremely friendly to third-party developers, providing almost all core functionality-related, unreserved permissions.
There are many developers who build gadgets and interesting plug-ins based on this. Not only are they monetizing themselves, but some extremely bright ones also add a lot to Twitter.
But in August 2012, Twitter modified the API access rules. It sets a user limit for all third-party tools and plugins, and gradually gathers permissions to try to eat the ecological dividend on its own.
This measure turned out to be extremely wrong later. As for why Twitter ’s decision-making has undergone such a major shift, the most direct reason is that there is something wrong with Twitter ’s leadership.
Although Evan and Jack ’s governance ideas are not exactly the same, they always have the same vision for Twitter:
”If we had a billion users, that will be the pulse of the planet.”
If we have a billion users, Twitter will be the pulse of the planet.
This was set by an internal strategy meeting on Twitter on February 25, 2009. But in the summer of 2010, things changed.
The strategy of “Twitter will be the pulse of the earth” only lasts for one year. Because it is too illusory and does not see the prospect of commercialization, the board chose to launch Evan of the then CEO and replace it with Dick Costolo.
Dick, the new CEO, worked much harder than his predecessor. Once he came to power, he drastically resolved the long-standing downtime problem and quickly promoted the commercialization of the product.
The reason why the new CEO was selected by the Twitter board is because he has enough experience in the media and advertising industry (its media company was acquired by Google at a high price, and he himself joined in). Therefore, the monetization method he chose for Twitter was-media and ad.
Why is this directly related to the “modify API access rules” mentioned above? Because the choice of media and advertising means everything from product design to recruitment, marketing and sales, all of which should focus on how to most effectively harvest user attention, maximize their participation, and convince advertisers to pay .
So, Twitter has a huge incentive to treat users as private property, want to share a piece of soup to make money secretly? That doesn’t work.
This directly led to Twitter’s restrictions on its API and its hostility to third-party tools. After all, anyone who wants to go for hair removal is an enemy.
But the problem is that even if Twitter has hundreds of millions of users, if it wants to make money from media and advertising, it means going to war with Facebook and Google.
And what is the odds of Twitter in this competition? Twitter has been listed for nearly 7 years and its share price has remained below the issue price; Facebook has been listed for nearly 8 years and its share price has more than quintupled; Google has been listed for nearly 16 years and its share price has more than folded more than 20 times. Stock price changes are the answer.
Twitter’s identity crisis
For Twitter, whose commercialization plan was not clear at the time, in addition to user volume and duration, data was also an extremely important asset. Choosing to become a “data-driven media company” or a bet on “media-driven data company” will directly determine Twitter’s identity, competitors and future ceiling.
”Data-led media companies”, to put it plainly, rely on data to measure (improve) advertising effectiveness and charge advertisers more advertising fees.
This is true of Facebook and Snapchat. The platform controls the distribution to the greatest extent and grasps the number of contents that can reach a specific audience.
This has led to data-driven media companies always facing pressure to increase the size of users because it represents the scalability potential of their business.
Is Twitter successful enough in this regard?
To quote Ben Thompson:
”Twitter is currently doing almost all brand advertising, not performance advertising. Brand advertisers work with Twitter because it allows certain groups of people to see themselves at specific times. Brands want to be everywhere, and Facebook does not cover all groups, This is an opportunity for Twitter. “
The difference between brand advertising and performance advertising is that brand advertisers want to achieve the goal of making money at a certain time in the future by enhancing brand affinity, while performance advertisers are much more direct-they want to make money directly.
This means that performance advertisers are not interested in high coverage, they are interested in ROI that can be directly measured. Which advertising platforms have the highest return on investment? Of course Facebook and Google. Accurate delivery can bring generous returns. Perfect infrastructure means the lowest investment. The two are superimposed, and advertisers have no better choice.
However, do n’t forget to mention above that brand pursuits are everywhere, as long as it is cheaper to advertise on Twitter, this has always been a good place.
