Porter’s Five Forces Analysis of Twitter

Business, Company Profile, Management, Markets

Twitter was founded in 2006 as a microblogging platform. It later evolved into a multi-feature social media platform and social networking service that retains its core microblogging differentiation while allowing users to share images and videos, stream and participate in live video and live audio conversations, and send private messages to other users. The specific social networking company “Twitter” was later acquired by Elon Musk and the corresponding social media platform was placed under his X Corp company. It remains one of the most popular social networking services in the world but its status has remained unchallenged by more popular platforms like Facebook and Instagram from Meta and newer platforms like TikTok from ByteDance and Threads from Meta. This article analyzes the industry and competitive positions of Twitter using the Five Forces Framework of Michael E. Porter.

An Analysis of Twitter Based on Porter-s Five Forces Framework: Understanding Its Industry and Competitive Positions

1. Industry or Competitive Rivalry

There are only a handful of social networking services or social media platforms in the world. However, despite the seeming low firm-or-brand-to-buyer concentration ratio, these platforms compete for the time and attention of internet users and advertisers through differentiation or unique value proposition and technological innovations.

It would appear that platforms like Twitter and Facebook or even TikTok and Instagram have similarities centered on social networking or online-enabled communication. But they also have high levels of differentiation. Facebook is a hodgepodge of social media use cases while TikTok is a dedicated short-form video-sharing platform. LinkedIn is focused on professional networking while YouTube is a dedicated video-sharing platform.

Twitter is somewhat similar to Facebook because of its mixture of features and functionalities but it remains a microblogging platform. However, to compete, Meta has introduced a similar microblogging platform called Threads. It is also obvious that platforms like TikTok and Instagram have certain appeals due to their feature-focused orientation.

The industry or competitive rivalry is a strong force for Twitter because of the presence of other tech companies and their respective social media brands. These companies invest heavily in research and development to introduce or improve new features, as well as in hiring capable talents and other acquisitions to expand further their respective capabilities. The level of differentiation also intensifies the competition among social media platforms.

Below are the factors that explain why the intensity of industry or competitive rivalry is a strong force for Twitter:

• Low Firm-or-Brand-to-Buyer Concentration Ratio Moderated by High Importance of Product or Service Differentiation and Limited User Time and Attention

• High Levels of Investments in Research and Development Due to the High Importance of Technological Capabilities and Innovation and High Importance of Branding

2. Threat of Substitutes

Social media platforms have become substitutes for static websites and traditional digital mediums of communication like texting and messaging services. This also means that these online-enabled products are substitutes for social media platforms like Twitter.

Platforms like TikTok and Instagram can be considered substitutes for Twitter because of their different selling points and different utilities. The same is true for YouTube. An internet user might prefer Instagram for image and short-form video sharing and some advertisers might prefer advertising on platforms that appeal to a more engaged audience.

It is also important to note that online-enabled brands compete for time and attention. This means that other possible substitutes for social media platforms include video games, virtual reality or augmented reality applications, and other video streaming services.

Nevertheless, based on the aforementioned, the threat of substitutes is a moderate to strong force for Twitter because most users tend to use different platforms and services on different occasions. These substitutes still force Twitter to rationalize its value proposition also adding new features that can attract more time and attention from internet users.

Below are the factors that explain why the threat of substitutes is a moderate to strong force for Twitter:

• High Level of Substitute Products and High Propensity of Switching Moderated by Low User Switching Cost

• High Importance of Perceived Differentiation Moderated by Low-Firm-or-Brand-to-Buyer Concentration Ratio

3. Threats of New Entrants

Developing a social media platform is a possible task for a professional or team of professionals with a background in web development and software development. However, with regard to gaining traction and a significant market position, the particular platform needs to overcome several barriers to entry in the digital space.

Established platforms like Facebook ad Twitter are barriers themselves. They have a large user base who would need enough reason to explore and use another platform. Differentiated platforms like TikTok and Instagram also have strong selling points that should be countered by the value proposition of a new platform. This new platform would also compete against different substitutes that are attracting the time and attention of internet users.

It is also important to highlight the fact that the cost of running a social networking company is high. Owners must invest in data centers and a capable talent pool to address the computing demand and constant system improvement requirements of a social media platform that aims to cater to hundreds of millions of internet users.

The threat of new entrants is a moderate force for Twitter because of the high relevance of branding and differentiation. This might be a low force but the arrival of newer platforms like TikTok or the Reels feature of Facebook and Instagram has demonstrated that it is possible to enter the digital space and specific social media space given the right resources. The force is moderated further by the high cost of running a social networking company.

Below are the factors that explain why the threat of new entrants is a moderate to strong force for Twitter:

• High Importance of Product Differentiation, High Relevance of Branding, and High Impact of Marketing

• Low Initial Cost Moderated by High Operational Costs and High Relevance of Economies of Scale

4. Bargaining Power of Buyers

Remember that the “buyers” or “customers” of social media platforms are advertisers and internet users. These platforms compete for the time and attention of users to give strong reasons for advertisers to allocate ad budgets and place digital ads on their ad spaces.

The concentration of firms or brands relative to the number of internet users might be low but strong product differentiation is an important factor. A particular platform must provide a suitable reason for initial sign-up and retained usage. It must remain relevant through its features or functionalities and the level of user engagement.

It is also important to highlight the fact that social media platforms depend on the level of user activity. Their respective users must keep on producing and sharing digital content and consuming and engaging in this user-generated content.

The bargaining power of buyers is a strong force for Twitter. The brand is compelled to adapt to market trends or emerging innovations, listen to user consensus, and even appeal to the sensibilities of the advertisers. There is a low cost to switching to alternatives and even substitutes because social media platforms are accessible and free to use.

Below are the factors that explain why the bargaining power of consumers is a strong force for Twitter:

• Low Buyer Switching Cost and High Availability of Market Information that Moderate the Low Firm-or-Brand-to-Buyer Concentration Ratio

• High Level of Product Alternatives and Product Substitutes, High Relevance of Product Differentiation, and Limited User Time and Attention

5. Bargaining Power of Suppliers

Social media platforms and social networking services are online-enabled businesses. Their digital platforms are their products. These companies market these digital products to end users or internet users and business customers or advertisers. Their platforms serve as a digital medium for communication or information exchange and for placing advertisements.

It is important to note that digital products and other services are not tangible. This also means that online-enabled businesses are less dependent on suppliers than businesses involved in manufacturing and providing tangible products. It is still worth mentioning that the suppliers of online-enabled businesses consist of hardware manufacturers, data storage services, content delivery networks, and other technology providers, among other

Some small-scale online-based businesses might have some level of dependency on suppliers but larger businesses like Amazon, Google, and Meta, as well as other prominent social media platforms from X Corp and ByteDance, have resources that have given them a considerable level of vertical integration and forward integration.

The bargaining power of suppliers is a weak force for Twitter due to several reasons. There is an abundance of suppliers to service different online-enabled businesses. The capacities of these suppliers are also expanding to maximize their earnings potential. Large digital platforms like Twitter also have significant technological resources to keep themselves less dependent on third-party providers while protecting the integrity of their data.

Below are the factors that explain why the bargaining power of consumers is a weak force for Twitter:

• High Supplier Capacities, Low Switching Cost for the Firm, High Switching Cost for the Supplier, and Moderate Impact of Suppliers on Costs and Differentiation

• High Vertical Integration and Forward Integration Possibilities, High Availability of Alternatives, and High Availability of Market Information

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