Why Twitter is Like an Overbuilder

Much will be made of Twitter's inability to monetize its traffic. To be fair, one might add all the other interesting firms, lead by apparently capable leaders, who likewise have failed to create robust ad-supported business models over the last decade or two.

Perhaps it is worth keeping in mind other markets where market share is a duopoly. Between them, Google and Facebook earn about 52  percent of all mobile advertising revenue, each having an order of magnitude more net mobile ad revenue than the closest other provider.

Facebook and Google also are getting 76 percent of all the net new advertising growth, according to KCPB.

source: eMarketer

In that sense, the mobile ad market is nearly as concentrated than the telecom market. Looking at internet access subscribers, for example, two firms--both cable companies--control 60 percent of U.S. internet access accounts.

ISPs	Subscribers at End of 3Q 2016	Net Adds in 3Q 2016
Cable Companies			Mkt Share
Comcast	24,316,000	329,000	26%
Charter	22,202,000	387,000	24%
Altice	4,122,000	17,000	4%
Mediacom	1,145,000	17,000	1%
WOW (WideOpenWest)*	728,400	2,700	1%
Cable ONE	510,573	2,256	1%
Other Major Private Company**	4,765,000	20,000	5%
Total Top Cable	57,788,973	774,956
Phone Companies
AT&T	15,618,000	-23,000	17%
Verizon	7,038,000	24,000	8%
CenturyLink	5,950,000	-40,000	6%
Frontier^	4,404,000	-99,000	5%
Windstream	1,063,000	-12,800	1%
FairPoint	309,547	-1,893	0%
Cincinnati Bell	299,800	3,100	0%
Total Top Phone Companies	34,682,347	-149,593
Total Broadband	92,471,320	625,563

source: Leichtman Research data

The point is that Twitter is something like an overbuilder (third provider in a market dominated by a cable company and a telco), where getting as much as 20 percent market share normally is a major achievement.

The “reason” Twitter has so much trouble monetizing its business could well be for the same reasons that smaller providers (and even some big companies) find it so hard to gain scale in the telecom business.

Where durable duopolies exist (for internet advertising, mobile advertising or telecom services), it is hard for provider number-three to get a foothold, much less challenge the market leaders.