Twitter - How to Handle the Challenges - Case Study Example

Twitter Case Study Summary Twitter is social networking corporation that has provided an online networking site from which users have the ability to send and access short messages with a maximum of 140 characters referred to as tweets. The main problems of the corporation are creating long-term strategies to sustain their growth as well as highly competitive market. The paper will analyze the problem facing the company and develop recommendations on how to handle the challenges. Analysis The main problem affecting Twitter as a brand is its ability to retain their initial market objective and monetize the services it offers. In an argument by Piskorski et.al apart from 2011 the corporation has not made significant profits; “despite of the success with the users and media, Twitter took a long time to monetize” (2015, 1). In the years, Twitter has contracted with other companies to use the site as an advertising site. For instance, the deal with Paramount Pictures to sell one million sneak peak pictures was massive money making venture (Piskorski et.al, 2015, 1). In the years, the advertising corporation with other companies influenced the revenue growth from $28 million to $307 million in the next years. Advertising seemed to be the best placed monetization strategy the company could use successfully. However, the growth of the brand required increased revenues from other strategies other than advertising. The size of the company was not evident until the IPO in 2013 which raised $1.8 Billion. From these results, the stakeholders were determined to increase the revenue of the corporation. In addition, the increased growth required more than just advertising in order to raise enough revenues. Piskorski et.al is of the assumption that it was a concern that the company would not sustain it size and market relevance by relying just on advertising; “many industry observers were starting to wonder whether advertising alone would sustain long-term growth” (2015, 1). However, the development of the brand was steady and fast. By 2009, Twitter had over 200 million users. This also created the query on how the company could utilize the number for monetization purposes. As a brand Twitter has developed exceptionally, with new users adding up each day. The brand has also attained a global reach. Regardless of this growth, the monetization process of the company has not been effective. The use of advertising is considered as the only option for effective monetization. Clearly, the long-term sustainment of the company and brand cannot be attained by relying on the revenues from just advertising. This increases the need to develop more monetization strategies. Another major problem affecting Twitter is competition. In the social network market, there are numerous entities that have not yet acquired the status of natural monopoly. Before the entrance of Twitter to the market, Facebook had been able to topple my space to the leading used social network site. Twitter had to compete with Facebook since the brand was global and its market relevance was occasionally developed to sustain the consumer demand. To understand the importance of the market to Facebook, after its realization the company tried to acquire Twitter to minimize the risk of new competition (Piskorski et.al, 2015, 8). The offer was, however, declined a fact that Facebook realized would increase its competition. In 2009 after the launch of Twitter, Facebook increased features of the site trying to remain relevant under the threat of a new entrant. For instance, Facebook included the features to share photos and videos directly in the status box, a feature that was not use before and realized by Twitter (Piskorski et.al, 2015, 8). However, Market entrance was not a problem for Twitter as each day the site attracted users in soaring numbers. Twitter was quickly the preferred mode of communication for businesses, celebrities and television stations. The features Twitter offered were new to the market making the site a more preferred product. By 2014, the site had added more features to sustain their market relevance. However, Facebook still retained a larger market share. In addition, Facebook was able to emulate the ideas used in the site an increase its competition level. For this reason, Twitter required to increase the services it offers to its users. With the growth of the company, Twitter requires to ensure the long-term competitive advantage is retained. With still the market being open for new entrants, Twitter faces a major risk of losing relevance if trendier products are provided to the changing market. In addition, Facebook provides a greater competition. With well-developed infrastructures, the company has been able to partner with numerous online companies making it a greater market player than Twitter. Twitter is given an upper hand in the competition considering number of new users in preference to the product. However, with its competition quick to emulate the features that it has used, the company has a major problem is acquiring a larger competitive advantage. Additionally, its main competitor Facebook has a large corporate following making it more market relevant than Twitter. For the long-term success of the company, Twitter requires to develop effective competition strategies in order to sustain the demanding market. The effects of these problems on the Twitter Brand have been significant. Firstly, Twitter requires acquiring more users of the product and at the same time market itself. For the company, to acquire more revenues from advertising, new strategies are required that may affect the original model of the product. The company has to incorporate new market demands in the brand in order to increase monetization from advertising. In addition, the problem that the organization has to realize new money making ventures other than advertising may require the cutting down of expenditure in the field. This may be a problem to the brand since it relies massively on advertising for growth and development. The problem of competition, however, poses the greatest challenges. The strategy used by Twitter to curb competition was providing a product with new features to the market. However, the introduction of the features leads to emulation by competitors. This has made the strategy less effective. Most importantly, the features contained in the product created the brand, Twitter. With emulation, the original brand cannot be sustained. This directly affects the strategy of the organization in market performance. New strategies would be required for brand development and competition effectiveness. Recommendations As suggested by Aaker Twitter should strive to acquire an exemplar status: an exemplar status refers to the ability of a market to become a market leader and attain a closer status to natural monopoly (2010, 50). The status also requires a company to identify an anchor to the brand that may be unique to other competitors. In this way, the anchor may be used to increase the market relevance of the brand, product and services being offered by an organization (Aaker, 2010, 51). The author further cites that the exemplar status is also defined by relevance. The relevance of a brand should be able to attain market recognition that competitors cannot achieve. To attain the exemplar status, a company should first identify and develop categories and subcategories instead of focusing solely on the brand. Aaker is of the assumption that the “development of categories and subcategories automatically develops the brand” (2010, 51). For Twitter, categories refer to the products and services the company has to offer to the market. Increasing the quality of the products increases the market relevance on the company. Twitter also has the opportunity to increase the efficiency in the way in which the products are offered to the market. This should be done not in consideration on the brand’s objectives and goals. As the categories and subcategories capture the