Can Disruptive Start-ups Be Conventional Businesses?

On 7th September 2017 by good2us

Twitter grabs the headlines as much as any social media platform and often more than any; but struggles to perform as a business. But does it point the way for social platforms?

At one time of day the only quotes anyone saw were in newspapers and from a very small group of people. Twitter allows individuals with any number of followers to produce quotes, insights and smart-ass comments. It receives the kind of free attention most companies can only dream. of

But its reported results in early 2017 showed slowing revenue growth, a loss of $167m and slowing user growth: it added just 2m users in the period. Facebook added 72m. The day of the results, shares in Twitter dropped by 12%.

However, the lack of user growth is largely irrelevant as Twitter’s basic business model, attract eyeballs to sell advertising, isn’t working. Despite becoming one of the most important services for public and political communication among its 319m monthly users and having played an important role in the Arab spring and movements such as Black Lives Matter it finds it hard to spin gold from it. In fact, really trying to do so by packing Twitter feeds with advertising would drive away users.

There is a point of view that considers it should never have become a publicly listed company and advocates alternate models of ownership, such as a co-operative. If the company were co-operatively owned by users, it would be released from short-term pressure to please its investors and meet earnings targets.

Though some co-ops have shown themselves resilient, they are generally thought to be less dynamic due to democratic governance. Yet it is possible that the diversity of Twitter users would result in features that would rescue it from its most toxic elements, such as harassment and hate speech.

Another ‘vision’ is that of s futuristic co-op (“co-op 2.0”?) in which responsibility is split between idealistic entrepreneurs, who control product innovation, and users, who have the say on such matters as data protection.

Even if such models could be made to work, Twitter is unlikely to become a co-op soon: its market capitalisation still exceeds $12bn, an amount users can hardly dream of scraping together. Twitter’s experience has stoked another, long-simmering discussion in the start-up world – whether firms should always aim to go public. More and more start-ups questioning whether they should opt for conventional ownership structures.

Etsy, Kickstarter and Wikipedia, among others, have pursued set-ups that allow them to keep their social benefit front-and-centre.

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