I’ve been in many discussions about Twitter. Here’s what I see.

  • The Company: The origins of Twitter and how the company arose will be a dark Hollywood movie some day. Betrayal, lies, backstabbing, and so on was described in the book “The Hatching of Twitter“. Key people were pushed out. This management chaos produces many problems, incl. the lack of direction or innovation.
  • The Idea of Twitter: Just exactly what is Twitter? Key people at Twitter have different ideas about it. It’s a status update; it’s celebrity updates; it’s social chat; it’s TV advertising. The company promotes it as a celebrity update tool and tries to sell advertising services, but many use it for social chat and they ignore the celebrities and ads.
  • The Product: Eight years ago, the idea of web-based chat via SMS was a clever idea. But Twitter hasn’t moved much beyond that. The tool is basically the same. The 140-character SMS limit is no longer needed, but the tool hasn’t moved beyond that. There is very little innovation. In contrast, Tumblr is a better Twitter, with better look, tools, features, etc. There are also the various chat tools from China, such as Wechat (400m users), LINE (300m), and so on, which are constantly improving and evolving and offer many more features.
  • Number of Users: Twitter claims to have 250m users, but it notes in its SEC filing papers that the number isn’t verified by an outside authority. This means the number is fake. Based on Pew research, I estimate Twitter has 145m users worldwide, of which 50m are in the USA. That’s a very small base for advertising. In contrast, WeChat has 400m users.
  • The Advertising Platform: Ads in Twitter work remarkably well. I’ve used it for several ad campaigns. Easy to set up and the results (click-rate and cost-per-click) are very good. However, a year later, there are still no tools for bulk editing. This means ads are only for small projects. Twitter advertising produces revenue, but Twitter.com costs about a billion dollars per year to operate, so currently, the company is losing money. They must increase revenues substantially just to stay open.
  • The Stock and the Valuation: This is the real problem. Twitter’s stock is wildly overvalued at $50 billion, which is 300X EBITDA. Wall St. calls Twitter stock a “cult”. Investors, who are better described as speculators, are interested only to increase the valuation. They then sell their investment to the next speculator. At some point, the game is over, the stock collapses, and the last buyer loses.
  • San Francisco: Twitter is the flagship of the social media startups in SF. Twitter’s fifty-billion dollar valuation attracts investors to other social startups. This brought tens of thousands of people to live and work in SF. Real estate investors are building dozens of high-rise condos in SF. A new condo sells for a million dollars. Rents are the highest in the USA (higher than Manhattan or Palo Alto.) All based on… Twitter, which has lousy management, a tool without innovation, inflated number of users, and a valuation based on speculation. Twitter is a bubble and will collapse. That’ll crash the social media startups, which will crash the house prices. People who paid a million for a condo will lose money.

So, I like the tool, but the rest of it is a mess.