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Twitter Lightning: An Opportune Moment?

Megan Bradfield, Kris Hodgson, Mark Malowany

MACT, Faculty of Extension, University of Alberta

August 30, 2015

COMM 550: Intro to Electronic Commerce

RUNNING HEAD: TWITTER LIGHTNING 2

Introduction

The popular social networking site, Twitter, was originally developed in 2006 as a simple

interface to share personal, text-based updates with friends through mobile phones. Years later,

Twitter is an award-winning, highly addictive 140-character micro blogging platform that

became a publicly traded company in 2014 (Piskorski et al, 2014). Today, Twitter is having a

hard time retaining its market advantage. So, to innovate, Twitter announced its newest product

in June 2015: Twitter Lightning. Lightning is an interface that will allow users to leave their

traditional Twitter timeline in exchange for curated images, videos and text surrounding specific

news or events within a more immersive, full-screen, content-focused user experience (McAlone,

2015). Interestingly, Lightning allows both Twitter subscribers and non-users to see timelines

and all information about events from inception to completion.

This paper explores the market space opportunity that Twitter has identified with its

impending project Lightning and establishes why Twitter perceives this as an opportunity. Using

a “Framework for Market Opportunity Analysis,” we provide our recommendation for why

Twitter should or should not proceed with this new platform.

Addressing the Market Opportunity

Twitter serves both business-to-business and business-to-consumer sectors: Individuals and

companies use Twitter to share, market and analyze content. Twitter’s value system is its web of

suppliers, partners, and customers who create raw content value in the form of informational

tweets, advertising content, and tools that help optimize user experience. Currently, Twitter

offers three advertising methods to generate revenue and supply value to advertisers: Promoted

Tweets, Promoted Trends, and Promoted Accounts, all of which work on mobile devices and

focus primarily on text-based calls to action (Laudon & Traver, 2015).


Twitter’s latest quarterly earnings statement tells two important stories that define the

company. On one hand, Twitter delivered unexpectedly strong revenue, primarily based on

advertising—it has proven itself to be a desirable platform that matches an audience with

advertisers. On the other hand, growth in new users has stalled and engagement of existing users

has weakened (Goel, 2015). Twitter has the dual motivations of providing a better experience to

existing users to unlock trapped value, while striving to radically engage mass audiences and

create new-to-the-world value offerings. Lightning is set to help Twitter enhance advertiser

interest by complementing existing advertising options, while also being a fun and useful tool to

help serve existing users and attract new audiences.

Discovering Underserved and Unmet Needs

Focusing on Twitter’s value proposition will help to understand how Twitter is, or is not,

meeting customer needs. In broad strokes, Twitter’s customers are advertisers and these clients

want access to segmented and receptive audiences. Twitter’s job is to cultivate such an audience

by attracting users and offering an efficient way to track and describe their activity.

While Twitter active users may be 316 million, over a billion accounts have been created,

so many remain dormant (Sacca, 2015). This suggests an available and underserved audience of

casual, relatively inactive users. Lightning represents an opportunity to re-engage this audience.

To discover unmet needs, one should ask the questions: What is the valuable gift Twitter

offers to the public and can this be improved? How does Twitter fulfill the needs of customers

that other firms cannot and is Twitter retaining this value by offering custom products for lesser

costs, while providing easy-to-use services?

In essence, Twitter provides a community-building platform for people to communicate,

share, curate, and receive information about topics meeting their interest without being hindered


by geographical or time-based constraints (Laudon & Traver, 2015). Twitter is an amazing tool

for finding breaking news and information trends but, because there are hundreds of millions of

tweets every day (http://www.internetlivestats.com/twitter-statistics/), it is difficult to cut through

the noise to find relevant information. There are little barriers to register with Twitter, yet the

platform is consistently perceived as difficult to use and third-party providers aggressively

compete with Twitter’s in-house tweet management and analytics services (Piskorski et al, 2014).

In order to maximize its value proposition to customers and meet their underserved needs,

Twitter must focus on ease of use and connecting with users. To date, Twitter has adopted a

hashtag method to stream and catalogue conversations at events via a keyword or phrase prefixed

by a pound “#” character, which has worked well for its core audience. But Twitter needs to

move beyond the hashtag to extend its core audience and bring the Twitter experience to a

significantly larger audience, realizing its full potential to users and advertisers as the ultimate

tool for communicating, following, marketing and sorting event information; easily and in real-

time.

