Twitter Inc (TWTR) and its recent struggles have been well-publicized. Most notably, the social network’s stagnant user growth has been put under the microscope by investors, who wonder loudly why Facebook Inc (FB), with five times as many users, can actually grow faster.
On top of that, Twitter still isn’t close to being legitimately profitable (on a GAAP basis), and its CEO Jack Dorsey is two-timing investors by dividing his focus, energy and brainpower between TWTR and the other public company he runs, Square Inc (SQ).
Wall Street has taken notice, and TWTR stock’s once-lofty valuation has taken a 64%-plus beating in the last year.
Some investors have suggested that an acquisition, perhaps at the hands of Alphabet Inc (GOOG, GOOGL), is in the cards. A buyout, they hope, will come at a hefty premium, and Twitter’s stock price will rocket higher.
These are delusional thoughts — especially since GOOG (and FB for that matter) appears to be content building out its own real-time features, something traditionally thought to be Twitter’s greatest differentiator.
GOOG, FB Both Doing Real-Time
Google appears to be quietly building out more and more real-time features, including an initiative in January that allowed people searching about the GOP debate to see candidate “cards” with their platforms and views. Campaigns could respond to issues as they arose onscreen in real-time, and trending searches during the debate were also displayed.
Then, just this month, GOOG began giving small businesses the ability to provide information on themselves that will show up in search results, and the company is doing something similar with cricket players. These efforts seem to be related to a new, under-the-radar feature called Google Posts, which will allow public figures, organizations and “verified individuals” to post text, videos or photos that will “appear instantly in search results related to the publisher.”
This is a threat to TWTR in two ways: First, it’s in real time. Second, and perhaps more importantly, it threatens to strip Twitter of something users enjoy about it most: The ability to connect directly with the world’s movers and shakers. (And celebrities.)
Imagine if this were around when Charlie Sheen was going through his very public mental breakdown. When searches spiked for him in 2011, you would’ve seen incomprehensible ramblings from the actor himself every time you Googled him. Perhaps his agent would’ve stepped in and had him write something semi-sane.
Perhaps Charlie wouldn’t have 11.6 million Twitter followers. Perhaps, even, some people joined Twitter merely to watch Sheen’s breakdown as it unfolded. And perhaps, in an age of Google Posts, that will be an antiquated concept … imagine what happens to TWTR user growth then!
And with GOOG’s recent hiring of the founder of 4chan, it’s clear that social is a renewed area of focus.
Even if Google Posts doesn’t succeed, Facebook is also eroding important unique aspects of TWTR.
One of Jack Dorsey’s first “big ideas” when he took the reins at Twitter last year was creating a “Moments” tab, where trending stories could be displayed visually through photo- and video-heavy content. TWTR fanboys, as always, were enthralled by the feature. In reality, it was a hokey attempt to reignite engagement and attract new users but was destined to have no long-term impact.
Today, FB not only has a “trending” section next to the newsfeed, but you can click “See All”, and a Moments-like experience begins.
FB is also moving forcefully into live sports, and I’ve found myself several times watching post-game press conferences of my hometown Charlotte Hornets Coach Steve Clifford who, for what it’s worth, is oozing with insight. I don’t seek out the press conferences. Facebook, I assume, sees that I like the Hornets and have been to many games, so it prompts me to tune in to a live postgame conference.
It’ll be interesting to see what March Madness holds in store.
What’s in store for TWTR stock, however, is a world of pain. Just when it most desperately needs to show its value and attract users for Wall Street, GOOG and FB have the gall to compete.
That’s a problem, unfortunately, that I don’t see going away.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
