E-commerce 2021-2022: Business. Technology. Society., Ebook, Global Edition

How do you think we can use social media to support our e-commerce initiative? Should a tools company have a social media presence?

You can suggest here that social media is an excellent platform for branding messages and consumer information. In addition to Facebook, there may be other social net­works directed more specifically toward the firm’s customers. Twitter should definitely be monitored routinely for customer mentions, to identify influencers to support the firm’s products, and of course to obtain direct customer feedback. It would be a good idea to have a social media specialist in marketing to focus on social media marketing.
CASE STUD Y
Weathering the Storm:
Twitter Tweaks Its Business Model
Twitter, the social network originally based on 140-character text messages, continues in the long tradition of Internet developments that emerged seemingly out of nowhere to take the world by storm. Twitter’s basic idea was to marry short text messaging on cell phones with the Web and its ability to create social groups.
Twitter has since expanded beyond simple text messages to article previews, pho­tographs, videos, and animated images, and in April 2020, had over 185 million daily active users worldwide. The 5,000 tweets a day that it began with in 2006 has turned into a deluge of around 6,000 tweets per second and 500 million per day worldwide. Special events, such as the Super Bowl and Academy Awards, tend to generate an explosion of tweets. Some celebrities, such as the pop star Justin Bieber, have millions of followers (in Bieber’s case, around 110 million).
Twitter has a number of important assets, such as user attention, significant audience size (unique visitors), and its searchable database of tweets, which contain the real-time comments, observations, and opinions of its audience. Twitter has become essential in modern society as a media platform for the instant distribution of news that many in the





