At what price did Twitter acquire TellApart
Twitter Inc. (NYSE: TWTR TWTRTwitter Inc19. 90 + 0.96% created with Highstock 4.26) is an online social networking service that allows users to send and receive short messages of 140 characters that are as Tweets are called. Known as a microblogging service, Twitter has been used as a website to network with people and get timely information.
With Twitter's stock price fluctuating since it went public and CEO Dick Costolo's decision in 2015, investors and stakeholders are wondering whether Twitter's business model has been broken.
In order to determine whether the business model has actually broken, the desired outcomes of the model must first be defined. It is then possible to analyze whether or not Twitter's business model is effective to achieve these results.
Much like any other social networking site, the Twitter user base and engagement of those users is the lifeblood of the company. In terms of business model, the overall goal for success is to increase the number of users on Twitter and keep those users engaged once they've signed up for the platform.
If user growth is slowing, stalling, or waning, it could indicate that Twitter's business model is not working.
Since the first quarter of 2015, Twitter has recorded slower user growth and has not been able to increase the number of active users beyond the current 300 million users. Twitter is having trouble acquiring new mobile users. A lack of mobile user growth is a dire sign for Twitter.
Twitter users are important to the company because they are the content creators. Without active, engaged users, Twitter has little to no value.
Revenue growth and revenue streams
Since Twitter views its active users as its content producers, it cannot create a revenue model to show these users highly relevant ads as Facebook (FB) has been successful. As for Twitter, serving ads to top content producers will reduce the amount of content these users want to produce, reducing the value of Twitter itself.
Twitter posted $ 436 million in revenue for the first quarter of 2015, lower than analyst estimates of $ 440 million to $ 450 million.
Twitter's low revenue is largely due to the ineffectiveness of its direct response ads, which allow users to download mobile applications directly from their cell phones.
While its direct response ads are underperforming, which supports the perception that its content producers don't value advertising, there are no new publicly stated strategies to bolster Twitter's ad product and increase its sales, which also supports the idea that Twitter's business model is broken.
Twitter's recent acquisitions and partnerships
While not all of Twitter's business plans and strategies are public, it appears from the outside that Twitter is trying to strengthen the company through acquisitions rather than internal user growth or internal revenue growth.
Twitter has partnered with Google's ad serving platform DoubleClick to help strengthen Twitter's ad serving capabilities. However, the company has to share its advertising revenue with Google, which could further reduce Twitter's revenue.
Twitter recently acquired TellApart, a mobile technology company that offers businesses unique cross-device retargeting capabilities. Twitter can use this to advertise to non-users through retargeting, who send them to potential users who have visited the Twitter platform but have not yet created an active profile.
This is a huge signal that Twitter will continue to struggle to monetize its current active users. Additionally, it means that Twitter is moving towards a business model that aims to drive sales through its non-users.
With a focus on non-users, Twitter runs the risk of lowering its value and brand. It is increasingly evident that Twitter's business model is broken and won't be fixed any time soon.
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