Home Technology Twitter Must Monetarize User Base As Facebook Has So Successfully

Twitter Must Monetarize User Base As Facebook Has So Successfully

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Just a couple of days ago, it was noted that a redesign of the social networking site Twitter Inc (NASDAQ:TWTR) bore more than a passing resemblance to its big rival Facebook Inc (NASDAQ:FB). But although tweeting has become part of everyday behavior, not to mention the standard lexicon of language, Twitter would rather resemble its great rival in economic terms, rather than just physically.

Twitter Inc (NASDAQ:TWTR) has created a lot of buzz and attracted a lot of users in the eight years that it has been live, the more established Facebook Inc (NASDAQ:FB) continues to rule the roost in social media, at least in economic terms. Facebook currently generates over twenty times annually the revenue accrued by Twitter, and though the original and largest social networking site has had its fair share of problems, it still has a business model which is far superior to that of Twitter.

Twitter, Facebook earnings

This reality was further emphasized by financial news related to the two companies which has emerged in the last few weeks. Facebook was delighted to announce to the markets that its fourth-quarter revenue and earnings had comfortably exceeded analysts’ estimates, with the $8 billion plus figure for 2013 that Facebook was able to import representing a 55 percent increase from 2012. Meanwhile, the company’s operating income reached $2.8 billion; an extremely healthy 500 percent increase within but one calendar year.

While there were numerous reasons for this surge in income, Facebook placed a particular emphasis on the rapid increase in mobile advertisements. This was not only good news for the social media giant, it was also something of a triumph as the ability of the site to generate such ads was seriously questioned by analysts and markets alike at the time of its initial public offering in May, 2012.

The good news for Facebook with regard to earnings was reflected in its share price last night, which reached a new peak after a generally upward trend for several months.

Facebook Stock Chart

By contrast, it hasn’t been the most successful few months for Twitter. The social media site has only been a public company for a short period of time, and thus recently issued its first quarterly report. Although sales and earnings beat estimates made by the same Wall Street analysts that were cautious on Facebook revenue, investors weren’t overly keen the ability of Twitter to engage users and grow its user base. Thus, Twitter stock lost nearly one-quarter of its value in merely 24 hours, although the social media site’s stock has recovered slightly since then.

twitter stock chart

The Chief Executive of Twitter, Dick Costolo, was forced to face the Wall Street analysts shortly after the earnings results were released, and was keen to emphasize that the results his company had achieved were outstanding. Unfortunately, the call didn’t go quite according to plan and analysts became rather more fixated with whether Twitter could engage users more successfully. And concluded that it couldn’t.

This isn’t the first time that a social media site has hit upon economic problems, though. Lest we forget, Facebook initially struggled after its flotation, as investors and city analysts wondered how it would generate significant income, let alone long-term revenue. Although the site has answered its critics to a certain extent, some naysayers still believe that its long-term future is less than rosy.

Nonetheless, Facebook Inc (NASDAQ:FB) has emphatically shown that it is possible for social media sites to attract significant mobile income, and the growth in this continually fashionable sector, which it particularly driven by rabid tablet computer sales, perhaps bodes well for Twitter Inc (NASDAQ:TWTR). If the world’s second most significant social media site can learn anything of substance from Facebook it is with regard to generating mobile income for its site.

Clearly this is something that has paid off massively for Facebook. The company proudly announced that it generated over $1 billion in mobile ads during the last quarter of 2013 alone. This represented over half of Facebook’s advertising revenues, and given that the company has clearly created a very solid block of business in this area, Facebook is well placed to benefit from growth in this sector going forward; hence the rising share price.

Twitter vs. Facebook: user engagement

By contrast, Twitter attracts lots of users. People love Twitter. Every television channel in the world seems loathe to broadcast for five minutes without asking their viewers to contribute via Twitter. There is without doubt a huge potential customer base for Twitter, but the company has somehow failed to satisfactorily monetarize this user base, and needs to find a way to do so in the future. It should be the ideal platform for mobile advertising, so this needs to be addressed in very due course.

Facebook Inc (NASDAQ:FB) has already denied the doubters and doom-mongers who considered it a sitting duck at the stock price it was launched at. If Twitter Inc (NASDAQ:TWTR) learns from the sensible strategies employed by its rival, it could be the next social media site to turn around its share price and future.

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