tech industry believe resembles a public utility. However, Twitter has struggled to develop a profitable business model and display consistent growth, and its financial results and stock price have not matched its popularity and influence on culture and politics.
Twitter derives the lion’s share of its revenue from advertising, with 87% of its 2019 revenue coming from various advertising products, with over 90% displayed on a mobile device. Twitter offers advertisers a variety of options, including Promoted Tweets, Promoted Trends, Promoted Accounts, and Promoted Video. Companies pay to have their tweets and Twitter accounts appear higher in Twitter searches or to reserve a place within Twitter’s Trends section, which shows the most-discussed topics of the day. They can also pay to show video advertisements that run prior to video clips embedded within tweets using a product called Twitter Amplify. Video is Twitter’s fastest growing advertis­ing segment and, in 2020, grew to comprise 60% of Twitter’s advertising revenue. All of Twitter’s advertising products can be geo-targeted both locally and nationally.
Twitter also continues to refine its data mining capability, recognizing that its stockpile of customer sentiment about products, services, and marketing efforts is among its most valuable assets. Acquisitions of companies such as Lucky Sort, Topsy Labs, and Gnip have helped Twitter provide better information about user behavior. Twitter licenses its user data to companies seeking to improve their understanding of customer sentiment. The company’s data licensing segment accounted for about 13% of its revenues in 2019.
Twitter became a publicly traded company in 2013 with a valuation at that time of about $14 billion. The public offering was viewed as a rousing success, with the stock price jumping almost 75% on its opening day, despite the company’s lack of profits. However, its share price declined significantly from its high of over $74 in December 2013 down to an all-time low of less than $14 in 2016, well below its IPO price. Analysts expressed seri­ous concerns about Twitter’s future beyond the obvious lack of profits. Twitter recorded anemic growth rates between 2013 and 2015 due to unusually poor user retention—60% of new users failed to return to the site the following month. Twitter also had highly unbalanced user engagement, with the top 15% of users accounting for 85% of all tweets. Advertisers also complained that Twitter’s advertising products simply were too costly for the sales they generated, and that dummy accounts and trolls ran the risk of ruining the Twitter user experience. Acknowledging a need for a change in direction, chief executive officer Dick Costolo stepped down in 2015, replaced by co-founder Jack Dorsey.
Dorsey vowed to narrow the company’s focus on its core service, with particular emphasis on breaking news. Twitter moved away from products and features that didn’t do enough to enhance the basic user experience. For example, Twitter had hoped that it would become a hub of social e-commerce and rolled out a Buy Now button in 2014 that allowed users to add products to their Amazon shopping cart. However, in 2016, devel­opment on the service halted due to users’ lukewarm response, and it was then phased out. Other services that failed to take off, such as Twitter’s #Music app, were shelved and even popular features like its Vine app for short-form video were discontinued. Instead, Twitter made changes to bolster its ability to deliver the news, including increasing the character limit for tweets from 140 characters to 280 characters and showing more promoted news content in user timelines. In 2018, Twitter redesigned the Explore tab within its app to improve ease of use, added breaking news alerts, and launched dedi­cated content hubs for significant events that allow users to follow events the way they might follow a person. In 2019, it also launched a redesign of its desktop site, aiming
to provide a more consistent experience across both its mobile and web platforms. The redesigned site features simplified navigation and heightened emphasis on the Explore tab directing using to live videos and personalized content.
Twitter is also concentrating on improving its premium streaming video capabil­ity, including support for its popular Periscope video service. Although Twitter initially competed to obtain the rights to stream various live sports events, such as Thursday night NFL games, it has taken a step back and now is focusing instead on getting broad­casters to put sports footage on the platform, rather than buying it itself. For instance, it made a deal with NBCUniversal, which owns the rights to broadcast the Olympics, to show limited live event coverage, highlights, and a daily Olympics show, and has also struck deals with ESPN, CBC Sports, Eurosports, and Univision, among others. It also has enhanced users’ ability to use Periscope to broadcast live video.
Developing machine learning capabilities has also been an important initiative for Twitter. It established an internal research group called Cortex that focuses on improv­ing Twitter by enabling advanced artificial technologies. Twitter purchased artificial intelligence startup Magic Pony in 2016 to bolster this effort. The company adjusted the way it ranks tweets in users’ feeds, emphasizing relevance to individual users instead of simple chronological order, and its machine learning algorithms now decide what types of push notifications to deliver to users. Twitter has also eliminated its less effec­tive advertising formats, focusing only on those that deliver the best engagement for advertisers. In November 2019, Twitter acquired Aiden, which has developed machine learning software that provides recommendations for social media advertisers and con­tent creators, detecting cost anomalies and automatically allocating budget. Twitter intends to deploy the technology to improve Twitter’s self-serve advertising offerings for small businesses. Twitter is also focusing on techniques to promote what it calls conversational health, adjusting its algorithm to ensure that low-quality tweets are less accessible in searches and conversations and changing its API to prohibit links and con­tent from being shared from many accounts at once, which is a common technique used by Twitter bots (dummy accounts that are used to spread misinformation). Although Twitter continues to aggressively identify and remove these accounts, more continue to pop up in their place. Twitter has also tried to improve its handling of habitual abus­ers and hate groups using its platform. In 2019, it acquired startup company Fabula AI, which has developed machine learning technology to detect network manipulation and online disinformation. Fabula AI’s team will join Twitter’s Cortex group. Striking a balance between allowing free speech and policing unacceptable hate speech and delib­erate misinformation will continue to be a difficult challenge for Twitter, but Dorsey has candidly embraced it, saying that the company has not done enough and must do better. In November 2019, in an effort to further enhance the conversational health of the platform, Twitter banned political ads, with some minor exceptions (such as ads in support of voter registration), and said it would prohibit issues-based advertisers from targeting users based on geographic location, political leaning or affiliation.
These changes, in addition to Dorsey’s restructuring of Twitter’s board and layoffs of 9% of Twitter’s workforce, finally jumpstarted Twitter’s stagnant growth. In the fourth quarter of 2017, Twitter recorded the first profitable quarter in the company’s history, and the company continued that trajectory through the fourth quarter of 2019. For 2019, Twitter recorded revenue of $3.46 billion, an increase of about 15% compared to 2018, and overall net income of $1.47 billion, compared to $1.21 billion in 2018.
The number of daily active users increased from 120 million in March 2018 to 152 mil­lion in December 2019. But the year was not without its challenges. In August 2019, Dorsey’s personal Twitter account was hacked and filled with racist tweets, and around the same time, Twitter admitted that for over a year, it had mistakenly shared certain user data and targeted ads based on other data without permission, raising questions about Twitter’s ability to handle security and privacy issues. Then, in the third quarter of 2019, Twitter announced that malfunctions in its ad targeting software, which pre­vented Twitter from serving ads to users with the same level of precision targeting as it normally offered, had resulted in reduced ad spending by advertisers. Twitter’s share price plunged by over 20% in a single day, wiping out more than $6 billion in market value. But Twitter appeared to recover from that challenge, with promising 2019 fourth- quarter and year-end results, boosting its share price back up to its previous levels by mid-February 2020.
Then, the Covid-19 pandemic hit. Although its first quarter 2020 earnings beat Wall Street expectations on both total revenue and user growth, Twitter, not surprisingly, recorded an overall loss for the first time since the third quarter of 2017. Although results for the period from January through early March were as expected, from that time forward to the end of the quarter, revenue dropped precipitously. Although user engagement increased significantly during that time, advertising declined by almost 30% compared to the similar period in 2018. Adding to the turmoil, an activist inves­tor group that acquired a significant chunk of Twitter’s shares sought to have Dorsey removed as chief executive officer. While a truce was reached, leaving Dorsey in place for the time being, his future remains somewhat uncertain. In the meantime, Twitter will attempt to grapple with the changing environment wrought by the pandemic. Event cancellations due to social distancing and stay-at-home measures, as well as the sus­pension of major sports leagues and the 2020 Summer Olympics, will likely continue to negatively impact its advertising revenues, which are heavily event-driven. To cope, Twitter is aggressively working on its direct response (DR) advertising formats, which include methods to drive consumers to take an immediate action. It has high hopes, for instance, for its Mobile Application Promotion suite of products, which enables adver­tisers to promote their mobile apps via Twitter, including app installs directly within Twitter. Twitter hopes to tap advertisers promoting mobile games, video services, food delivery services, and other markets that may be more resilient during an economic downtown. Twitter believes it is well-suited to weather the storm, with Dorsey noting that Twitter’s over-arching purpose is to serve the public conversation, and that in times such as these, that work has never been more critical.