Enter Twitter Lightning, a new feature that will allow users and non-Twitter users to view

video, images, and news surrounding events. Journalist Matilda James (2015) says Lightning is

“an attempt to enhance the user experience” by organizing event tweets and allowing users to see

all information, regardless of whether or not the users follow each other. Also, Lightning allows

larger photos to be shared, which increases engagement rates regardless of whether or not a user

is logged in. Furthermore, Lightning may help Twitter reach new audiences and grow its

membership for it is targeted to “work in tandem with TV networks” because “live content has

lately become a crucial source of revenue generation for media companies” (James, 2015).


Target Customers and Users

Twitter’s target customers are digital marketers of the display ads and social marketing

segments. As of 2015, ad revenue accounted for about 90% of Twitter’s total with the rest

coming from data reselling (Twitter, 2015). This is an attractive area to be in as online

advertising is a growth area, for online advertising spending outpaced broadcast TV for the first

time ever in 2014 (Hof, 2014). Mobile space advertising shows additional, explosive growth and

opportunity.

Project Lightning is positioned to better serve marketing clients by increasing Twitter’s

usage rate, providing superior event-driven marketing opportunities, and generating broader and

richer psychographics for resale. This strategy aims to help Twitter differentiate itself and remain

competitive amidst other social media platforms.

To succeed, Twitter must provide a superior, compelling product: Twitter users. The market

for advertising and data reselling is increasingly competitive and Facebook trumps Twitter in two

key areas: the amount of active users and the rich set of demographics to facilitate advertising

and marketing segmentation. Project Lightning will address both of these shortcomings.

Usage Rate. Facebook has over 1.49 billion active users

(http://newsroom.fb.com/company-info) and Twitter, 316 million

(https://about.twitter.com/company): Therefore, Facebook provides a more expansive canvas for

marketers to draw from.

Twitter Lightning provides an opportunity to re-engage casual and lapsed Twitter users to

immediately and vastly increase its usage rate, by building opportunities for logged-off and non-

registered users to participate.


Demographics vs. Psychographics. The personal nature of Facebook provides a trove of

demographic data to exploit, with which Twitter cannot compete. The event-driven nature of

Twitter (further accentuated in Lightning) promises to provide rich psychographics, a

complementary demographic description that focuses on activity, interest, opinion (AIOs),

attitudes, values, and behaviour (“Psychographic”, 2015). Facebook excels at the personal, the

‘who,’ whereas Twitter’s foundation is event and opinion—a vast, differentiated pool of

psychographics to exploit.

Summary. Twitter is not reinventing the wheel with Lightning. It continues to target

advertising and marketing clients in the social networking space in order to monetize the service.

This is sound strategy, as spending for online advertising is increasing. Twitter Lightning

promises to tap into the growing area of online marketing by targeting casual-users, non-users

and more fully exploiting second screens and mobile devices.

Resource Requirements

For Lightning to succeed it will require the following ecosystem: a) backend technology;

b) frontend design; c) partnerships; d) editorial (curation) staff; and e) audience.

Backend Technology. The backend consists of two components. First, the basic Twitter

engine. This mechanism delivers Tweets, provides user engagement (comments, likes, retweets),

and tracks analytics. This existing technology is tried, tested, and proven to scale. The second

backend technology is the software to curate Tweets. In some ways this is a departure from the

Twitter experience. Twitter is primarily designed to be a ‘firehose’ of data and Lightning is

attempting to capture and showcase moments in the stream. Twitter currently has curator

software designed for businesses to discover and showcase conversations


(https://curator.twitter.com). This seems to demonstrate capability to curate content, though it is

uncertain how it scales.

Frontend Design. The frontend includes the look, feel and user experience. Twitter can be a

confusing place for newcomers. As billionaire Twitter investor Chris Sacca (2015) points out,

Twitter can be hard to use, scary, and lonely and the front-end design should directly confront

those obstacles. But, to date, Twitter has been consistently challenged at providing compelling

user experiences with mass appeal.

Partnerships. Lightning will be event driven, targeted at corporate partnerships to define

‘moments.’ Twitter has a proven track record of media partnerships to provide such moments of

shared content (i.e. Amplify; https://biz.twitter.com/twitter-amplify).

