Twitter (NASDAQ: TWTR) was supposed to be a revolutionary social media brand that would produce stellar returns for investors for years to come. Hasn't quite worked out that way, though. When one thinks about Twitter, it's difficult to see where it can go. Overall, it's a simple platform to use for purposes of connecting with people; its short-message protocol promotes concise, clear communication. However, this tech company won't be able to survive far into the future as an entity of growth if its business model remains mostly based on ads sold around different iterations of its messaging system; something else is needed.
Memo to CEO Jack Dorsey: Twitter should go Hollywood.
Anyone who has read past articles of mine knows I'm a big believer in using original content as a way of not only making money, but as a method of differentiating one brand from another. To me, storytelling is a product that has many distinct advantages in the marketplace, making it additive of value. Social media is exactly that - a collection of platforms that can be used to communicate ideas, fictional ones as well as those of the nonfictional type.
It's no different than television, which is composed of multiple channels. In the past, one might have interacted with an independent TV station by writing a letter that would later be broadcast, just as a letter to the editor of a print newspaper would be published in the editorial section. In today's modern age, Twitter might be used to interact with a cable network as a piece of programming plays its tale out for the masses; it may be more immediate than print and analog broadcast stations, but the thrust and intent is wholly similar.
Amazon (NASDAQ:AMZN) recognized that, while it sells all kinds of products, its interface is also social and media-like. The jump from selling shoes to selling shipping discounts along with scripted content (i.e., Prime) was a leap that is, in hindsight, both logical and ultimately inevitable. Twitter needs to sell content along with its platform. It no longer is enough to offer, for free, the ability to pass along pithy proclamations.
The Twitter audience obviously intersects with the audience that demands quality original content. Users of Twitter are also users of Netflix (NASDAQ: NFLX) and HBO (NYSE:TWX) and Hulu. They like to comment on content as it plays, and they like to pass along recommendations about what to watch next.
Twitter could make movies and TV shows using the analytics it has at its disposal. Obviously, every media company has its own analytics, but perhaps that could be part of Twitter's business model - use, as Netflix does, data to learn what types of movies/etc. its audience wants.
Then, there's a decision to make, at least in terms of feature films - should they debut on Twitter, or go to theaters before coming to the social platform? It might sound strange for Twitter to become a studio that competes head-to-head with all the other major studios out there, but all this would mean is that Twitter is following its demographic to where it normally goes as it engages its economic consumerism - hitting the multiplex certainly applies.
The smart thing to do would be to diversify away from the 140-character/advertising model and use the platform as a marketing tool to push a business model based on storytelling. The great thing is, Twitter is already used for that purpose; the company itself, however, should theoretically know best how to apply the platform in the most efficient way possible so as to allow marketing expenditures to be less than what it typically costs to open a movie.
How would Twitter fund a content slate? It would probably be wise to start out with outside investors, but that sometimes comes with a cost related to control; management would want to do everything it could to ensure that it retained as much creative control as possible over its projects, because being a passive investor in the movie business is not a best practice to follow, since that would mean other people would steer the creative direction in a way that benefits them and not necessarily in a way that maximizes the value for the initiating entity (Twitter wants other people involved, but mostly to get at the other people's money, as the cliché phrase goes). Twitter could also look to its users to fund its projects in part - Twitter could probably easily set up a crowdfunding mechanism specifically for such a purpose.
Besides crowdfunding, Twitter could also search its base for ideas and talent. And I don't mean holding contests - it could literally put a call out for pitches and treatments that could be turned into movies. Amazon famously tried this route, but, unfortunately, it apparently didn't find much value in turning to the masses to keep development costs down. I believe getting scripts from unknown talent is a cheap way to enter the development process.
Funding movies and episodic series is a risky venture; there's no telling what consumers want, and if a company is not attached to a major studio, then the scale can be all wrong. Twitter would face severe challenges if it entered the movie business, but taking small steps at first - i.e., funding low-budget horror films (think something like Unfriended) - can be a way of making it work successfully.
It might be more risky to rely on short messages for the long term - that could always go out of favor as new platforms come out of Silicon Valley. Storytelling, however, never goes out of style, and it can lead to all kinds of ancillary business opportunities - merchandising, over-the-top entertainment channels, partnerships with big media, and so forth. This is an area Dorsey should explore for his company.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.