Twitter posted healthy revenue for the second quarter — US$312 million, up 124 percent year-over-year. Its profit? Not there yet. However, even though the company reported a net loss of $145 million, investors are likely to overlook the lack of profit for some time.
Financials aside, what Twitter really wants everyone to know is that it is big — as in average monthly user big. That’s because growth in its user base — or lack thereof — is not an issue that shareholders or advertisers are likely to overlook for long.
Along with its second quarter earnings, Twitter proudly released the following evidence of growth in both its traditional and mobile user bases:
- Traditional users numbered 271 million, a 24 percent year-over-year increase.
- Mobile users numbered 211 million, a 29 percent year-over-year increase.
A Losing Battle?
The reason for the strong positioning of these numbers in Twitter’s quarterly report is fairly straightforward. Twitter’s narrative has shifted in recent months from a network that every social networker uses to one that attracts only a certain slice of the social networking population. Twitter is losing the social media war to Facebook, according to this narrative, much like MySpace fell about a decade ago.
The timing of this narrative couldn’t be worse for Twitter, which is steadily rolling out a number of initiatives for advertisers.
These include mobile app promotions that allow developers to drive installs and engagements on Twitter, as well as cards that enable advertisers to surface website content within a tweet and drive relevant traffic to their site.
To induce advertisers to pay for these tools, growth at Twitter is essential.
Battle for Mindshare
Clearly Twitter is engaged in a battle for mindshare with Facebook and traditional media sources, Barry Randall, Technology portfolio manager on Covestor, told the E-Commerce Times.
However, that doesn’t mean the two networks can’t co-exist, he said.
“Right now they serve distinct markets, though there is almost certainly an overlap among their users. There are also hundreds of millions of people worldwide who are not — yet — members of either Facebook or Twitter,” Randall added.
Twitter does have to worry — but not because of its numbers, he suggested.
“It would be fairly easy for Facebook to incorporate Twitter-like functionality into Facebook’s network,” Randall said, “but it would be impossible, given the vast trove of Facebook’s user-generated content, for Twitter to offer a Facebook-like experience. And Facebook is quickly moving forward to next-gen messaging platforms like WhatsApp, which it feels may soon rival its own core offering.”
An Argument About Numbers
This existential issue is not what Twitter is focusing on, though. Rather, it is arguing that its numbers are greater than portrayed — that is, the actual number of people engaging with Twitter is far greater than the number who are logged into the site.
There is something to this, said James A. Pearson, EVP of corporate communications at Grooveshark.
“If print magazines have a pass-along factor, or a number attributed to how people are virally influenced or touched by the subscribers’ edition,” he said, “how many people does a popular tweet move?”
This is an oft-used argument by social media, Randall told the E-Commerce Times — but to him, it doesn’t hold water.
“If Twitter wants to join the downtrodden brotherhood of traditional media companies,” he said, “it should be prepared to be valued like one — not a dot-com bottle rocket.”