Editorial Staff. This is perhaps the single biggest departure from Twitter and unknown

variable for Lightning. Curating content is a profoundly human endeavour. While much of

Lightning is bringing together existing elements with the Twitter ecosystem, this is the wild card

element. It is labour intensive and the specific resource requirements are unclear.

Audience. For Lightning to work, an audience must be in place to participate. Twitter is in

the enviable position of having near ubiquitous name recognition, even if it is only being actively

used by a fraction of that audience. Twitter can leverage this awareness into action.

Financial, Competitive, and Technology Opportunities

Twitter has a sizeable, active core following. Tinkering with their fairly successful formula

poses a risk of alienating the installed base. This risk might be deemed acceptable if reward is

suitably compelling. In light of this, how attractive an opportunity is Twitter Lightning?

Financial Opportunity. Lightning has the potential to shore up existing advertising revenue

and tap new money coming into the online realm. Total industry advertising spending in the US


is estimated to be $187 billion for 2015 (Lunden, 2015) with online ads accounting for nearly one

third of that.

Digital ad spending is increasing, predicted to double by 2019 to match or surpass TV +

Cable revenue (Peterson, 2014). Twitter Lightning has the opportunity to gain a bigger piece of

this market. Interestingly, the event-driven nature and mass audience of Twitter Lightning shows

great synergy with TV, forming an end-to-end strategy in the advertising funnel by coupling the

broadcast nature of TV targeting brand (awareness) with digital follow through on lead

generation and action.

Competitive Opportunity. Facebook is a social networking behemoth via overall usage and

personal sharing, but Twitter has a competitive advantage in the public sphere through its events-

based sharing. This must be protected and extended or Twitter risks squandering it all. Twitter

Lightning is predicated on the idea that people want to participate in mass events online.

Twitter’s current advantage is to be the place where celebrities and newsmakers congregate and

interact with the public. In this sense, it is ‘the place to be.’ Twitter has the opportunity to put a

lock on being the de facto public space of the Internet.

Technology Opportunity. Twitter has most back-end technology components in place to

integrate Lightning’s elements into a coherent, marketable product. Yet, Twitter is criticized as

being confusing to newcomers, so Lightning’s development presents an opportunity to improve

the front-end, fulfill user expectations, and improve retention. In short, it is an opportunity to

rationalize disparate technologies and deliver a coherent product.

Further, this is an opportunity to exploit mobile technology to collect insightful data from a

larger pool of logged-off users. Mobile devices are inherently personal and the tracking of device

ID makes it possible to build meaningful psychographic profiles from otherwise anonymous


input. Twitter’s strong position in mobile provides revenue growth potential for Twitter’s data

reselling arm.

Porter’s Five Forces Analysis

In an increasingly tight digital advertising market, competing forces make profitability a

challenging proposition. Our analysis of Porter’s five forces will show that, through competition

for digital advertising dollars, Lightning aims to claim a distinct and lucrative niche designed to:

1) reduce supplier power by increasing usage and content generation; 2) reduce buyer power by

increasing the value proposition of Twitter ads; 3) reduce the threat of substitutes through

product differentiation; and 4) reduce the threat of new entrants by dominating the space.

Bargaining power of suppliers. Suppliers are the players (corporate and organic) who create

content that actively engages users: this stream of content provides the backdrop to sell

advertising. Here, suppliers have power via mobility across social networks. If players are

choosing to participate in Facebook or Snapchat, this reduces Twitter’s ability to generate profit.

Twitter Lightning is designed to increase the available pool of users and increase their

engagement, both of which reduce supplier power. A large pool of engaged users increases

Twitter’s ability to generate profit.

Bargaining power of buyers. Buyers are users who purchase promoted tweets, trends and

accounts. Buyers may choose other social networks to advertise on, but many turn to Twitter

because of the minute-by-minute engagement. “Establishing an ongoing dialogue and continued

interaction with Twitter’s unique user base can be highly advantageous for advertisers” (Pierce,

2015). For example, despite advertisers investing 127% more on Facebook, Twitter consistently

delivers a higher click through rate (Resolution Media, 2015), so advertisers get more eyes on

their content. Also, use of Lightning does not require Twitter membership, thus opening an


opportunity for advertisers to reach casual browsers. “Twitter has the incredible advantage of

being the place where the world already turns to share information” (Pierce, 2015), so advertisers

can take advantage of this worldwide attention.

