• by Sean Hargrave , Staff Writer, April 27, 2017

Less is sometimes more -- that's a lesson Twitter may well have proved this week. Or, at least, it has certainly proven that more isn't always more. Any business that claims success in increasing a number that doesn't increase the most important number of all -- profit -- is seriously delusional. 

Thus, we have today's odd situation of Twitter being excited about adding 9% more users and claiming that user activity has risen 14% during the first quarter of 2017. You can imagine investors thinking this is superb news -- after all, social media is all about the big numbers. However, it comes with a "but" -- and it's a big one. In the same period that user numbers and engagement swelled, revenue dropped to just over half a billion dollars. That's a drop of 8%.

In my opinion, eMarketer may be erring on the side of being overly supportive of the social media giant, pointing out that while the revenue figures are disappointing, they are not as bad as feared.

I would suggest the bigger picture is here is twofold. This was the first decline in revenue for Twitter, and it came despite a rise in the metrics it likes to talk most about -- its numbers of users and engagement levels.

It reminds me of the plight newspapers face. The Guardian was always top of the pile, and has since been replaced by MailOnline. However, even when it was claiming millions of users and was top of the heap, it was still losing money. How can you be losing money if you're the best at what you're doing? That pretty much summed up my response and, likely that of many media observers. Is there any point boasting about how many millions of users you're not making money from?

To give The Guardian its due, it has moved on to asking readers to become paid-up members and is very strong in native content, featuring several clearly signed sections made possible through big-name sponsors. It clearly saw that if you're chasing money, chasing big numbers of free users alone doesn't make sense.

Which brings us right back to Twitter again. It has a clear problem -- loads more users than LinkedIn, but which would you rather own? A free service that's still losing money or a freemium recruitment and networking powerhouse? Twitter has far fewer users than Facebook and so can't compete in a numbers game there. It's caught between the small focussed service that has a handy subscription option to bring in revenue and the direct opposite of a massive player that can make the big numbers work.

It can't claim to be the place where a specific demographic hangs out, as Snapchat can with Millennials and Facebook with Gen X and older.

It's hard to see a positive outcome for Twitter. It's committed to a path of growing numbers, hoping that will lead to a profit, but it hasn't yet to date. Even when user numbers are up 9%, revenue has declined 8% over the same period.

There is talk of a subscription model through which users would get an enhanced version of TweetDeck, so that could potentially be a step in the right direction. It is, at least, a realisation that just quoting high numbers of users is meaningless until you can monetise them. 

As a confirmed member of Generation X, I'm always more impressed by a company that makes some money out of customers, rather than suggesting that losing money with lots of customers is anything other than farcical. I'm also from the generation that would ask if you can't make any money out of earning more than half a billion dollars in your latest quarter, or two billion dollars per year going forward, isn't it time for a massive rethink on both burning less cash and developing a serious freemium offering?

Pushing advertising more aggressively and launching a freemium model have to be the only options available to Twitter, don't they?