by Adam Hartung | Oct 5, 2015 | Current Affairs, In the Rapids, Innovation, Leadership, Web/Tech
Twitter’s Board decided in July to oust the CEO, Dick Costolo, due to frustration over company profits. As I wrote at the time, Twitter had continued to add members, at a rate comparable to its social media competition. And it had grown revenues, while remaining the industry leader in revenue per active user.
But the concern was a lack of profits. Oh my, if rapid revenue growth but weak profits were a reason to fire a CEO, how does Jeff Bezos keep his job?
Anyway, Mr. Costolo was replaced by an original founder and former Twitter CEO Jack Dorsey on an interim basis. Four months later, after failing in its effort to find a suitable full-time CEO, the Board has made Mr. Dorsey the permanent CEO. While he simultaneously remains full time CEO of Square, a mobile payments processing company.
As I said in my last column on this subject, investors better beware.
Facebook is tearing up the social media market. It has grown to be not only #1 in active monthly users, but at 1.5B monthly active users (MSUs) the site has 5 times the number of users that Twitter has. By adding a slew of new features and functions Facebook has become more valuable to its users – and advertisers.
According to Statista, simultaneously Facebook has grown Facebook Messenger to 700M MSUs, acquired WhatsApp with 800M MSUs and Instagram with 400M MSUs. By constantly expanding the ecosphere Facebook now has 3.4B MSUs – over 10 times the number of Twitter. Facebook is so dominant that even muscular Google, with all its resources, abandoned its efforts to compete with the juggernaut by killing Google+ (which had 300M MSUs) earlier in 2015.
Twitter had great organic growth numbers, but unlike competitors it does not dominate any particular category of social media. Linked in, with only 100M MSUs dominates business networking, and bosts a user base that skews older and more professional. Pinterest and Instagram are battling it out for leadership in photo sharing. But it is unclear how one would describe a social growth category that Twitter dominates.
I actively use Twitter. But among my peers I am the exception. When I ask people over 40 if they use Twitter I regularly hear “I don’t get it. It all looks completely chaotic. Why would I want to follow people on Twitter, and why would I want to post.” This sounds a lot like what people said of Facebook and Linked in 5 years ago. But those companies found their connection with users and people now “get it.”
So the question is whether Mr. Dorsey will make Twitter into a site that is ubiquitous, at least for one category. Can he make the product so useful that users can’t live without it, and that continues drawing in massive new numbers of users?
Twitter has not changed much at all since it was founded. It still depends on users to sign on, start tweeting, and search out others a user wants to follow. And that means follow for some reason other than that person is a celebrity or politician that simply can’t stop spouting off. The Twitter user has to hunt for like minded individuals, find a way to connect with folks who are informative to their needs and then create a dialogue — and all with pretty much the same character limits and shrunken link technology available many years ago.
Apple floundered as a manufacturer of niche PCs. The returning CEO, Steve Jobs, resurrected the company by putting all his money on mobile. It wasn’t an improved Mac that turned around Apple, but rather the launch of the iPod and iTunes, followed by the iPhone and the iPad. The way Apple stole the thunder from previously dominant Microsoft was by creating new products built on the mobile trend that led to explosive growth.
Mr. Costolo left Twitter in far better shape than Apple was in when Mr. Jobs retook the reins. But will Mr. Dorsey be able to launch a series of new products that can create an Apple-like growth explosion?
Square, where Mr. Dorsey ostensibly spends half his time, is preparing to go public. But, even though it is currently considered by many the leader in its marketplace, Square is looking down the barrel of ApplePay – a technology on every iPhone that could make it obsolete. Then there’s also Google Wallet that is on all the other smartphones. Plus well funded outfits like PayPal and Mastercard. Square will need a very competent, capable and visionary CEO to guide its development competing with these – and other – well funded and powerful companies. Square will need to add features, functions and benefits if it is create long-term value.
A lot of new products are needed by two relatively small companies in short order if they are to survive. Success will not happen by cutting costs in either. It will require intensive product development with very rapid product cycles that bring in millions upon millions of new users.
Twitter was once a disruptive innovator. Now it is hard to recognize any innovation at Twitter. Does Mr. Dorsey get it? And if he does, can he do it? And do it twice, simultaneously?
by Adam Hartung | Oct 12, 2011 | Current Affairs, Defend & Extend, eBooks, In the Rapids, In the Whirlpool, Innovation, Leadership, Lifecycle, Lock-in, Transparency, Web/Tech
Wal-Mart has had 9 consecutive quarters of declining same-store sales (Reuters.) Now that’s a serious growth stall, which should worry all investors. Unfortunately, the odds are almost non-existent that the company will reverse its situation, and like Montgomery Wards, KMart and Sears is already well on the way to retail oblivion. Faster than most people think.
