Strategic Position of Twitter in the Social Media Space

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Twitter is an important player in the social media space today. At this juncture, it would be worthwhile to have a look at the strategic position of Twitter in the social media space. Let us use the Porter’s five-forces model to look at the various forces impacting Twitter.

(Michael E Porter of HBS drew a framework for industry analysis enumerating 5 forces that determine how attractive any industry is in terms of profitability. Click here to learn more about the model)

Here is a brief, bullet point description of the 5 forces in my view.

Force 1 : Existing Competitors

  • Though different in nature, Google Buzz and Facebook are the most potential threats.
  • Google has deep pockets while Twitter still doesn???t have a firm revenue model in place.
  • Facebook is already attracting a lot of traffic (400 million users), even though it has to sort out privacy issues.
  • Point to be noted here is that only 4 out of 10 new users continue to use Twitter, and many of them quit within a month! That???s 10% of the number Facebook has, indicating clearly the inherent competitive forces at play in the social media space.
  • An important aspect will be the fact that status updates in future will be omnipresent across websites, and might be made by accessing a single page. How will Twitter then be different from others?

Twitter will have to remain ahead of the curve to keep its place.

Force 2 : Threat of New Entrants

  • As social media grows across the world, more players would be tempted to jump into the fray.
  • Especially, there is a lot of scope for regional players (like Baidu in China).
  • I am sure that a Hindi version of Twitter/Facebook will bring in a lot more Indians into the realm of social media.
  • Obviously, Twitter neither has financial muscle not the reach yet to create entry barriers for new entrants.

However, since the social media space is large enough for all to co-exist in the short to medium term, this is only a long term threat.

Force 3 : Bargaining Power of Users

  • At present, Twitter hasn???t put in place its revenue model. It doesn???t charge from its users (individual or business).
  • Hence, there is little bargaining power the users have (unless of course they start leaving Twitter in hordes!).They are free to join/leave Twitter.
  • But once Twitter starts depending on businesses for revenue, their bargaining power will increase. This is still some time away and, to me, doesn???t seem to be a big potential threat in the medium term.

As of now, Twitter therefore just needs to be alert towards keeping the user experience high class to ensure retention of users

Force 4 : Threat of substitute Products/Services

  • Email/SMS are the only potential substitutes in sight but are unlikely to pose a threat for obvious reasons.

This threat is therefore minimal.

Force 5 : Bargaining Power of Suppliers

  • Venture Capitalists
    • They command significant bargaining power as Twitter doesn???t have a revenue model of its own.
    • Overcoming this threat will significantly depend on Twitter developing a credible and sustainable revenue model and then going public.
  • Developers
    • Ever since Twitter bought Tweetie 2, there have been murmurs whether Twitter has decided to offer key services on its own.
    • Such a fear might compel developers to migrate to other media.
    • Bargaining power of developers in an increasingly competitive social media space cannot be underestimated.

Conclusion

  • Clearly, the biggest threat to Twitter emanates from the existing competitors and the bargaining power of venture capitalists.
  • In the medium term, Twitter needs to keep the developer community satisfied.
  • In the long term, it should aim to be very large in size as well as financially independent and strong to be a sustainable global powerhouse.

How do you feel Twitter will grow from here? What kind of revenue model will be sustainable? Are there any potential threats that I have missed out? Would love to have views/comments!

References

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About Aman Sharma

Management Professional.
This entry was posted in Business, Social Media, Twitter and tagged , , , , , , , , , , , , , , , , , . Bookmark the permalink.

2 Responses to Strategic Position of Twitter in the Social Media Space

  1. ashwinkgopal says:

    That is an amazing analysis! Not only does it have a sound standing, it also has a very strong user base that it can absolutely be proud of!

  2. Anonymous says:

    Nice Post this is the new and another data i find out about SEO.Through social Media SEO is developed So that it will easily become in google ranking.<a href="http://www.schweizdesign.ch/">seo z??rich</a>

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