For Twitter Inc, “Hope Is Not a Strategy”: Analyst

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Twitter has made a number of changes to its service in recent weeks in an attempt to check declining user growth. Most recently, it announced that users will be able to write longer tweets exceeding 140 characters, as now the limit will not include certain elements in tweets. However, analysts believe this is not any kind of coherent growth strategy.

Advertisers moving away from Twitter

Moffett Nathanson, a research firm specializing in analysis of media companies and their market value, gave a Sell rating to Twitter and a price target of $12 in a new report titled “Hope Is Not a Strategy.” The analysts believe these tweaks will not help the company achieve growth in any manner and are just like rearranging the deck chairs on the Titanic

An important question to be answered is what made Moffett Nathanson so pessimistic about Twitter’s chances. The research firm believes Twitter’s business is on a rapid decline, not only in terms of the number of users or engagement levels, but also in terms of the advertising-based business that Twitter has tried to build on top of its service.

Analyst Michael Nathanson says the growth rate of Twitter’s advertising business was in the double-digits a couple of years ago, but this is not the case anymore. Google’s revenues are more than 35 times as large as those of Twitter, which are growing at the same rate as those of the search giant.

“Twitter is now not only dealing with user fatigue, but advertiser fatigue as well,” the report says.

Not a must-have

Referencing conversations with ad agencies, the analyst states, “The commentary we continually hear is that most aren’t pushing their clients to increase their budgets on Twitter or are actively steering clients away from Twitter all together.”

Live events still have some interest around them, but it has become clear that the micro-blogging firm is not a must-have for most people, “and we don’t see that sentiment shifting at this point.”

Twitter intends to attract both new users and boost the engagement levels of existing users. It has made most of its usability and design changes, such as the introduction of features like Moments that allow human editors to curate news topics, while keeping this in mind.

Twitter has argued in the past that the real value of the network does not lie in its 310 million logged-in users but rather in the 1 billion users who see and interact with tweets somewhere without the need to log in.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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