Restoring the Glory Days 140 Characters at a Time

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Investors are still unsure about Twitter’s prospects. The tech company’s stock dropped by 10% after reporting low user growth in its third quarter earnings report, despite seeing revenue grow by 58% compared to 2014.

Vdovichenko Denis / Shutterstock.com

Investors are still unsure about Twitter’s prospects. The tech company’s stock dropped by 10% after reporting low user growth in its third quarter earnings report, despite seeing revenue grow by 58% compared to 2014.

The firm added just 3m new users since June – paling in comparison to rival Instagram, which saw users grow by 100m to reach 400m users in the past nine months alone.

Delivering on the equation of revenue and user growth is no mean feat – and the firm’s new CEO Jack Dorsey has a tough job on his hands. However, he appears to know at least what it takes to boost the company’s popularity.

The comeback kid

Comebacks might be frequent in the world of sports and music, but not so in the world of CEOs. Dorsey is hoping to follow in the footsteps of Steve Jobs in returning to the company he co-founded to help turn its fortunes around. Dorsey helped launch Twitter in 2006 and was its first CEO. However, Evan Williams replaced him in 2008, another co-founder of the company. Dorsey went on to form Square Inc., a business platform for card payments on mobiles in 2009 and remains its chief executive – something for which he received criticism.

He returned as interim CEO in July 2015 and the job became permanent in October 2015. His predecessor, Dick Costolo, spoke of the pressures involved in running a public company – particularly, dealing with the short-term thinking fuelled by stock market expectations. Satisfying short-term expectations in a firm that also needs to build a long-term vision is now the battle Dorsey must fight.

When he first took back the reins, Dorsey laid out a vision to simplify Twitter’s product offering – to make it easier to understand and more approachable to people. He said it would focus on “big bets across Twitter, Periscope and Vine.

The question is if this simplification will begin to deliver. The number of monthly active members did actually rise 11% year-over-year to 320m and saw a slight rise from 316m in the previous quarter. However, more work needs to be done – and at a higher tempo. Making Twitter easier to use is the key challenge the company faces to increase its user base.

The Q3 revenue of US$569m points to a rise of 58% year-on-year, US$9m above its forecast range. Of this revenue, about 90% came from advertising (US$513m, an increase of 60% year-on-year). In addition, an impressive 86% of the total advertising revenue was mobile-based. The forecast range for Q4 is US$695m to US$710m. Yet, in the metric of monthly active users, which is often used by investors to judge the long-term prospects of social media firms (as it helps attract even more advertising revenue), Twitter is struggling.

Twitter’s moment

Three areas encapsulate what is happening at Twitter now: Twitter’s new Moments feature, videos and the way it targets small and medium-sized businesses. Moments is a new product that organises tweets, pictures and video around live events that users can choose to follow. It features the best stories happening on Twitter, prepared by Twitter and select partners.

According to Dorsey, Moments represents a fundamental shift in Twitter’s thinking – organising content by topic instead of timing, where users follow topics live instead of accounts. This sums up the current efforts to make Twitter easier to understand for both users and advertisers.

In an effort to boost its popularity, Twitter aired its first TV advertisement to showcase Moments during the World Series Baseball tournament. The ad created a backlash from some Twitter users, however, who found it complicated and were unsure of the message it was trying to convey. This vividly shows the dual challenge Twitter has of engaging both new users through a simplified interface and current ones who want extra functionality from the service it already provides.

Twitter’s first ad

Advertising is already in Moments. However, as this is a relatively new service, there are still questions: will developers and advertisers adopt Moments as a novel way to reach out to current and new audiences? Will Moments help Twitter increase its user base?

Increasing the “in-app experience” that Twitter offers is an important area of development for the company. Similar to Facebook’s Instant Articles, keeping users inside the app instead of having hyperlinks send them onto a web browser is an important part of keeping users engaged in their services for longer. The result is frequent use of its service and more attention by advertisers. In addition, with the volume of video consumption on the rise, Twitter is trying to attract the video ad budgets of advertisers. In the next quarter there will be more related products released, such as new video features in the form of Promoted Moments.

Finally, Twitter hosts 9m small and medium-sized business’ accounts that are a new marketing channel, which Twitter and its advertisers have yet to utilise. If these businesses view Twitter as a way to connect to their users and suppliers easily and more effectively, then they might be more willing to use the array of services and advertising options Twitter is offering (for example, exclusive promotions to their followers).

It takes time and effort to turn around a business. Moreover, it is at this precise moment, when time seems to be running out, that Dorsey and his team needs to step up their efforts. These efforts need to strike a balance by improving current products and offering new services. It is only then that Twitter, and its CEO, will start delivering on both revenue and user growth.

Can comeback CEO Jack Dorsey turn Twitter around? is republished with permission from The Conversation