Twitter’s next frontier

• Global
• Clubhouse, Facebook, Google, Pinterest, Twitter
• March 6, 2021

For all its ubiquity, Twitter hasn’t always been the most popular kid on the playground. Advertisers, its main source of revenue, have flocked to Facebook and Google and users have favoured Instagram and Pinterest. As a result, investors have also turned their attention and money elsewhere, causing the share price to languish well below its IPO price for many years.

However, a reversal of fortunes seems to be on the cards.

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Twitter’s Q4 earnings result had a number of highlights:

• Revenue up 28% year-on-year to $1.3 billion (highest ever in a quarter)
• Monetisable daily active users, a metric for the number of users that logged in and were shown ads, increased by 27% to 192 million
• Operating income rose by 65% to $252 million, improving its operating margin from 15% to 20%
• 80% of Twitter’s audience now sits outside of the US, emphasising the strength of its global reach

Investors responded to the results by rocketing the share to levels last seen in 2013.

The results weren’t the only reason investors piled in. Twitter finally seems focused and ready to use its user base to its advantage, launching an exciting new feature and working on a possible new revenue stream.

The Next Frontier

When Twitter launched a Stories feature last November – or Fleets as it refers to them – there was a collective groan from users. Instead of innovating, Twitter was chasing a social media trend that Instagram started in 2016. It felt old hat, and a sign that the company didn’t know how to lead, only follow.

However, for the first time in years, Twitter seems to be on the forefront of a new innovation in social media: audio. Soon after it launched Fleets, Twitter announced Spaces, its new social experience involving audio-only chat rooms.

Clubhouse, a fast-growing new audio-only app, has popularised and pioneered the format but its youth may lead it to fall behind. While it has currently has more than ten million users (and counting), access to the app is on an invite-only basis and it is exclusive to iPhone users. That’s good for an app that isn’t even a year old yet, but it’s not so good when your closest competitor has 192 million users.

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The format of Clubhouse and Spaces is quite simple. User can enter virtual ‘rooms’ which will contain a group of speakers and an audience. You can start your own room or request that the room’s moderator bring you ‘up on stage’ to speak. It has the feel of a live podcast, group phone call and conference all rolled together and is a great and efficient way of facilitating discussion beyond text.

The advantage that Twitter’s newest feature has over Clubhouse lie in its oldest feature: the timeline. When Elon Musk famously crashed Clubhouse’s servers after hosting a Q&A on the app, the discussion took place on Twitter. Clubhouse has no text features and a limit of 5,000 people per room, so the play-by-play of events was taking place on Twitter. It was free advertising for Clubhouse, but also an example of the opportunity Twitter has to integrate discussion with experience.

Twitter 2.0

Twitter has also announced that it is building a subscription product in an effort to diversify its revenue streams away from advertising and towards recurring revenue.

The new feature, called Super Follows, will allow Twitter users to charge followers for access to extra content. Similarly to Patreon and OnlyFans, the extra content provided would be up to the creators. It could range from exclusive tweets, access to a community group or deals and discounts to a creator’s products. It would seem to be a natural next step for creators, as most build and acquire their most ardent fanbase through engagement on Twitter.

Revue, a newsletter platform that Twitter recently acquired, will certainly also be part of its long-term plans. Revue is a way for newsletter writers to charge their subscribers, while only taking 5% of the subscription amount. Substack, the leader in this field, currently takes 10%.

Revue is another example of Twitter realising the value of its platform. Substack newsletters would get discussed en masse on Twitter, with Twitter capturing none of the value. Through Revue and Spaces, Twitter can finally keep the value on the platform.

Twitter’s value proposition for users is finally becoming clearer:

You can build an audience on Twitter, distribute longer thoughts through a newsletter on Revue, use Spaces to engage more personally with your subscribers and monetise access to your content through Super Follows. It’s the perfect feedback loop.

It’s clear why investors are bullish. This is the most exciting Twitter’s prospects have seemed in years. With the right implementation, Twitter 2.0 might finally win the social media war after many lost battles.

Editor’s note: The Finance Ghost has seen incredible growth and engagement through Twitter. The platform is powerful and the latest strategic shift seems sensible. The Finance Ghost is a Twitter shareholder.

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