10 Things to Know About the State of Twitter

10 Things to Know About the State of Twitter
Twitter Is Small Compared With Competitors
User Growth Is Painstakingly Slow
Where Are the Profits?
Revenue Is Growing, at Least
Let's Talk About Jack
Advertisers Are Looking Elsewhere
Shareholders Are Concerned
Its Users Are Finding Value in Other Services
Changes Don't Seem to Matter
The Sharks Are Circling (and Leaving)
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10 Things to Know About the State of Twitter

Twitter is having a difficult time demonstrating its value proposition, as suitors withdraw their bids for acquisition. Here's a deep dive into where Twitter stands today.

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Twitter Is Small Compared With Competitors

Twitter was, at one time in its history, growing by leaps and bounds. Today, the company is awfully small compared with its competitors. With about 313 million average users, Twitter pales in comparison to Facebook's more than 1 billion users. Facebook-owned photo-sharing app Instagram also has more than 1 billion users. Once Twitter's size, which years ago was big for a social network, was one of its selling points. Now, it's causing some to question how successful it really can be.

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User Growth Is Painstakingly Slow

User growth is one of the chief concerns at Twitter. In the second quarter, Twitter's year-over-year user growth reached 3 percent, to 313 million average monthly active users. Just three years ago, the company's year-over-year growth stood at around 39 percent. What's worse, most of Twitter's users are coming in from overseas, signaling softness in its base U.S. operation. To put that into perspective, LinkedIn saw its year-over-year growth hit 18 percent in the second quarter. Snapchat has about a 30 percent growth rate.

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Where Are the Profits?

Profits still are elusive for Twitter. In 2015, its last full year, Twitter reported a $521 million loss. Over the last three full years, Twitter has lost more than $1.6 billion. The company has said it believes profits will eventually come, but so far this year, Twitter has again posted losses. And there are no signs of that changing anytime soon.

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Revenue Is Growing, at Least

Although Twitter has been unable to manage its expenditures, the company has done a fine job at growing its revenue through advertising and other opportunities. In 2012, for instance, Twitter generated about $317 million in revenue. Last year, its revenue soared to $2.2 billion, and it is on track this year to surpass that figure.

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Let's Talk About Jack

Jack Dorsey took over as Twitter's CEO last year after the company's shareholders expressed concern over Dick Costolo's ability to turn the company around. Now, they're wondering whether Dorsey, who also serves as CEO at mobile-payment platform Square, has the ability to address Twitter's soaring costs and massive headwinds. Dorsey has said on numerous occasions that building Twitter's audience through news, celebrities and new features would be critical. However, his plan has yet to bear fruit, and there's no timeline on when it might.

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Advertisers Are Looking Elsewhere

The most recent data from research firm eMarketer found that marketers increasingly are dedicating their ad budgets to Twitter competitors including Facebook, Instagram, Snapchat and others. Even worse, already some softening appears to be taking place: As of this writing, Twitter is on pace to come in just above last year's $2.2 billion in revenue—a sum that would disappoint investors and Twitter itself. The reason is simple: Twitter grew its revenues by $800 million between 2013 and 2014, as well as 2014 and 2015. A tiny boost in revenue this year would match eMarketer's findings, suggesting Twitter is now having trouble attracting advertisers.

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Shareholders Are Concerned

So, how concerned are shareholders? So far this year, Twitter has been home to a massive sell-off, as shares have fallen 27 percent to $16.88. In the last year, Twitter's shares have lost nearly half of their value. There are no signs of Twitter surging back to the $60 mark its shares touched after it went public in 2013.

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Its Users Are Finding Value in Other Services

As mentioned, Twitter's user growth is slowing in the face of growth in competitor services. Looking a bit deeper, many of Twitter users are leaving the service in favor of alternatives that include Snapchat, Instagram and WhatsApp. So not only are Twitter's competitors growing their services more quickly, but they're also stealing users from Twitter.

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Changes Don't Seem to Matter

To its credit, Twitter has made several changes in an attempt to keep its existing users and attract new users. Those changes have ranged from modifying how character counts are measured and improving discovery through its search function to expanding into other areas such as live video with Periscope. However, those changes generally haven't brought more users back to Twitter, and even Periscope has been outshined by Facebook Live. For now, Twitter stakes claim to news—acting as the megaphone for people to share their thoughts on world events—but new initiatives aren't necessarily working out the way Twitter had hoped.

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The Sharks Are Circling (and Leaving)

Several companies are said to have at least looked at acquiring Twitter, including Google parent company Alphabet. Other reports have suggested Salesforce had considered a deal and Disney had hired a financial adviser to conduct due diligence on a buyout. However, Salesforce has walked away and Alphabet is said to have decided against a deal. While it's possible they might come back into the fold as Twitter's stock price continues to fall and the company becomes cheaper, they also might have run away forever. At least for now, Twitter's would-be suitors appear to see the major troubles within the company.

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