For a social network that exhorts users to tell their stories on its platform, Twitter Inc.'s (TWTR) own story has become pretty messed up in recent times.
Consider the recent spate of headlines concerning the company: "Departures of Key Executives Continues Sense of Tumult at Twitter", "Twitter Tanks as Users Revolt Against Facebook Like Changes", and "Twitter to Lay off up to 8% of Its Workforce". All of this makes dismal reading for the company's investors. Indeed, its stock price is currently trading at $14.55, a steep 78% drop from its highs at the beginning of 2014. Within the last year alone, it has lost 69%. And, tomorrow's earnings are not expected to bring much cheer for the company's investors.
Twitter's User Growth Problem
The main problem with Twitter is one of user growth.
After stratospheric growth rates post launch, Twitter's user growth has slowed down. This has happened even as rival Facebook (FB) grows its user base across the world and other social networks, such as Snapchat and Pinterest, have garnered billion-dollar-plus valuations. For example, between Q1 2014 and Q3 2015, Twitter's user base grew by 25% and Facebook recorded growth figures of 17% during the same period. But, that comparison masks actual user number growth. While Twitter added 61 million users during this time, Facebook grew by 214 million users.
As its user growth has slowed, its share of the overall advertising pie is also in danger. According to research by eMarketer, 65.2% of U.S. businesses are on Twitter. This compares unfavorably with Facebook, which has 84.7% of businesses on its platform. And, there's more bad news. By 2017, Facebook-owned Instagram will have overtaken Twitter with a 70.7% share of the overall business market as compared to Twitter's 67.2%.
Trying to Change
The plateau in Twitter's user numbers is mainly due to its core product, which has been deemed too complex for mainstream users. The company's attempts to change it, whether by introducing 10,000 word tweets or reordering timelines algorithmically, has met with resistance from its core user group. Immediately after taking over as CEO last June, Jack Dorsey, who divides his time between Twitter and Square, said that he was focused on simplifying the service and introduced "Moments," a tweet compendium of notable events. But, it has failed to take off.
But, something has to give in the end. The introduction of a new ad product - First View - is seen by some commentators as a sign that the company may go ahead and change its core product to align it with advertiser interest.
The Bottom Line
Twitter's recent experiments have garnered headlines but have failed to generate corresponding user growth. The company needs to take some bold steps to stop the downward spiral in its stock price.