Twitter chose to become a “data-driven media company”. The choice to eat the budget of brand advertising is not bad in the short term. Even because there is a pioneer who is exploring the road ahead, it only needs to watch and add execution.
But we might as well consider another possibility-“media-led data company”.
Because Twitter has too much real-time data, it can completely touch what a billion users see, think, and think. This information (data) has the potential to help customers gain insight into the market and even make better business decisions. This may be more valuable than Twitter as social media.
And if this assumption comes true, perhaps Twitter will take a completely different path. Because in order to do this, the number of active users should not be the indicator that it is most concerned about, nor is it to aggregate user attention, nor to maximize user participation, nor to sell advertisements.
Its goal should be to collect and analyze as much data as possible, anywhere, anytime, any time, and it should be real-time data.
If Twitter does not regard users as private property and third-party applications as enemies, then third-party applications should be able to provide assistance for it to become the “pulse of the earth”, and ultimately aggregate data, sales data, and even analyze and analyze it. Refining truly effective information.
This could be a viable path to help Twitter escape the game of eye-catching and attention-grabbing games.
Is data and information valuable? Bloomberg is a positive answer. Bloomberg terminals, which have been booming for more than 30 years, are well-known in the financial circle, with an annual subscription fee of $ 24,000 and 300,000 subscribers worldwide. Such performance is in front of them, which is enough to prove the huge demand and potential hidden behind the data.
The above assumptions are not purely whimsical. Leaving aside Evan, Jack was very open-minded when confronted with the question of “how do you view Twitter’s future prospects”:
”People used to think that the way you used Twitter was that you had to post a tweet. Actually not. We want to make everyone accustomed to it. Any big or small things happening in the world can be shared here and deserve attention.
Twitter may be able to use other tools to let everyone have more fun when participating in competitions or other activities. It may be able to “augmented reality” in a very interesting way, because it provides a conversation around everything that is happening in the world.
The greatest value we can bring should be speed-the speed of the information, insights and entertainment we provide. We can even predict what will happen.
In my opinion, Twitter can be understood as “a collection of what is happening in the world and what is going to happen.” The more we can recognize unique sounds in real time and connect people, the more potential we have to do this. “
Unfortunately, when the board chose a CEO who was good at media and advertising, they were almost destined to obliterate Twitter’s greater possibility.
And at that time, they will very sincerely explain: “We are social media, selling advertising is our bounden duty.”
Now that we have chosen the path of social media, how did Twitter go?
Since listing, Twitter and Facebook have also followed suit, trying to maintain first-mover advantage through successive acquisitions of small products. But it does not have the vision and luck of Facebook, nor the ability to buy tens of billions of WhatsApp. In hindsight, most of its acquisitions were unsatisfactory, and most unfortunately, it had made considerable decision errors.
There are three main projects with relatively good M & A results: Magic Pony Technology, MoPub and TapCommerce. They are directly or indirectly linked to the Twitter advertising business.
Twitter acquired Magic Pony Technology in 2016 to improve its machine learning capabilities. With this acquisition, Twitter did improve the delivery of photos and videos across applications.
As for MoPub, because it hosts the world ’s largest real-time pricing mobile advertising server, allowing advertisers to self-service transactions and freely choose the scale of delivery, it is very helpful for Twitter’s core advertising business; and TapCommerce is helping Twitter improve its ad positioning Statistical analysis function, which in turn has an auxiliary role in its advertising business.
There are two relatively failed acquisitions: Gnip and TellApart.
Gnip is a company that provides API aggregation services for social media, and was already a Twitter partner before the acquisition. After the acquisition was completed, Twitter expanded its data platform and public API. However, it gradually became obsolete because of the finalization of the media business.
TellApart is Twitter ’s largest M & A deal to date, costing $ 479 million in 2015. The original intention was to help optimize user acceptance and feedback on advertising, thereby increasing Twitter ’s advertising revenue, but this decision was later proven to be considered Unkind. In 2017, Twitter confirmed that it had a negative impact on the overall business and decided to abandon it.
