Social Suicide? Membership Is Plateauing But Revenues Rising. What's the Future...

What was it, seven or eight years ago? The depths of the post-crash recession. The future looked pretty grim, even in tech. And then, social networks emerged from the gloom. They were that year's answer.

And hey, let's give some props: they've done pretty well. More than that, actually, but let's not get all gooey. They are a piece of the puzzle. Convergence and mobility and multiple platforms, civilization's ADHD approach to attention have rendered them a player.

But the latest data have raised some questions about the future. Questions which can not be blown off.

The basic issue, as the following article explains is that they are learning how to make money. Lots of it. Enough so that even investment bankers are nodding their heads and licking their lips. But meanwhile, membership is slowing.

This is ironic since for so many years the reverse was true: huge membership gains and no way to monetize it. So the question now is whether this is a sustainable business model - harvesting cash from a dedicated customer base - or whether the economics of the web are such that without growth in numbers, social becomes a sideshow, an ancillary rather than a main event. And with the 65+ age cohort becoming the fastest growing demographic on Facebook, the largest social net, is your business gonna die as your customers do?

You can make a nice living as a subsidiary driver of value. For a while. Until something better comes along, which is probably why a lot of that new money is going to get ploughed into ways to extend the franchise rather than paying off the shareholders. Sorry, bankers, that's the biological imperative speaking. JL

Dylan Tweney reports in Venture Beat:

Growth is slowing down to the 10-30 percent range, while each of the companies gets better at actually making money from users.Facebook-owned Instagram and Twitter-owned Vine capture the younger crowd, but for now these sub-networks aren’t a major force — yet.
Twitter’s got an interesting problem: Its revenue is booming, but — as with all the major social networks — its user growth has slowed to a crawl.
That’s not a good place to be for Twitter: It means that the odds are very, very good that the company will forever remain #2 or #3 in its market.
Here are the numbers.
In its earnings call yesterday, the social network reported Q4 revenue of $479 million, up 97 percent over the same quarter in 2013, when it posted $243 million in revenue.
Meanwhile, the number of people using Twitter at least once a month increased 20 percent year-over-year to 288 million — but that was actually a decrease of about 4 million from the previous quarter. Last year, it reported 30 percent year-over-year user growth. So growth is slowing.
Compare that to LinkedIn, often regarded as an also-ran social network that’s focused on the lucrative but boring business niche. But LinkedIn is doing pretty well. LinkedIn reported just 93 million monthly active users (a year-over-year increase of 23 percent) and revenue of $643 million for Q4 (44 percent growth year-over-year). Same slow growth, but much larger revenues.
Or the giant in this market, Facebook, which grew its count of monthly active users 13 percent year-over-year to 1.39 billion, while its revenue grew 49 percent to $3.85 billion for the same quarter.
Let’s look at the annual figures:

Above: 2013 vs 2014 figures for Facebook, Twitter, and LinkedIn.

Image Credit: VentureBeat

What these three companies tell is a similar story: Growth is slowing down to the 10-30 percent range, while each of the companies gets far better at actually making money from those users. Of course Facebook has the lion’s share of both users and revenue, but there’s probably a healthy amount of the market left over for the other two.
Networks like Facebook-owned Instagram and Twitter-owned Vine attempt to capture the younger crowd, but let’s stipulate for now that these sub-networks aren’t a major force — yet. (Though Snapchat’s reported 100 million user figure, and its forays into original content, suggest that there might be another chapter to this story.)
Incidentally, Wall Street investors seem to like the revenue picture, sending Twitter’s stock up 16 percent today, despite the low user growth number.
For now, Twitter’s main challenge is hanging on to its existing user base, so it doesn’t fall even further behind Facebook. But it’s also got to figure out what makes it special.

What does Twitter do uniquely well?

There are a few possibilities. Twitter plays a key role in the news ecosystem: For me, as for many journalists, Twitter is both a valuable dashboard of what’s going on in the world and in the tech industry. It’s also a useful tool for publicizing the news that VentureBeat publishes.
But I think I am in a minority, and our traffic figures — like those of most publishers — show that far more people use Facebook to learn about the news.
Twitter is a useful mobile tool that offers great control to end-users than Facebook does. Rather than try to anticipate what you want to see, Twitter lets you curate your own lists — or just follow the whole tweetstream generated by everyone you’re following — without mediating that too much, other than with the occasional promoted tweet. So it probably appeals to control freaks who get weirded out by Facebook’s algorithms. Again, a minority.
It’s a uniquely public place to hold conversations, so famous people — or even slightly famous people, like tech journalists and VCs — can have intelligent conversations with one another that other people can follow along with. But along with that public quality comes a significant downside, which is that anyone can troll anyone else. Just ask Anita Sarkeesian about the downsides of public conversations.
It’s one of the last major bastions of pseudonymity, so you don’t have to use your real name on the service. Again, the downside is trolling. To his credit, Twitter chief executive Dick Costolo seems to recognize that this is a serious problem, and says he will make dealing with it a high priority. How he does that remains to be seen.
And finally, Twitter helps people form more emotional connections with each other — and with the content they’re consuming. A very intriguing and somewhat creepy study done by Twitter’s marketing science team shows that actively using Twitter while browsing the web increases the sense of that web content’s relevance by 51 percent.
That’s powerful evidence that Twitter can play a key role in making content more persuasive, powerful, and effective. That’s news that should be incredibly interesting to digital marketers as well as publishers of content.
For the most part, Twitter has avoided being tarred with the same kind of brush that’s often used to paint Facebook as a privacy-hating, opportunistic marketing machine. It even won an award last night at the Crunchies (an annual tech industry event cosponsored by VentureBeat and TechCrunch) for positive social impact.
So Twitter’s future lies somewhere along that line: The smaller, more likeable social network that news publishers and marketers use to forge stronger ties with their readers and viewers.
Maybe it will always be #2 or #3 in users and traffic — but as LinkedIn has shown, if it can identify a lucrative segment, even a smaller social network may be able to turn its users into an ever-larger slice of revenue.