After 4 decades of defending and extending its success formula, Wal-Mart is in a gladiator war against a slew of competitors. Not just Target, that is almost as low price and has better merchandise. Wal-Mart’s monolithic strategy has been an easy to identify bulls-eye, taking a lot of shots. Dollar General and Family Dollar have gone after the really low-priced shopper for general merchandise. Aldi beats Wal-Mart hands-down in groceries. Category killers like PetSmart and Best Buy offer wider merchandise selection and comparable (or lower) prices. And companies like Kohl’s and J.C. Penney offer more fashionable goods at just slightly higher prices. On all fronts, traditional retailers are chiseling away at Wal-Mart’s #1 position – and at its margins!
Yet, the company has eschewed all opportunities to shift with the market. It’s primary growth projects are designed to do more of the same, such as opening smaller stores with the same strategy in the northeast (Boston.com). Or trying to lure customers into existing stores by showing low-price deals in nearby stores on Facebook (Chicago Tribune) – sort of a Facebook as local newspaper approach to advertising. None of these extensions of the old strategy makes Wal-Mart more competitive – as shown by the last 9 quarters.
On top of this, the retail market is shifting pretty dramatically. The big trend isn’t the growth of discount retailing, which Wal-Mart rode to its great success. Now the trend is toward on-line shopping. MediaPost.com reports results from a Kanter Retail survey of shoppers the accelerating trend:
- In 2010, preparing for the holiday shopping season, 60% of shoppers planned going to Wal-Mart, 45% to Target, 40% on-line
- Today, 52% plan to go to Wal-Mart, 40% to Target and 45% on-line.
This trend has been emerging for over a decade. The “retail revolution” was reported on at the Harvard Business School website, where the case was made that traditional brick-and-mortar retail is considerably overbuilt. And that problem is worsening as the trend on-line keeps shrinking the traditional market. Several retailers are expected to fail. Entire categories of stores. As an executive from retailer REI told me recently, that chain increasingly struggles with customers using its outlets to look at merchandise, fit themselves with ideal sizes and equipment, then buying on-line where pricing is lower, options more plentiful and returns easier!
While Wal-Mart is huge, and won’t die overnight, as sure as the dinosaurs failed when the earth’s weather shifted, Wal-Mart cannot grow or increase investor returns in an intensely competitive and shifting retail environment.
The winners will be on-line retailers, who like David versus Goliath use techology to change the competition. And the clear winner at this, so far, is the one who’s identified trends and invested heavily to bring customers what they want while changing the battlefield. Increasingly it is obvious that Amazon has the leadership and organizational structure to follow trends creating growth:
- Amazon moved fairly quickly from a retailer of out-of-inventory books into best-sellers, rapidly dominating book sales bankrupting thousands of independents and retailers like B.Dalton and Borders.
- Amazon expanded into general merchandise, offering thousands of products to expand its revenues to site visitors.
- Amazon developed an on-line storefront easily usable by any retailer, allowing Amazon to expand its offerings by millions of line items without increasing inventory (and allowing many small retailers to move onto the on-line trend.)
- Amazon created an easy-to-use application for authors so they could self-publish books for print-on-demand and sell via Amazon when no other retailer would take their product.
- Amazon recognized the mobile movement early and developed a mobile interface rather than relying on its web interface for on-line customers, improving usability and expanding sales.
- Amazon built on the mobility trend when its suppliers, publishers, didn’t respond by creating Kindle – which has revolutionized book sales.
- Amazon recently launched an inexpensive, easy to use tablet (Kindle Fire) allowing customers to purchase products from Amazon while mobile. MediaPost.com called it the “Wal-Mart Slayer“
Each of these actions were directly related to identifying trends and offering new solutions. Because it did not try to remain tightly focused on its original success formula, Amazon has grown terrifically, even in the recent slow/no growth economy. Just look at sales of Kindle books:
Source: BusinessInsider.com
Unlike Wal-Mart customers, Amazon’s keep growing at double digit rates. In Q3 unique visitors rose 19% versus 2010, and September had a 26% increase. Kindle Fire sales were 100,000 first day, and 250,000 first 5 days, compared to 80,000 per day unit sales for iPad2. Kindle Fire sales are expected to reach 15million over the next 24 months, expanding the Amazon reach and easily accessible customers.
While GroupOn is the big leader in daily coupon deals, and Living Social is #2, Amazon is #3 and growing at triple digit rates as it explores this new marketplace with its embedded user base. Despite only a few month’s experience, Amazon is bigger than Google Offers, and is growing at least 20% faster.
After 1980 investors used to say that General Motors might not be run well, but it would never go broke. It was considered a safe investment. In hindsight we know management burned through company resources trying to unsuccessfully defend its old business model. Wal-Mart is an identical story, only it won’t have 3 decades of slow decline. The gladiators are whacking away at it every month, while the real winner is simply changing competition in a way that is rapidly making Wal-Mart obsolete.
Given that gladiators, at best, end up bloody – and most often dead – investing in one is not a good approach to wealth creation. However, investing in those who find ways to compete indirectly, and change the battlefield (like Apple,) make enormous returns for investors. Amazon today is a really good opportunity.