At present, the most unfortunate target is naturally Periscope. In January 2015, Twitter acquired Periscope, a live video streaming media, for nearly $ 100 million. The original intention was to further develop video capabilities, including the provision of real-time broadcast services.
Tianmaxing thinks in vain, for Twitter, it may once bring the significance of transforming live broadcasting to Momo. But as of today, this possibility is very slim. The creator ecosystem is not as developed as TikTok, the content pool is not as deep as YouTube and IGTV, and the user base disk is not as strong as Facebook, and it is almost impossible to have miracles.
Twitter’s forced innovation
In addition to the acquisition of external companies, Facebook has always maintained a keen sense of smell in product innovation, such as the story function that everyone later talked about and was copied and copied by Facebook. So there is an important question, why does Twitter seem to have never done a similar fire after reading?
The reason is hard to guess at the moment, we only look at the reality, Twitter has some action recently.
One of the highlights is that Twitter has acquired Chroma Labs in mid-February 2020, which is dedicated to providing photo and video editing services for Instagram, Facebook Limited Time Dynamics and Snapchat. In short, it’s the “outsourcing” part of the story.
In a way, the value of Chroma Labs is a bit like the built-in filters and editing tools in TikTok.
So what new features Twitter wants to polish is worth looking forward to. The second important thing is that Twitter’s “read and burn” function has made real progress. In order to reduce the pressure on users to produce content, it launched a new content form that automatically disappears within 24 hours-Fleets, which basically benchmarks Stories of Snapchat. Not long ago, it has been tested in Brazil and has not been promoted globally.
The characteristics of Fleets are: this kind of content will not receive likes, cannot be answered, cannot be forwarded, and cannot be directly searched. Before you disappear, others can click on your homepage to view it.
The background of the new feature launch is naturally that Twitter wants to know whether Fleets can help users share information more easily. This is a long-standing common problem of all social products that reach a certain level of user scale.
As Ben Evans mentioned in the article “The Death of NewsFeed”:
All social applications are growing until you need a NewsFeed
All NewsFeeds are growing until you need an algorithm-driven NewsFeed
All algorithm-driven NewsFeeds are growing until you are tired of not seeing / misseeing things, and switch to using less overloaded, smaller new applications
Then, new applications are growing until you need a NewsFeed
Twitter, which does not naturally have acquaintance relationships, is theoretically much more redundant than Facebook. After all, Facebook users with hundreds of friends are rare, but Twitter users who follow hundreds of accounts are not uncommon.
In order to cover up the embarrassment of user activity and slow growth, Twitter invented the so-called mDAU indicator (monetizable daily active users). If the content is burned after reading, can the users of the production content release themselves? Will users who consume content not be so tired?
It is worth mentioning that this new development almost happened at the same time as Twitter was trapped in the coaching whirlpool, so it is worth pondering how the two are related.
Write at the end
It is important to note that as of this writing, Twitter and hedge fund Elliott have reached a temporary ceasefire agreement. After a few months of fermentation, Twitter’s coaching has officially ended (temporarily).
In short, because Twitter compromised, Elliott got what he wanted, so he decided not to go on.
What did Elliott get?
First, Jack’s retreat, he made it clear that 2020 will not be as wayward as before, he will not go to Africa to work remotely, and will stay honestly on Twitter as CEO;
Second, the well-known PE Silver Lake agreed to invest USD 1 billion in convertible bond investment on Twitter, and Twitter also promised to repurchase USD 2 billion in stock.
In addition, Silver Lake and Elliott each sent a person to the Twitter board of directors, and decided to set up an independent five-member committee to regularly evaluate the Twitter leadership.
So in fact, Elliott pressured by buying stocks, and really wanted stock repurchase commitment and influence on Twitter’s board. It basically succeeded.
And Twitter is not a failure. Not only did the CEO keep it, but also the stock repurchase policy, which was a positive stimulus to short-term stock prices.
But as far as the long-term value of the company is concerned, can more shareholders be happy now? I don’t think so.