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Steve's ITK: Too big to fail

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Steve's ITK

February 13 · Issue #13 · View online
Steve's In The Know: Everything I published recently, commentary you won't find elsewhere, write-ups of events I attended or spoke at, and industry rumours.

MIRI recording in my studio last year
Opening thought: Too big to fail
One question I dread being asked is: what “cool” apps have you installed lately? The truth is, although I do get to hear about new startups almost every single day, I’m pretty conservative when it comes to the products I actually use.
They consist almost exclusively of a bunch of messaging and productivity apps, such as Gmail, Skype, WhatsApp, Facebook Messenger, Convo, and Slack.
Others that make the list are video streaming apps, including BBC iPlayer, Amazon Prime Video, and YouTube, and a couple of smart home apps used to control my central heating (Hive) and home lighting (Philips Hue).
However, the two app and services I almost certainly hold dearest are Spotify and Twitter. Both companies made headlines this week because they are struggling to convert passionate and loyal users like me into a sustainable business, or at least one capable of satisfying Wall Street.
The clock is ticking for Spotify,’ screamed BBC News. The report, written off the back of original reporting by TechCrunch, notes that Spotify has 100 million users, including 40 million paying subscribers, but is still a long way off from making a profit.
Worse still, loans taken out by Spotify penalise the Swedish company the longer it takes to IPO.
… as time goes on, Spotify must pay ever larger sums to its creditors just to settle the interest on its loan, while the amount of money it can raise from its IPO is trimmed by an ever greater amount.
And yet, Spotify remains the music industry’s great streaming hope, even if the record companies themselves seem intent on playing hardball with it. 
The service is not only loved by its users but has managed to fend off deep pocketed competition from Apple, Google and Amazon, mainly with a much superior product. 
As Billboard argues, Spotify has almost become too big to fail (where have we heard that before?). If it can’t make the business of music streaming work then who can?
Next up, Twitter’s latest financial results showed a decidedly mixed picture, and that’s me being uncharacteristically generous.
The publicly-listed social media company said it grew daily active users by 11 percent compared to the same quarter last year, but doesn’t break out the numbers. Monthly active users also grew by 2 million, and now stand at a decent but modest 319 million. 
However, Recode provides a sobering data point: Facebook added 72 million users in the same quarter during so-called “Trump Mania,” which analysts thought would benefit Twitter most.
“That was Twitter’s slowest quarter all year for user growth, and its U.S. user growth — where it has 67 million monthly active users — was actually zero,” writes the tech news site.
Ouch.
Worst still, Twitter has managed to monetise less. As TechCrunch reports, the company’s advertising business has stalled, which is a far cry from Facebook’s ability to seemingly print ad dollars:
Here is the biggest data point from the company’s fourth-quarter earnings report: according to the company, advertising revenue totalled $638 million, which was down slightly year-over-year. A reversal in its advertising growth is certainly not going to help Twitter’s case, which needs to be able to pitch itself to advertisers as a legitimate alternative to Facebook…
The head-scratching thing about Twitter’s growth and monetisation problems is I can’t think of another company or brand in history that has garnered as much mindshare (and free advertising) or had as much impact on the world without converting this into a very profitable business.
Bonus: Check out this excellent post by ex-TechCruncher M.G. Siegler on a few ways Twitter could and should fix its product. After you’ve read it, his suggestions will seem like a complete no-brainer.
Things I wrote this week
Nextdoor to acquire “assets” of UK local social network Streetlife
Icebreaker.vc wants to help Finland’s “pre-founders” make the switch to startup life
Dublin and London-based Frontline Ventures closes new €60M fund to invest in B2B startups
Xeneta raises $12M Series B to crack open ocean freight pricing
Airsorted, a fast-growing Airbnb management startup, raises £1.5M
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Closing thought: Never say never
Last week I was interviewed by Irish Tech News and editor Simon Cocking asked the inevitable question: Am I tempted to do another startup? Here’s the answer I gave:
I’d never say never, but I kind of feel that ship has sailed. I don’t think you should ever do a startup unless you have a burning desire to solve a particular problem and a belief that you are best-positioned to help do that.
Right now I’m really enjoying journalism again, and in my down time I’m working on an album. Music was my first love and even though I don’t really distinguish between various creative pursuits — writing, filmmaking, web/app development etc. — it has been really nice to get back into the recording studio.
Close friends and eagle-eyed Twitter followers will have already known I’m co-writing and producing an album in my home studio, working with members of my ex-band and new musician friends alike.
One of those is the singer-songwriter MIRI, with whom I’ve co-written a track. She’s currently featured on Secret Sessions and needs your vote.
Get in touch
Want to continue the conversation? Just hit reply to this email – I answer every single ITK email I receive.
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Till next time,
Steve
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