Twitter’s Probably Screwed

The Rugged Landscape of Digital Advertising

Sponsored By: Alts

Let me guess: Your portfolio has been getting hammered lately?

Yeah, me too. The S&P is down. The NASDAQ is down. And crypto is down.

But did you know that comic books are way up? Or that tickets are mooning? Or that farmland is completely unaffected?

That's why we've been reading Alts. These guys analyze the heck out of alternative investment markets, and you reap the rewards.

Stefan and Wyatt provide original research and insights to help you become a better investor.

Oh, and and get this: They don't just track these markets, they are actually crushing them. While everything else in the world was down last week, their own recommendations were up 1.4%. 

Join 30,000 others and find out what you've been missing.

When Twitter IPO’d in 2013, the general feeling was elation. It had incredible product-market fit, the growth story was compelling, and it was set to be the hot new thing. The next Facebook, maybe. If you were a banker selling the stock, your pitch probably sounded something like the following:

“An ad-supported content platform is the single greatest business model ever invented! There is strong incentive alignment between the service you deliver to consumers and the service you deliver to your paying customers (advertisers). You want consumers to scroll and scroll and scroll, interacting with content, indicating interests, and just spending as much time on the site as possible. This interaction feedback loop results in a content canon, firing memes that keep people clicking. Simultaneously, advertisers love it because all those clicks help make the ads really effective. Twitter is where this is going to happen.”

That is a compelling pitch! There is nothing retailers want more than a service that tricks their customers’ stupid monkey brains into buying whatever an ad slaps in front of their faces. Unfortunately, this growth story turned out to be completely false. 

It would not be an exaggeration to say that Twitter has blown it. Its stock is down ~21% from its IPO price 8 years ago. Their overall growth is abysmal in comparison to Facebook. They have less than 5% market share in digital advertising and are an afterthought for marketing teams. In 2017 they had negative user growth! While things have picked up recently with the service adding 25M monetizable daily active users last year, it has fallen far short of its potential. My favorite description of the business comes from Mark Zuckerberg, who said, “they drove a clown car that fell into a gold mine.

However, over the last year, it feels like Twitter has finally woken up. There are dozens of new product initiatives, a fresh strategy, a new CEO, and a 2023 revenue target of $7.5B and 315M monetizable daily active users. These goals are challenging and demand perfect execution from the team. The company has a renewed focus on creator monetization tools and improving their direct response ad business. There is actually some optimism among the investor base that maybe, just maybe, this time will be different. Maybe Twitter will finally be able to turn its soft, social power into hard dollars and cents.

I am not convinced. 

Today, we will be explaining how the digital ad market works, where Twitter fits on that landscape, and why its likelihood of building a high-growth advertising business is small. 

Click, Click, Buy

Learn more

This post is for
paying subscribers

Subscribe →

Or, login.

Thanks to our Sponsor: Alts

Thanks again to Alts for sponsoring this newsletter. If you want to discover and invest in the best alternative assets check them out here:

Read this next:

Napkin Math

Revenue: It’s Simple, Until It Isn’t

Finally, a clear explanation of bookings, billings and revenue

141 Feb 5, 2021 by Evan Armstrong

Napkin Math

In Defense of the Unoptimized Life

Give yourself the space to be inspired

254 Jan 12, 2023 by Evan Armstrong

Napkin Math

The Addiction Economy

Addicted, Overwhelmed, Oversubscribed: How Technology Hooked the World

137 🔒 May 26, 2022 by Evan Armstrong

What Does It Mean to Be Strategic?

The practice of connecting intentions to outcomes

84 Jan 30, 2023 by Dimitri Glazkov

The Cup of Coffee Theory of AI

AI has its use cases, but it can’t solve a perennial mystery—yet

98 Feb 6, 2023 by Billy Oppenheimer

Understand AI

Get one actionable essay a day on AI, tech, and personal development

Subscribe

Already a subscriber? Login