Vine Shutdown by Twitter: What went wrong?

Vine, the 6 minute video sharing site, acquired by Twitter in 2013, is now closing down.  Many had assumed that Vine was to be here forever.  We all thought that it was Twitter who had been in trouble, and it is so, and the first axe to fall is on Vine.

Could Vine have survived independently? 

Sometimes acquisitions don’t work out.  And in some cases, it could be the acquirer itself that is the reason for these failures.  Could Vine have survived independently? Did the acquisition stop innovation? That is a question that only Vine founders could answer. Rus Yusupov, the cofounder of Vine tweeted simply, “Don’t sell your company!”.  No further comments came from him.  Yahoo Finance reported that he regrets the sale and has reached out to him for further comments.

This was a strong message from Rus.  And now let’s look at the larger picture.

Twitter reported that it is pruning 9% of its workforce.  Wall Street Journal  reports that the social-media company is cutting around 350 jobs, largely in its sales, partnerships and marketing organization. Twitter reported dwindling revenue growth for the third quarter and another loss over $100 million. Revenue rose just 8.2%, compared with over 50% growth in the year-ago quarter.  So, in hindsight, did Vine pay for Twitter’s troubles?

What happened since the acquisition of Vine in 2012?

Vine was bought by Twitter in 2012, before it was launched.  The valuation was at $30 million. Essentially, Vine was acquired before the idea was proven, and it was seen as a gamble then in October 2012.  Why did this gamble fail? However, the main reason that, as indicated by Fortune, seems to be that Twitter did not have a proper innovation strategy for this pre-launch acquisition.  And this is how people feel about the use of Vine as a strategy.

Fortune says that some Twitter watchers and analysts believe that making Vine a standalone app was a mistake, and that the company should have just built support for short-form video into the service itself, the same way it supported GIFs. But others believe Vine lost some way down the line to SnapChat and Instagram.

This essentially puts the problem back on Twitter. Unlike Twitter, Facebook acquired Instagram in the same year, and since then, Instagram has been a hit. In a note to investors recently, Credit Suisse estimates that Instagram’s revenue could reach $3.2 billion this year and $6.4 billion in 2017, while Twitter itself is at $3 billion in the same period.

Instagram is now an independent revenue source for Facebook.  It has a separate product innovation roadmap and is part of the overall strategy of Facebook.

Now look at SnapChat – a similar short-video sharing platform which is valued at $15 billion.  Being independent, there has been constant innovation and user adoption and so far, this independence seems to pave way for its growth and valuation.  And there seems to lie the difference.

– Ashok Subramanian

Ashok Subramanian is a Business Strategist, the Executive Director and Member of Board of WiseLane Capital Inc.  He can be reached at http://twitter.com/ashok_speaks 

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