Entrepreneurs at Twitter - Assignment Example

Entrepreneurs at Twitter Executive Summary Twitter became a household name almost as soon as it was launched as a unique microblogging site. Owing to its enigmatic popularity that increased by leaps and bounds, the company has been able to garner huge amounts of investments despite being unable to earn any profit whatsoever till the fourth year of its operations. However, the picture was not all rosy all through – the company had hit the headlines when its user base touched the 29 million mark in mid-2009 and soon nosedived to 24 million within a period of merely six months. At this juncture, analysts started arguing that the company lacks a sustainable future and many were of the opinion that Twitter does not have an efficient marketing strategy. This report has aimed analysing Twitter’s past and present records to map out its journey. Subsequently, its marketing strategy – which is largely undefined – has been evaluated and the future strategies have been recommended. The capability of Twitter to earn profits has also been touched upon while analysing how the company may capitalise on its popularity. Finally, an action plan has been recommended. Introduction The current topic necessitates an analysis of the business case of the popular microblogging service called Twitter. Headquartered in San Francisco, the organisation had commenced it business in 2006. It had an almost instantaneous success because of the fact that it shares numerous characteristics with most of the commonly used communication tools such as “email, IM, texting, blogging, RSS, social networks and so forth” (O’Reilly & Milstein, 2009, p.7). However, the uniqueness of this service lies in the fact that messages that are sent and received on it “are no more than 140 characters, or about the length of a news headline” (O’Reilly & Milstein, 2009, p.7), and hence, they can be easily read as well as written. Owing to the speed at which information is shared through it, it has been argued that companies must be present on Twitter as it is an invaluable platform that helps in bootstrapping marketing activities. On a more precise note, with Twitter, companies (especially start-ups and SMEs) “can help their search engine rankings and website traffic” (Thomases, 2010, p.90). In the light of the immense business potential that Twitter is capable to offer, this case analysis will aim at evaluating its current situation and part record. Simultaneously, attempts will be made to comprehend the marketing strategy of Twitter in order to recommend future strategies. In addition to these, Twitter’s profitability will be analysed so as to predict whether it may benefit from its popularity, and a set of plausible action plans will be provided at the end. 1.1. Analysis of Twitter Apart from serving as a free platform whereupon people can share personal thoughts and feelings, experiences, etc. Twitter has also been “emerging as a key business channel, letting companies engage with customers, partners and other constituents in a direct way that’s both personal and public – something no other medium allows” (O’Reilly & Milstein, 2009, p.17). As a result, businesses are being able to monitor how people rate their products and/or services; respond to the queries of customers; communicate with stakeholders; and most importantly, generate revenue through an assortment of creative promotions. In a nutshell, Twitter has redefined the concepts of business. Figure 1: Global Distribution of Twitter Users (Source: Java, Finin, Song & Tseng, 2007, p.5) The figure appended above exhibits the almost-ubiquitous nature of Twitter. Although the maximum user-density is in North America (approximately 45%), this social networking site (SNS) has a footprint in all the continents (Java et al., 2007, p.4). While reporting that “the rate at which new users are joining the network has declined” after March, 2007, Java et al. (2007) have asserted that “despite the slowdown the number of new posts is constantly growing, approximately doubling every month indicating a steady base of users generating content” (Mobasher, Zhang & Spiliopoulou, 2009, p.122). As it is a significant point that “search engines love fresh content, just the kind of material Twitter and other social media platforms regularly provide” (Thomases, 2010, p.90), it is most likely that fluctuations in their user bases won’t hold back the business interests of companies that are registered with them. However, an increase in the number of users will enhance the exposure and hence, the chances of getting spotted, of the existing users. 