Threat of substitute products or services. Twitter is successful at being event-driven,

allowing anyone to interact with newsmakers, journalists and celebrities as events unfold. This is

unique set of characteristics and a hard formula to replicate. Robust analytics tools allow users to

track performance of tweets, followers and engagement, to identify trends that help advertisers

market to a wider audience. Furthermore, Lightning promises to aggregate all content into one

feed, even if people are not following each other. Thus illustrating another way posts will reach

widespread audiences.

Rivalry among existing competitors. Currently, Twitter dominates at engaging people in

news surrounding live sports games and awards shows, but Facebook is developing similar

technology, purportedly geared to compete with Lightning (Levy, 2015). But, Twitter’s proposed

ad layout should prove more successful than Facebook’s, for Lightning will allow ads to appear

full-screen and immersed within timelines in mobile apps (Kim, 2013), whereas Facebook ads

appear to the right of, not embedded within, a person’s timeline.

Twitter will compete with traditional broadcasters who are seeing a decline of ad revenue

for the first time in history. Social network’s interactive advertising revenues for 2013 hit an all-

time high of $42.8 B, exceeding broadcast television advertising revenues of $40.1 B (IAB,

2014). These figures, combined with the fact that advertising revenue continues to grow

exponentially on mobile devices, creates a larger arena for Twitter to capitalize on.

Threat of New Entrants. It would be challenging for a new organization to take on

Twitter’s 316 million users, and there seems to be few threats from new providers to take away


market share from Lightning. In fact, Twitter’s venture into new territory with Lightning may

help create distance from its competition. As previously mentioned, the greatest threat to Twitter

Lightning comes from existing—not new—players who already have a stake in the market share,

like Facebook.

However, there is a looming potential threat from the relatively new social platform,

Snapchat. With nearly 100 million daily active users in the 18-24 demographic (Onfro, 2015),

Snapchat features a live stories section: curated content of a single event. Since this is what

Twitter Lightning is trying to achieve, it will be interesting to see who will do it better. “Both see

their greatest business and cultural potential in coalescing massive audiences to share a live

experience,” (Fast Company Staff, 2015).

The biggest issue hinging on the success of Twitter Lightning is when it will actually be

released to the public. In the world of technology where speed is everything, it’s challenging to

know if the money will follow this first major marketing push.

Final Assessment

We recommend Twitter go forward with project Lightning. Winning back lapsed

members presents great opportunities: to increase usage, to act as a gateway to convert casual

users to active users, and to collect more (and marketable) data in innovative ways for new

revenue growth. The greatest risk Lightning presents is diluting the Twitter experience and

alienating its core. Because Lightning augments rather than replaces the existing Twitter

experience, this risk is minimized. A secondary risk is that the engagement metrics of ‘full’

Twitter might not translate to the new experience and revenue will not track as expected. By

collecting and reselling data from this new source, some of the revenue concerns can be softened.


We anticipate Lightning will take the Twitter interface to the next level, creating a needed

and welcoming environment to engage in global events as they happen. If successful, advertisers’

ROI will increase with strong click-through-rates extending to a larger pool of users. Twitter’s

recently improved, robust analytics tools will allow advertisers to see where people are engaging

with content and where advertisements are gaining traction. Users will benefit from easier access

to communities and subjects that matter to them. Essentially, Twitter is where the world is

turning for conversations because it is where news breaks first.

Conclusion

Twitter provides a platform where the world’s news is first discovered, but Twitter needs

more of a compelling way to keep its followers engaged. Kevin Weil, Twitter’s head of product

development, sees a great opportunity in creating a new user experience. States Weil, “we can

create an endless browsing experience. There’s so much amazing content on Twitter, and it’s our

job to do a better job connecting users to the content they care about” (Newton, 2015).

By integrating improved analytics, opening the platform to non-users, allowing unconnected

people to share in conversations, and efficiently curating visual content surrounding breaking

new and events, Lighting is set to draw the attention of paying advertisers. If the Twitter

experience can be improved dramatically for both users and advertisers, and if Twitter focuses on

its core strength of being the first on the scene of breaking news and events, Lightning will put a

whole new spin on the 140 characters.


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