In this article, I will discuss two companies moving in the opposite direction. YouTube continues to dominate the online video landscape and Twitter continues to lose ground. Twitter is a disillusioned company which has a base of dedicated users, but no momentum towards accelerated user growth or profitability. YouTube’s profitability isn’t broken down by Alphabet, but being the leader of online video will become even more powerful as linear TV dies out and the money flows to online services.

Twitter reported 75 million tweets sent on Election Day which destroyed the 31 million tweets sent in 2012. It appears Twitter dominated the discussion about the election. Even with Facebook sponsoring a debate, Twitter as able to do well because of Trump’s usage. You would think that Twitter had a great year because President Trump made it the centerpiece of his campaign. However, as you can see from the chart below, in the months leading up to the election, Twitter saw declining year over year usage. After the election ended, November and December usage fell off a cliff. Time spent on the platform was down 28% year over year in December. This is seasonally a weak time for Twitter, but since it’s year over year data this not a valid excuse.

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This usage chart is an important lesson investors in social media firms need to behoove. Twitter has been reporting growing monthly active users in the midst of this year of declines. Monthly active user growth is a faulty metric. The amount of users on the platform can be manipulated. It hurts the company to report it as a metric investors care about because it encourages the firm to try to gain new users who don’t end up spending much time on the platform instead of deepening the usage of those already on the platform. This is why Twitter tries to create new products to expand the user base instead of listening to people who actually use the service every day. It may make strategic sense to focus on appealing to power users because they are less likely to stop using the service altogether. I’m not saying Facebook and Snapchat will necessarily experience the same type of downfall as Twitter, but it’s important to heed this warning and ignore monthly active and even daily active user reports. Any metric that goes from the bottom left to the top right, with no declines, needs to be analyzed closer.

When Jack Dorsey stepped into the role as CEO, his most prominent product announcement was moments which aimed to grow the user base by making the top stories easier to find. The reality is this isn’t necessary because top stories gain retweets which make them more visible. Twitter created a superfluous product. It could’ve created the ability to edit tweets which is actually a function users are asking for.

Because Twitter is widely known to be in decline, many people have given their advice on how to make the product better. I will throw one more possibility into the fray. Twitter should make more of an effort to help its popular users make money on the platform. Having a revenue split with top users would be tough because the firm is already losing money. However, the monetary incentive to create great, original content on the platform would drive traffic growth. Twitter is working on this with video content, but it won’t be able to compete with YouTube. Text is still Twitter’s bread and butter. Twitter has been shirking its core as I explained earlier. This move with be a reinvestment in the core product.

This brings me to YouTube which is set to release a new product on January 30th which I think will be a game changer. Previously, YouTube had Fan Funding on its platform as a way for viewers to support creators. This is a failed attempt because it’s just like a PayPal function to accept donations. YouTube has the advantage of being the owner of the platform, so any product it creates will be integrated fully and has a higher chance of being successful. Even with this built-in advantage, Patreon still managed to become the main way to fan fund creators because it allows creators to easily give rewards to their benefactors.

YouTube is now getting rid of the Fan Funding button and replacing it with Super Chat. This feature allows users to donate to their favorite creators during a livestream. When a user donates, their question is highlighted in the chat. This does a couple things which are great. First, it encourages creators to do more livestreams because they can earn money if they have a decent subscriber base. This puts YouTube ahead of the competition in the space because YouTube creators have the skill set to produce good live content. They are great at speaking to the camera and setting up the technical aspect with mics and cameras. The second thing this feature does is it is a unique way for creators to make money outside of Patreon. Any way YouTube can bring an outside product in-house will help its profitability and increase the usage of the product because it’s built-in. The image below shows the simple process which highlights donors’ questions, letting them get a response from their favorite YouTuber.

Conclusion

Twitter has had Periscope for about two years, but hasn’t come out with a product to monetize broadcasts. Twitter needs to create a revenue sharing model for monetized broadcasts and users’ regular timelines to help improve engagement metrics. By YouTube doing this first, it will take share from Periscope and deeper the connection creators have with the platform. Twitter needs to find a new CEO because Jack Dorsey doesn’t understand this potential and has instead focused on the moments product which doesn’t offer any discernible advantage to users. The best way for a social network to grow is to reinvest in the power users. When you have power users, it’s easier to get ancillary users who are greater in number, but use the service occasionally.