Why Twitter will always be #2

Twitter’s got an interesting problem: Its revenue is booming, but — as with all the major social networks — its user growth has slowed to a crawl.

That’s not a good place to be for Twitter: It means that the odds are very, very good that the company will forever remain #2 or #3 in its market.

[aditude-amp id="flyingcarpet" targeting='{"env":"staging","page_type":"article","post_id":1656644,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,social,","session":"C"}']

Here are the numbers.

The trouble with Twitter, in numbers

In its earnings call yesterday, the social network reported Q4 revenue of $479 million, up 97 percent over the same quarter in 2013, when it posted $243 million in revenue.

Meanwhile, the number of people using Twitter at least once a month increased 20 percent year-over-year to 288 million — but that was actually a decrease of about 4 million from the previous quarter. Last year, it reported 30 percent year-over-year user growth. So growth is slowing.

Compare that to LinkedIn, often regarded as an also-ran social network that’s focused on the lucrative but boring business niche. But LinkedIn is doing pretty well. LinkedIn reported just 93 million monthly active users (a year-over-year increase of 23 percent) and revenue of $643 million for Q4 (44 percent growth year-over-year). Same slow growth, but much larger revenues.

Or the giant in this market, Facebook, which grew its count of monthly active users 13 percent year-over-year to 1.39 billion, while its revenue grew 49 percent to $3.85 billion for the same quarter.

Let’s look at the annual figures:

What these three companies tell is a similar story: Growth is slowing down to the 10-30 percent range, while each of the companies gets far better at actually making money from those users. Of course Facebook has the lion’s share of both users and revenue, but there’s probably a healthy amount of the market left over for the other two.

Networks like Facebook-owned Instagram and Twitter-owned Vine attempt to capture the younger crowd, but let’s stipulate for now that these sub-networks aren’t a major force — yet. (Though Snapchat’s reported 100 million user figure, and its forays into original content, suggest that there might be another chapter to this story.)

[aditude-amp id="medium1" targeting='{"env":"staging","page_type":"article","post_id":1656644,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,social,","session":"C"}']

Incidentally, Wall Street investors seem to like the revenue picture, sending Twitter’s stock up 16 percent today, despite the low user growth number.

For now, Twitter’s main challenge is hanging on to its existing user base so it doesn’t fall even further behind Facebook. But it’s also got to figure out what makes it special.

What does Twitter do uniquely well?

There are a few possibilities. Twitter plays a key role in the news ecosystem: For me, as for many journalists, Twitter is both a valuable dashboard of what’s going on in the world and in the tech industry. It’s also a useful tool for publicizing the news that VentureBeat publishes.

But I think I am in a minority, and our traffic figures — like those of most publishers — show that far more people use Facebook to learn about the news.

[aditude-amp id="medium2" targeting='{"env":"staging","page_type":"article","post_id":1656644,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,social,","session":"C"}']

Twitter is a useful mobile tool that offers greater control to end users than Facebook does. Rather than try to anticipate what you want to see, Twitter lets you curate your own lists — or just follow the whole tweetstream generated by everyone you’re following — without mediating that too much, other than with the occasional promoted tweet. So it probably appeals to control freaks who get weirded out by Facebook’s algorithms. Again, a minority.

It’s a uniquely public place to hold conversations, so famous people — or even slightly famous people, like tech journalists and VCs — can have intelligent conversations with one another that other people can follow along with. But along with that public quality comes a significant downside, which is that anyone can troll anyone else. Just ask Anita Sarkeesian about the downsides of public conversations.

It’s one of the last major bastions of pseudonymity, so you don’t have to use your real name on the service. Again, the downside is trolling. To his credit, Twitter chief executive Dick Costolo seems to recognize that this is a serious problem, and says he will make dealing with it a high priority. How he does that remains to be seen.

And finally, Twitter helps people form more emotional connections with each other — and with the content they’re consuming. A very intriguing and somewhat creepy study done by Twitter’s marketing science team shows that actively using Twitter while browsing the web increases the sense of that web content’s relevance by 51 percent.

[aditude-amp id="medium3" targeting='{"env":"staging","page_type":"article","post_id":1656644,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,social,","session":"C"}']

That’s powerful evidence that Twitter can play a key role in making content more persuasive, powerful, and effective. That’s news that should be incredibly interesting to digital marketers as well as publishers of content.

For the most part, Twitter has avoided being tarred with the same kind of brush that’s often used to paint Facebook as a privacy-hating, opportunistic marketing machine. It even won an award last night at the Crunchies (an annual tech industry event cosponsored by VentureBeat and TechCrunch) for positive social impact.

So Twitter’s future lies somewhere along that line: The smaller, more likeable social network that news publishers and marketers use to forge stronger ties with their readers and viewers.

Maybe it will always be #2 or #3 in users and traffic — but as LinkedIn has shown, if it can identify a lucrative segment, even a smaller social network may be able to turn its users into an ever-larger slice of revenue.

[aditude-amp id="medium4" targeting='{"env":"staging","page_type":"article","post_id":1656644,"post_type":"story","post_chan":"none","tags":null,"ai":false,"category":"none","all_categories":"business,social,","session":"C"}']