February 18, 2016

Will Twitter survive to tweet another day?

What is the future of Twitter?

Twitter may have a tough road ahead regarding its declining user base and monumental fourth-quarter losses. In terms of its monthly active users, Twitter saw a decline from 307 to 305 million in this latest quarter. Fortune's Mathew Ingram reported Twitter has been steadily declining in terms of market value over the past few months, losing around 50 percent of its market worth. These facts, coupled with poor fourth quarter earnings, hints at a risky future for the social media giant, as noted by its stock hitting an all-time low in the hours after the announcement.

What does this decline mean for Twitter's future?
Despite this downturn, internally, the company remains confident about its loyal user base. According to a company shareholder letter, Twitter wrote that "We saw a decline in monthly active usage in Q4, but we've already seen January monthly actives bounce back to Q3 levels. We're confident that, with disciplined execution, this growth trend will continue over time."

Industry analysts across the board are regarding whether or not a Twitter acquisition is inevitable given its current economic situation, yet most believe it is very likely. Much of Twitter's revenue problems center around its inability to profitably monetize from its MAU base.

The Wall Street Journal's Yoree Koh revealed that Twitter has, interestingly enough, altered its forward-thinking statements in its report, as the online platform said that its issues "include, but are not limited to the development of, investment in and demand for its products, product features and services, expectations regarding the growth of its monthly active users, advertiser base and ad engagements."

Historically, companies that have tweaked their forward-looking statements experience significant changes in the near future. Koh explained that instead of the company's usual three-page quarterly earnings report press release, Twitter sent out an extensive 12-page letter to its shareholders, outlining all of its current goals and future strategies.

Which companies could be Twitter's potential suitors?
If an acquisition is in Twitter's future, many industry experts speculate as to which company will initial the buyout. Recently, rumors circulated that the multinational mass media corporation, News Corp., would be the buyer, though an official company spokesperson denied this plan of action.

Aside from News Corp., one of the first choices on the top of the list is Alphabet, the newly formed parent company of Google. Many suspect that Alphabet would be interested, as Ingram explained that Google has "failed to get anywhere with its own social platform, Google+" and therefore could benefit from the innovative social media platform.

Others, such as the analysts from 24/7 Wall Street, argued that Twitter is not projected to surpass Facebook in terms of monthly users or monetary gain, therefore adding no lasting value to Alphabet's expansive market reach. Furthermore, these analysts cite Twitter's true strength aggregation of real-time data, which would fit in well with Google's targeted advertising strategy.

Meanwhile, Facebook is another viable option, as it previously tried to buy Twitter in the past. However, Facebook is currently in the process of creating its own Twitter-style features, making this course of action far more cost-effective in the long-run.

Regardless of if or who buys out Twitter, no analysts could deny the staying power the online network has in terms of its integral importance in modern society. From journalists to political leaders, Twitter's millions of users undoubtedly are there to stay for the time being.

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