MAGISTER ADVISORS: TWITTER’S STRATEGIC IMMOBILITY HAS SURRENDERED ITS MOBILE-FIRST ADVANTAGE TO FACEBOOK
Whereas Facebook has innovated to a $250 billion valuation, Twitter risks becoming a next-generation ‘dumb pipe’ with no prospect of increasing value significantly
Without its execution of a successful mobile strategy Facebook would probably be worth what Twitter is today
Twitter is at serious risk of becoming a ‘dumb pipe’ from which other businesses will extract value, rendering it no more valuable than a public utility, according to Magister Advisors, M&A advisors to the technology industry.
Twitter does not deserve to attract a ‘platform’ company valuation at this stage and remains a logical acquisition target for Facebook, Google or even Yahoo in Magister Advisors’ view.
Victor Basta, managing partner at Magister Advisors, said: “Twitter has for all practical purposes failed to innovate its product since it went public. At IPO, Twitter had a unique platform that was mobile-first, significant momentum and global profile from the Arab Spring and other high-profile events, and a billion sign-ups. Fast forward less than two years and, alone among internet ‘majors,’ Twitter has squandered its lead by failing to innovate, failing to drive engagement and consequently ceding the lucrative mobile ad revenue land grab to Facebook and Google. Whereas Twitter should be grabbing a big percentage of new mobile ad spend, the opposite is true; we see 75% of that spend going to Facebook and Google, who weren’t even mobile-first businesses but have passed Twitter in the past two years.”
Facebook: a case study in social innovation
“Compare Twitter’s progress with Facebook’s and the contrast is stark. When Facebook went public it faced serious questions about its mobile strategy. Since IPO it has successfully transitioned from desktop to mobile far more successfully than most analysts ever expected. Facebook has also combined internal innovation with landmark acquisitions notably Instagram, WhatsApp and Oculus, which have given Facebook a far broader product portfolio than it could have developed internally.
Twitter v Facebook: Failure vs. Dominance
“Facebook has become a dominant over the top technology in mobile, accounting for huge amounts of data across mobile networks and rendering mobile operators the digital drug mules of the 21st century. It has also extended its reach to feature phones with its Snaptu purchase. With exceptional engagement, one billion daily users, and a great suite of mobile products, Facebook has effectively ‘won’ in mobile.”
“In contrast Twitter’s pace of innovation has been borderline non-existent. Its platform is much the same as when it IPO’d. Standing still for an internet major leads quickly to a valuation death spiral (witness AOL). We see multiple addressable markets where the business could innovate – from sports to news to fashion – but Twitter is nowhere to be seen. Both Facebook and Google are precocious, rampant innovators. On the device side, Apple’s product innovation is staggeringly consistent. “
“As the smallest of the internet majors, Twitter should be innovating faster, not slower. Instead Twitter has remained stubbornly a firehose of data, catering for the power users, without any serious effort to organise, segment, and personalise its offering for different types of users.”
Victor Basta concluded: “It shouldn’t have been this way. Twitter is a smaller company than Facebook, it was completely differentiated from the start, it began as an effectively mobile platform (with none of the pain of transition) and it remains unique. Despite this, and despite no reluctance to acquire, it has not yet demonstrated an ability to acquire well.”