Category Archives: Growth

US cable, satellite and telco provider review for Q3 2014

As a counterpoint to the US wireless market trends deck I published last week, today I’m making available a review of some of the major operational metrics and revenue trends for the largest publicly-held cable, satellite and wireline telecoms providers in the US market. This deck focuses on pay TV, broadband and voice telephony services, and shows growth on an annual and quarterly basis as well as total revenues and revenues per user for these services. Some of the key messages are:

  • TV subscribers aren’t shrinking – if looked at annually, to overcome the inherent cyclicality in the market, subscribers are actually growing very slightly
  • Broadband is still growing rapidly, adding several million subscribers each year
  • Voice is shrinking fast, though the rate of decline has slowed recently, as decent cable growth fails to offset the rapid shrinkage among the telcos
  • Pay TV is around a $100 billion a year market, and shows no sign of shrinking despite the shift in viewing habits towards DVR, VoD and online consumption.

I’ve embedded the deck below. You can also see it directly on SlideShare here, where you can find the code to embed it elsewhere or download it as a PDF. As with the wireless trends deck, the data behind these slides is available as a paid service from Jackdaw Research. Please contact me if you are interested in this option.

Twitter’s channel model is broken

Zach Seward has an interesting piece on Quartz today about how Twitter is like TV. Quoting from that piece:

What makes the service so compelling—and also, yes, maddening—is how linear it is. Twitter marches in a straight line with time, like a novel or cassette tape or, most similar of all, television. You can wade in and out of the stream as you might tune in and out of a TV channel. It’s always on and crackling with energy whether you are watching or not.

At a basic level, I agree that Twitter is like TV, but it’s not really like today’s TV at all. It’s like TV from forty years ago, but with a hundred million times as many channels. Think about all the advancements in TV since that time:

  • The rise of cable television, providing vastly more channels, many of them aligned to specific interests (sports, movies, home improvement, history etc.), and bundled into packages
  • VCRs, and then DVRs, allowing you to capture slices of linear television for replay later on and enabling the pausing, fast-forwarding and rewinding of content
  • Video on Demand, allowing you to select specific content aired earlier to watch after the fact.

Not only this, but Twitter is effectively an a la carte TV service with hundreds of millions of channels on offer. The burden is on the user to choose individual accounts to follow, which can be an overwhelming experience.

Individual accounts as channels is a broken model

For a segment of Twitter users (myself among them), which I might describe as power users, the individual account model works perfectly. They have enough incentive, for personal or work reasons, to go through the effort of carefully selecting and curating a specific list of accounts to follow, and this relationship is sacrosanct. These are the very users who are now blowing up on Twitter about the change the service introduced this week. However, these users are a minority of Twitter’s current user base, and if the company is to grow from 271 million MAUs to Facebook or Google scale at over a billion, the new users it needs to gain look a lot more like the rest of Twitter’s current user base than its power users.

For those other users, though, the individual accounts as channel model is fundamentally broken. Most of them simply won’t go through the effort of selecting individual accounts to follow to the extent that they’ll end up having a satisfying experience. Twitter has now overlaid an interest-based filter on the onboarding experience, but it’s merely a step along the way to selecting individual accounts to follow, and the filters are too broad. What Twitter really needs to do is create channels at a higher level, and abstract them from individual user accounts.

For example, I might say that I’m interested in baseball at a high level. Twitter would then scan all baseball-related tweets at any given moment for all those that are most newsworthy, and curate these into a baseball-related channel which I can follow. Alternatively, I might go a level deeper and say I’m interested in the Yankees specifically, and Twitter would then curate tweets specifically related to that team. The other advantage with this model is that it doesn’t necessarily have to be based on following at all: I could simply dip into and out of topics as I’m interested in them. If I’m at work, I could focus on the topics that are relevant to that, and when I get home I could switch to my Yankees, current affairs or Modern Family channel. This would also avoid the frequent incongruity of seeing a tweet about a plane crash next to one about a celebrity breakup or iPhone rumors.

To go back to Seward’s TV analogy, live TV only works because you just have to turn on the TV and something is there. If you don’t like it, you change the channel. But on Twitter today, there’s literally nothing on until you explicitly tell the service what you’re interested in, and if you don’t like it, it’s a lot of work to change channels, because you effectively have to create each channel yourself in a very manual and labor-intensive fashion. It works fine once you’ve created a channel you’re happy with, but I suspect many users never reach this point and thus don’t use the service often or abandon it altogether.

Favorited tweets in the timeline is a bandaid

Twitter’s move to include non-followed but favorited tweets in timelines is a bandaid that doesn’t do anything to solve the fundamental problem of Twitter for the vast majority of users. But Twitter has the potential to change the model in a way that won’t break it for power users, while creating a new and different experience both for new users and existing users. This week’s change makes me worry even more about the problem I posited a couple of weeks ago ahead of Twitter’s earnings: that in the search for growth, Twitter will end up breaking the core experience for the very users to drive much of its value. It doesn’t have to be this way.

