Launched in 2006 by Jack Dorsey, Twitter is a social media and a news website. It is based in San Francisco, California, US, with more than 25 offices around the globe. Like other social media website, it allows users to register themselves with the website and post tweets that are max 140 characters. Twitter, in addition, to the website may also be used through its app and SMS. Twitter gained popularity in 2012 when its user base crossed 100 million with more than 340 million tweets per day. Currently, it is one of the top ten social media websites. In addition to posting videos and pictures, Twitter is used to share breaking news. In 2013, Twitter went public through an IPO and in 2016, Twitter posted a profit of $2.52 billion.
Following is a detailed Porter Five Forces Model Analysis of Twitter:
Competitive Rivalry – High
During the past decade, the social media industry has been highly competitive with the rise of many new players such as Twitter, Myspace, Instagram etc. However, most of these players fail to reach the fan base of Twitter due to the high entry barriers of the industry. The social media industry is continuously undergoing technical advancements and addition of new features. All websites are continuously adding new features to attract users from other social media websites onto their platform. Customers of these websites are seeking new and new features. Any player of the industry that fails to innovate and add new features gets kicked out of the industry. Many small players that are able to make an entry are usually acquired by the giants. This helps increase the fan base of the platform. Therefore, Twitter is facing a strong competitive rivalry.
Threat of New Entrants – Low
The success of a player in the social media industry relies on its level of innovation, a number of users, and its age. Although the technology required, web development and application development is not costly, the entry is difficult. Existing players have attained extensive technology, made their websites and apps highly innovative attracting the masses towards them. The existing players like Twitter have developed a brand image and brand loyalty (Iotism, 2016). Almost all businesses, news channels, individuals etc. have set up a Twitter account and its links can be seen on almost all company websites asking visitors to connect with them on Twitter. All of these raise the entry barriers making entry and then the success of new entrants very difficult making this threat very low for Twitter.
Bargaining Power of Suppliers – High
The suppliers of Twitter are the suppliers of technical equipment and the users who post the news, tweets, and generate impressions that lead to revenue to for Twitter. Also, as the number of technical equipment manufacturers are very limited such as IBM making the choice very limited for Twitter. The second suppliers, the users, who post the different news and posts in the form of tweets that lead to impressions. These impressions convert into revenue for Twitter. Thus, in both these cases Twitter does not hold any bargaining power and thus suppliers of Twitter have a high bargaining power against Twitter.
Bargaining Power of Buyers – High
The buyers of Twitter are the different businesses and marketers who run ads on Twitter through paying Twitter (Sukernik, 2014). Since there are many social media platforms and other internet sites that are running through funds from such advertisements, Twitter is in no position to attempt to raise ad prices in an attempt to gain greater revenue. Also switching cost is very low for these buyers. Thus, the buyers of Twitter hold a strong bargaining power over it.
Threat of Substitutes – High
In the social media industry, there are a large number of substitutes. These include Facebook, Instagram, Google+ etc. They all are competing to gain a maximum number of users on their platform and increase their market share. Also, since Twitter offers a limit to the numbers of characters that can be posted in a tweet, its substitutes are at an advantage as none of them hold this limit. Another limiting factor is the number of hours a user gives to each social media platform he is on. This all makes the threat of substitutes for Twitter very high.
References
Iotism, 2016. Five Forces: Twitter’s Advertising Business Division. [Online] Available at: https://iotism2m.wordpress.com/2016/07/25/five-forces-twitters-advertising-business-division/ [Accessed 22 June 2017].
Sukernik, L., 2014. Twitter External Analysis. [Online] Available at: http://larrysukernik.com/blog/2014/9/28/twitter-external-analysis [Accessed 22 June 2017].