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Both Facebook and Twitter have recently released earnings updates. However, while Facebook surprised on the upside, Twitter was a big disappointment.
Facebook’s third quarter numbers were strong all-round. The company grew its daily active users (that is, people who log in an use the site on a daily basis) by 18.6% compared to the third quarter last year, and its monthly active users by 13.5%. It delivered revenue of $3.2bn, up almost 60% from a year ago, and net income of $806m, up nearly 90% from a year ago. While costs rose, they rose more slowly than revenues, and the company improved its operating margin to 44%, compared to 37% a year previously.
The company demonstrated its mastery of mobile with a series of impressive numbers. It grew its mobile daily active users by 39% to 703m, and fully 66% of its advertising revenue of $2.96bn came from mobile advertising. This was good news for Facebook partisans – a few years ago when smartphones took off and more and more people started to access social media online, some worried that Facebook would struggle to translate its successful web model into the mobile environment. However, Facebook has now demonstrated that it is indeed able to do so, solidifying its position as a financially secure corporation.
Things at Twitter look very different. The main problem that the company is having is that its users are not growing rapidly enough. Although the company grew its active users by 23% year-on-year, on a quarter-by-quarter basis user growth is slowing, and the company reported a slump in a key metric – timeline views per user – that measures user engagement with the site.
Twitter managed to grow its revenues by a healthy 114%, but the company is still unable to show a profit – its loss for the quarter increased to $175m from $64m a year previously. Increasingly, it appears that investors are doubtful of Twitter’s ability to deliver results in the long-term – the Twitter share price has slumped by over 30% year-to-date.
Are they a fair comparison?
These two companies are often compared in the press, because they seem to inhabit the same category – they are both social media companies that people use to share updates about their lives and interests.
However, it seems to me that the comparison is not entirely appropriate. To me, Twitter and Facebook seem to be very different kettles of fish. Facebook is a site that seemingly everyone can use. People use Facebook to follow the lives of their friends and family, to see what they’re up to, to share pictures and experiences. In contrast, Twitter seems to be more of a news-focused service. When there are breaking world events happening, people flock to Twitter to follow the news as it happens, but when it’s time to share a picture of what they had for dinner, people are much more likely to turn to Instagram, Facebook, or Snapchat to share updates.
In other words, while Facebook feels like an interactive community, Twitter feels a lot more like a news feed (in the sense of hard news). There is interaction, but it’s fleeting and shallow – what matter on Twitter is the latest tweet. And thus, Twitter is not for everyone. It’s not the kind of site that invites leisurely scrolling and digging through archives. It’s not a site for a lazy weekend.
And that, to me, suggests that Twitter will have a much harder time building a loyal audience than Facebook. And thus, it will have a harder time building the kind of relationship with its users that advertisers value. Facebook has done a great job of translating people’s product preferences into saleable advertising (Your friend So and So like Coca-Cola!), a feat which Twitter has been unable to replicate. So, in my humble opinion, the long-term outlook for Facebook is very different from the outlook for Twitter, and it’s not clear that Twitter will be able to users its site into reliable profits.
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