1.2. Current Situation vs. Past Record Twitter had experienced a significant decline in terms of user numbers during 2009. The number was as high as 5 million, and thus forced analysts to wonder “whether the drop in users was a blip or whether it signalled that Twitter needed to revisit it marketing strategy” largely owing to the fact that the said SNS/microblogging service had accomplished its phenomenal popularity on the basis of “referrals, extensive (and free) media coverage, and the fact that it employed an open source platform, which encouraged the development of third-party applications by others” (Mark, 2010, p.1). However, in a more recent report it had been forecasted that “soon the service will surpass 100 million users worldwide” (Brooks & Churchill, 2010, p.2), and according to a TechCrunch report, “Twitter is now attracting 190 million visitors per month and generating 65 million Tweets a day” (Schonfeld, 2010). This indicates an exponentially high growth will soon take place in terms of “word-of-mouth information sharing between companies and consumers and amongst consumers” (Brooks & Churchill, 2010, p.2). Figure 2: Financial Forecast of Twitter (as posted on TechCrunch) (Source: Mark, 2010, p.10) From the above figure it may easily be understood that going by the 2009 forecasts, Twitter didn’t lose too many users at the end of Q4; although the number of users during mid-2009 (29 million) was way too high as compared to Q2 forecast of 12 million. When viewed from a different perspective it may be observed that an exceptional hike in popularity (+142% in Q2) followed by a marginal decline (-4% in Q4) over two quarters of a fiscal actually means that Twitter had lost 13% (instead of gaining approximately 109%) of its users during a period of just six months. That was obviously a significant reason to hit the panic button. However, it has been argued that “Twitter is now a growing source for broadly consumable information, not just current status or daily chatter” (Brooks & Churchill, 2010, p.4), and hence, it may be anticipated that it will be successful in materialising almost all the forecasted results by the end of 2010. 2.1. Twitter’s Marketing Approach Just like any other successful business, Twitter also has an efficient marketing strategy in place, although it has been said that “no one, however, seems to be able to explain its rapidly growing success” (Pride & Ferrell, 2008, p.35). Even though the main aim of Twitter is “to be a global community of friends and strangers”, it goes without saying that “as a free online service, it must attract enough users to gain online advertising revenue” (Pride & Ferrell, 2008, p.35). As has already mentioned in one of the previous sections, Twitter offers all its services for free, and this raises brows for obvious reasons – as a dot com wonder the organisation is financially successful too. 2.2. Recommended Future Strategy The fact that Twitter could not sustain its user base that had shot up to 29 million during Q2 of 2009 rang a bell that the company might need to work on its marketing plan. Although the astounding figure could have plummeted due to some technical glitch, but that is not a strong reason. When a company offers free services, there should not be any rationale behind such a sudden drop in the number of users, and hence, it is most likely that the marketing strategy needs to be tweaked. According to Ray Valdes Twitter seems to be in a dilemma – while they require a strong revenue model, they do also know it pretty well that in terms of perceived value they have lots of potential. As a result, they need to take a guarded stance while communicating anything negative about their existing revenue model because that may prove to be detrimental for the company’s perceived value (Mark, 2010, p.2). The main problem that lingers while analysing twitter is its business model itself – although the company has been in the market for quite some time, it is really not known how it works. It has been observed that the company is slowly moving into a zone wherein it can either emerge as an exceptionally successful venture or it may get dissolved – however, the second option is not quite ambitious. Twitter may start its own advertising network as its competitors have already done, in order to generate revenues. Moreover, it should enhance its business by selling mobile apps. This might prove to be beneficial as the worldwide user base of the company is rising steadily. Furthermore, the organisation may also make available customised themes to its users at a price – this will definitely draw the interest of corporate users who would like to enhance their interface. Although Twitter has been earning healthy revenues by inking non-exclusive search deals with Microsoft and Google, the figures can be augmented further if the deals are made exclusive. Owing to the fact that free services cannot be provided lifelong, Twitter may also license Tweets. However, as has been the case with Skype, Twitter may agree to a potential buyout offer – this will definitely reduce the levels of competition, albeit at the cost of reducing the ambitious organisation to the stature of a highly successful business division. 3.1. Capability to Earn Profits It’s quite interesting to note that “Twitter had raised a total of $155 million from a consortium of investors in several rounds of funding – without having earned a single cent in profit” (Mark, 2010, p.1); however, it is even more interesting a fact that despite such a performance, “in 2008, Facebook attempted to purchase Twitter for $500 million in Facebook stock” (Mark, 2010, p.9). Owing to the free platform that Twitter is, it is difficult for the company to reposition itself as a commercial venture as such a decision would shrivel its user base by repelling most of them. However, its ‘unique’ features are being replicated by Facebook and they are also proving to quite profitable for the latter. This means, Twitter can licence its services to other SNSs to safeguard its core competencies and earn revenues