attention of the market, the brand would grow to become more market relevant and competitive. Categories or subcategories should win to make the strategy successful; a failure in the strategy would devalue the brand (Aaker, 2010, 51). Secondly, the leader should identify the defining factors of the market. In each market, there are factors that influence the consumer preference. A company should strive and provide products and services that are within the consumer preference bracket. However, to attain the exemplar status an organization should develop ways in which they can be able to enlarge and refine the success factors. For the social networking industry, success is determined by how well consumers relate to the products a company offers. Specifically, the consumer seeks a trendy product that provides new experience and unique features. Twitter should develop more trendy features and service packages for its consumers. In this way, it would enlarge the requirements by other entities to sway the market. In another alternative, Twitter should refine the industry by providing more features for the site that are unique and use new technology. The continuous development of these features creates a major competitive advantage for the product; this requirement also requires the increased abilities to create innovations. The assumption the continuous innovation of categories in a brand makes it more valuable (Aaker, 2010, 52). The same argument is supported by Porter who cites that product and market innovations are requirements of product evolution, hence a more competitive ability (1980, 164). For instance, the growth and increased value of Twitter was majorly influenced by its ability to innovate its site. This should continue in order to increase its market relevance and value. In an argument by Aaker each market leader should have a large market share and sales; this requirement is mandatory for an organization to attain the exemplar status (2010, 53). An organization in a competitive market should become a market leader in market and sales regardless of the time of entrant to the market (Aaker, 2010, 53). For Twitter, this is a major problem. The company should increase sales and market share for it to attain a more profitable status. This should be done by developing more sales ventures. With the current status, the revenues acquired by Twitter have not been successful and attain the desired shareholder’s requirements. In an argument by Porter the industry structure and trends may be used to the advantage of alternative competitors: the author further points out the dominance of a company in one area create an opportunity for exploitation by other competitors (Porter, 1980, 90). The competitors just need to identify the opportunities that are presented by the structures in the industries. For Twitter, Facebook is the main competitor. The dominance on Facebook is influenced by users who required the industry before the entrant of Twitter. Porter develops a recommendation that to compete effectively a corporation should carry out an effective analysis of its competitors (1980, 49). This should be then followed by creating an accurate competitor response profile; the response should be opportunistic and utilize on the weaknesses on the competitors (Porter, 1980, 67). For this reason, the opportunity of Twitter to maximize on the opportunity is to sway the preference of new users. However, this is only attained through effective communication signaling for the new users (Porter, 1980, 91). Porter argues on this recommendation by stating that reaching out to new markets and opportunities from consumers is the most effective way to grow the market reach of a company (1980, 91). Twitter should develop communication networks aimed at putting the product in a better market and trendier position. In this way, new users may be swayed to prefer Twitter to other social sites. In addition, the strategy is made more lucrative by the fact that the user population for social network sites is growing each day. The teenage and young adult population is increasing significantly making the strategy more relevant and important to market players. From the provided recommendations, it is clear that Twitter requires to dwell more on the creation of brand that is more superior that that of its competitors. In this way, the organization may be able to attract more revenue and sales. However, the recommendation to increase monetization abilities would be solely based on the abilities of the leadership to realize alternative options other than marketing. This could be done by analyzing the strategic choices (Porter, 1980, 229). Strategic choices as defined by Porter refer to the selection of markets that are highly opportunistic. In addition, the argument develops the recommendation that techniques for industry forecasting should be effective enough to understand which emerging market an organization should utilize (Porter, 1980, 234-235). Twitter is in a lucrative market with an untapped consumer markets. For this reason, the organization should carry out effective accurate forecasts of the industry and identify new market entrants. Implications of the Recommendations The recommendation to attain an exemplar status through developing categories and subcategories, increasing sales and market share and realizing innovations has significant implications on the brand (Aaker, 2010, 51). The Twitter brand is hugely developed by its ability to increase its market relevance. Consequently, this attracts potential users, investors and money making opportunities. For instance, with exemplar brand the advertising opportunities would increase significantly. This is based on that advertisers select the mode of use by analyzing the impact of the mode to the market. With an exemplar and highly valuable brand, twitter would attract more advertisers and hence increase revenues generation. In addition, the exemplar status would place Twitter as the market leader thus a highly attractive venture for new industry entrants. The recommendation to increase the level of innovation has massive implications to the company. The social networking industry is based on how well a company utilizes technology it what it offers to the market. For instance, the growth of Twitter was influenced by its ability to use new technology. For Twitter, to ensure a continuous market relevance and growth innovation is mandatory (Porter, 1980, 164). With innovation the market share increasing, advertisers would have increased preference on the product, and the competitive advantage of the organization would increase. Consequently, sales and revenues would also be on an upward move. The implications of understanding market defining factors are also significant. The social network industry is always changing based on trend as influenced by consumer demands and technology. Understanding these changes and identifying market preference is a key strategy in attaining a competitive advantage (Aaker, 2010, 52). Twitter would gain massively by providing the market with its preferable before any other competitor. This would increase the brand equity. The recommendation to realize more revenues and sales ventures would have the most significant implication on Twitter. The organization’s main problem was the inability of advertisement ventures to provide long-term sustainability. However, this can only be realized by understanding developing effective industry forecast and analysis techniques. The choices should also be strategic based on opportunities and risks that may be presented (Porter, 1980, 229). This recommendation would increase the ability of Twitter to identify opportunities from emerging markets in the industry. Works Cited Aaker, David. Brand Relevance: Making Competitor Irrelevant. New Jersey: Jossey-Bass. 2010. Print. Piskorski, Mikolaj., Chen, David., Heil, Bill & Smith, Aaron. Twitter. Harvard: Harvard Business School. 2015. Pdf. Porter, Michael. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: The Free Press. 1980. Print. Read More