Twitter and Foursquare’s shared growth problem

Ahead of Twitter’s earnings tomorrow, I wanted to do a quick take on the problem that both Foursquare and Twitter share when it comes to growth. Foursquare is a privately held company and as such we have very little data to go on as far as how many active users it has or what its revenues might be, but it does report registered users from time to time, so we have something to go on.

The fundamental challenge both businesses face at this point is that their most active users to date likely don’t behave anything like the users they want to capture in the coming years. That is leading both companies to both consider and execute on major changes in the way their services work, which in turn will create challenges for retaining their most active users.

In the case of Foursquare, this has meant splitting its app into two: the classic Foursquare app, which is now a sort of Yelp equivalent, focused on recommendations, and the new Swarm app, which is focused on checkins. This is intended to strip away the checkin focus from the main Foursquare app to make it more appealing to the massive base of potential users who don’t want to signal their location constantly, while still making checkins available in the Swarm app for power users. The response from existing power users hasn’t been great: look at the ratings for Swarm on the App Store, for example: 1.5 stars for all versions of the app, with over 3000 ratings. The complaints fall mostly into these categories:

  • The hassle of splitting the app into two (see also Facebook Messenger)
  • It’s now harder to check in than it used to be, especially if tagging a friend
  • Killing the competition aspect, mayorships and so on.

In short, for these power users, hitherto Foursquare’s biggest advocates, Foursquare has broken the core experience of checking in and competing for mayorships. And some of these users are doing more than just posting reviews on the App Store.

Of course, with those as the two key pillars of the service, Foursquare has just barely reached 50 registered users (the number of monthly active users is likely much smaller, perhaps 10-20% of that). If Foursquare wants to grow beyond its current tiny base of users, it has to expand into new areas, and that means changing the core app experience from one that’s checkin and game-focused to one that’s recommendation-centric. As such, it was the right broad strategy to start to shift the focus of the app away from power-user features and towards these new ones, but the implementation has been poor, and in the process Foursquare has alienated its biggest fans.

Twitter faces to some extent the same problem – power users use lists, hashtag, @mentions, DMs and  Tweetdeck, and follow hundreds of accounts, but most ordinary users don’t. If Twitter is to grow, it has to cater to these new, ordinary users rather than the power users. That means changing the experience so that it’s not so overwhelming, and doesn’t have such a steep learning curve. Ideally, a new user would sign up, check a few boxes, and instantly have a feed that’s relevant and interesting, without having to do all the work of hand-crafting a list of accounts to follow. There’s talk this week of filtering feeds à la Facebook, and there have been multiple rumors in recent months about moving tags and @mentions out of the 140 characters, in part perhaps to remove some of the jargon from the stream and make it more user-friendly.

But in all this, Twitter faces the same risks that have plagued Foursquare since its repositioning. It needs to learn from Foursquare’s mistakes and preserve the core experience that its power users love while creating a new version of itself for mainstream users. That’s a tough balance to strike, because it’s almost like maintaining two products at once, with two separate user experiences. But Twitter, to an extent that’s not even true for Foursquare, needs its power users to continue to create the content for which its mainstream users will come to it.

Foursquare isn’t by any means beyond salvation, but it does need to quickly fix the Swarm app and with it the power user experience, if it’s to grow in the way it needs to, especially since its future revenue is likely as dependent on the data its users generate as it is on monetizing users or even merchants. Twitter is at an earlier stage and still has a chance to get this transition right.

The challenges faced by these two businesses highlight the less challenging experience of creating mainstream experiences from the outset: neither Facebook nor Google have had to dramatically reinvent their core products since they were first invented. Their original product is their current product, though both are considerably richer than they once were. But they haven’t had to make the same niche-to-mainstream conversion as Twitter and Foursquare will. There’s a good lesson there for both startups and investors: it is possible to scale a niche business so that it becomes mainstream, but at some point you have to make a significant transition, and it can be a make-or-break moment in the history of a startup.

Why iPad shipments aren’t growing, but might start again soon

As with last quarter’s Apple earnings call, there has been lots of handwringing about why iPad shipments aren’t growing this quarter.  I’ve done a fair amount of thinking about this, and did some analysis as part of the recent Apple profile my clients received. I thought I’d share some of that thinking here, and expand on it a bit. A fuller review of Apple’s earnings will be coming shortly.

Update: In-depth review of Apple’s earnings is up here now.

Shipments versus the base

First, it’s important to be clear about one very important thing: the difference between iPad shipments and the iPad base. Stagnant or even shrinking shipments don’t mean the base is shrinking, and in fact it’s likely growing at a decent rate. Here’s my estimate of the iPad installed base over time:iPad installed base over timeYou’ll see that it’s been growing at a fairly steady clip, and that it’s reached about 180 million. Naturally, I’ve made some assumptions about how long people hang on to their iPads based on various data sources, so it’s not 100% accurate, but it’s likely a good guess at what’s been happening. So the first thing to note is that the number of people who have iPads is growing, not flat or shrinking, even if shipments are stagnant or falling slightly. Continue reading