simultaneously. As been mentioned in the previous section, the company may also take the apps business seriously and enter into strategic tie-ups with high-end mobile brands like the iPhone, BlackBerry, etc. in a bid to reach out to a larger user base while making money out of it. 3.2. Capitalisation of Popularity It has been observed that Twitter had gained immense popularity during the recent past under circumstances of global interest – e.g. campaigns for presidential elections, publicity stunts by celebrity users, etc. As Ellen Siminoff has argued that “where you have audiences, you will make money” (Mark, 2010, p.7), it is most likely that Twitter may also capitalise on its popularity by enhancing its user base. This may be successfully accomplished if the company associates its brand name with as many events as possible in order to draw public interest. At this juncture it may be suggested that Twitter may license some of the Tweets to earn revenues from the marketing activities of organisations that make extensive use of its free platform. Equally important is the role that celebrities play in augmenting the image as well as popularity of this microblogging site – Twitter must gain unmatched recognition among celebrities who in themselves are valuable, marketable products. If this is done efficiently, the number of users will go up automatically because of the simple reason that the masses love to follow their favourite stars. 3.3. Recommended Action Plan As the success of Twitter is largely dependent upon the number of people that use its services, the company should ensure that it develops an unparalleled user base in order to leave behind its nearest competitors, viz., Facebook and Orkut, in terms of popularity. This may be accomplished by associating the brand with as many popular events and activities as possible. As the world is moving fast towards gaining the status of a global village, connectivity ranks high on the agenda of masses and hence Twitter should tap this opportunity by providing them with a free platform whereupon people can find it easy to share their views, opinions and ideas. It is also a fact that businesses (especially start-ups and SMEs) have already recognised the immense potential of Twitter as a marketing communication (marcom) tool. Twitter should likewise make attempts to commercialise its services through licensing and selling customised tools. The company should realise that its services are already being replicated by its competitors and as a result it is losing its users. Twitter cannot safeguard its core services because although the idea was unique, the technology is not; moreover it is a free platform and is hence vulnerable to aggressive rivalry. The company should take actions to gain sustainability by expanding its peripheral business activities through sale of apps, themes, etc. and aim at providing no more than a set of selective services for free. Conclusion During the course of developing this report, it has been observed that Twitter, despite being a significantly successful dot com venture, does not have a definite marketing strategy. This is rather shocking because numerous businesses of varying statures have identified the immense benefits that they may reap by using Twitter as a marketing platform! As the analysis of Twitter’s official website as well as various other relevant documents have revealed, many companies, including the likes of Starbucks, are using Twitter extensively in order to promote their products and services, analyse and address customers’ feedback and/or grievances, communicate with investors and to indulge in a multitude of other business activities. It has also been found that Twitter’s capacity to earn huge profits had been recognised by Facebook and Orkut – the strongest players in the SNS market. As has been mentioned before, Twitter lacks a well-defined marketing strategy but it has a strong revenue model. Attempts should be made in order to align these two aspects in order to position the company as an outstanding player in this highly competitive market. References Brooks, L. A. & Churchill, F. E. 2010. Tune in, Tweet on, Twit out: Information Snacking on Twitter. CHI 2010, April 10–15, 2010, Atlanta, Georgia, USA. [Pdf]. Available at: http://research.yahoo.com/files/CHI2010-Microblogging-ECAB2.pdf [Accessed on October 22, 2010]. Java, A., Finin, T., Song, X. & Tseng, B. 2007. Why We Twitter: Understanding Microblogging Usage and Communities. Joint 9th WEBKDD and 1st SNA-KDD Workshop ’07, August 12, 2007, San Jose, California, USA. [Pdf]. Available at: http://aisl.umbc.edu/resources/369.pdf [Accessed on October 22, 2010]. Mark, K. 2010. The Entrepreneurs at Twitter: Building a Brand, a Social Tool or a Tech Powerhouse? Ivey Management Services. Mobasher, B., Zhang, H. & Spiliopoulou, M. 2009. Advances in Web Mining and Web Usage Analysis. Springer. O’Reilly, T. & Milstein, S. 2009. The Twitter Book. O’Reilly Media, Inc. Pride, M. W. & Ferrell, C. O. 2008. Marketing. 15th ed. Cengage Learning. Schonfeld, E. June 8, 2010. Costolo: Twitter Now Has 190 Million Users Tweeting 65 Million Times A Day. TechCrunch. [Online]. Available at: http://techcrunch.com/2010/06/08/twitter-190-million-users/ [Accessed on October 22, 2010]. Thomases, H. 2010. Twitter Marketing: An Hour a Day. John Wiley and Sons. Read More