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Good Social Media Business

Recently, I’ve been enjoying Twitter, even though many disparaging things have been said about it, including on Twitter. What makes a viable social media business?

Social media platforms have been around for a couple decades. Sensibly, the industry has fragmented into recognizable target audiences. LinkedIn stayed professional, Instagram remains visually oriented, Tiktok skyrocketed to infamy from its carefree teen audience. Discord evolved from gamer discussion groups to groups that had common things to discuss. The granddaddy, Facebook, got ubiquitous – it’s the platform when a platform is needed but not a fav. Kinda like meeting friends at the local coffee franchise, despite no one loving the beverages, but everyone knows where it is and there are clean tables in the sitting area. 

Asking whether the platforms are making money is the same question as ‘are they successfully serving a need for customers?’. Meta, owner of Fb, Instagram and WhatsApp, is still shovelling in the money, even if it’s less, more money that before1. TikTok’s ownership structure mystifies its financials. Discord is private and independent. Microsoft owns Linkedin. From Microsoft press releases, LinkedIn makes significant money the old fashion way2 – advertising, and direct advertising, and ‘referrals’ which is a form of digital-age advertising. 

Is Twitter the exception, not making money? It has a similar business model to the others – content free to users, and freely contributed by users, for the price of being the target of paid ads. 

Users, or the general public, join social media platforms because they want to connect with the people who are there, whether friends, celebs. or train-wrecks that just have to be watched. Twitter sees itself as a platform for news and conversation, which resonates. It is a good place to enjoy interesting points of view, and find out where the next event is, or why there are six police cruisers at the end of the street. 

From this, I’d say Twitter has found its unique value for users. And yet, why is there discord about Twitter? 

In mid 2022, its financial statements3 told a simple story – while revenues were increasing, costs were increasing faster. Many categories of costs were increasing, including the cost of delivering the product, general administration and debt payment obligations.

Then, the company was taken private, and efforts renewed to make it into a profitable venture. 

Cost-cutting makes sense based on the financial situation. Mass layoffs contributed to the public outcry against the company. Layoffs are hardly uncommon right now, within the industry and the broader economy. However, from a business perspective, complaints when the delivery of the product falters is something any company needs to address. 

As the industry has progressed, people and organizations use their social media presence to build awareness and enthusiasm for their messages or products. This is a different marketing use of social media than purchasing paid ads from the platform. And one of the things that apparently annoyed people when Twitter has tried to capitalize on it through products that verify accounts (the coloured stars) and premium, paid services.

Is it as critical to increase revenue as it is to decrease costs? It seems so. While user numbers and revenue for Twitter have increased over time, by my calculations4, Meta and Google are both making significantly more per user, both in gross revenues and operating profit, than Twitter. Is this an issue with COCA5 (essentially marketing expenses) or overspending in other areas? As a percentage of total revenues, in 2021, Twitter spent more on R&D than either Meta or Alphabet (Google parent company), although not significantly more than Meta, but did spend more than twice (as a percentage of revenue) than the others on marketing and sales and general administration. 

The growth in users numbers suggest Twitter has value to users. The platform is a great place to browse, see a bit of this and that, without having to engage, more so that its competitors and thus worthwhile to its users. From a business perspective, a better question is, does it have value to paying advertisers and creators/influencers? Why wouldn’t it if the target market is there? 

Recent product changes at Twitter seem to amount to taking control. Of user’s newsfeed. This is nicely summarized in this article6 as:

  • allowing fewer programmers to program posts, 
  • selecting the order of what appears in a users’ newsfeed, 
  • reinstatement of accounts previously suspended because of inappropriate content or origin,
  • labelling of accounts for verification (the blue/other colour tick) and 
  • a premium service option. 

The unrest I perceived relates to timelines being different and not logically defined by observation. People don’t like change in general and are suspicious if they don’t understand why because it has the air of manipulation or ‘not to my benefit’. Extra concern arises if the platform is part of a business communication plan and it suddenly changes. 

This is the trouble with Twitter. It’s a known entity that users have embraced, which makes them question why it needs to be messed with. 

What needs to be fixed is turning it into a viable commercial concern without removing the existing value to users. There are users that will be advertised to. They accept this is the fee for their free access to the users they want to hear with something interesting to say. 

Value needs to be delivered to the users that make their living by having people listen to what they have to say, because it’s interesting. YouTube has this well worked out, with the system of likes, subscribes and comments that link to monetization on the platform. And finally, the customers that purchase ads on the platform need to find value for their advertising dollars.

The simple answer to the question of what’s wrong with Twitter is it isn’t making money, while it should. If it figures out how to combine providing value to the users who read posts, the users who post posts and the advertisers that pay to post in a stream of relevant users, everyone will be happy. I’ll post to that. 

1A quick look at the most recent financial releases show revenues continue to increase, although at a modest rate:


3Retrieved from :’22_Earnings_Release.pdf. sometime in April 2023. Interestingly, in late May 2023, this is no longer available, so I can’t verify my analysis.

4My quick calculations looked at annual reports from the three companies, comparing the number of Daily Active Users (for Meta and Twitter) or searches for Google, to annual revenues and operating income. 

5 COCA = cost of customer acquisition, or how much operating expense, which would include various marketing activities as well as administration costs


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