Being frank not enough, Twitter needs to broaden portfolio

29 Jul 2015 | Author: | No comments yet »

After Killing Twitter Stock Gain, Dorsey Wins Praise.

With the stock up on Twitter Inc.’s second-quarter revenue exceeding expectations, the interim chief executive officer didn’t self-congratulate or dwell on past successes but talked bluntly about Twitter’s shortcomings. Interim boss Jack Dorsey said the micro-blogging site isn’t satisfied with its user growth despite a 66 percent increase in second quarter revenue, to $502 million. The reversal came during an earnings call in which Jack Dorsey, Twitter’s interim CEO, called the results posted by the social-networking platform “unacceptable.” Twitter’s MAU count of 316 million — up only 2.5 percent from the previous quarter — was so disappointing it took precedence over the impressive gains recorded for the company’s top and bottom lines. Twitter surprised investors with a strong earnings report on Tuesday, even as the company searches for a permanent CEO and faces ongoing challenges growing its user base.

Photo: Richard Drew San Francisco – Twitter executives had a clear message for investors on Tuesday: We have a lot of work to do, and don’t expect great progress anytime soon. On a live-stream via the Twitter-owned Periscope app, Dorsey began by expressing frustration with the company he co-founded, saying product announcements “have not yet had meaningful impact on growing our audience,” which he called “unacceptable.” He also said Twitter hasn’t “done a great job at aligning the entire company” around its strategy. After initially embracing these financials — and only later focusing on such fundamentals as MAU — investors realized that Twitter’s growth cannot be sustained without corresponding user gains. And through research, he said, the company had identified its two biggest problems: too many people don’t know why they should use Twitter, and too many can’t figure out how to use it.

If he stays in the top job at Square, he could soon regularly be speaking to Wall Street: The mobile-payments company, which he also co-founded, has filed a confidential registration to go public, sources familiar with the matter have said. As Dorsey works to update Twitter’s offerings to attract a broader range of users, its sales team has been making deals – such as one with Google – to help advertisers use the site more effectively. The three primary objectives he outlined in the earnings report: “Ensure more disciplined execution, simplify our service to deliver Twitter’s value faster, and better communicate that value.” Twitter isn’t difficult to use.

But as for the day’s burning question of who will be picked as permanent CEO after Dick Costolo’s exit this month, Dorsey said,“We don’t have an update to provide today.” Users of the main application rose by just 2 million from the prior quarter – a gain of less than 1 percent. “Investors demand a re-acceleration of user growth,” said Paul Sweeney, an analyst at Bloomberg Intelligence. “We did not see that this quarter to any notable degree.” The stock dropped as low as $31.90 in late trading.

For some, he vastly improved his grade. “He provided one of the most cohesive explanations of Twitter’s mission as well as challenges we’ve heard in a long time,” said James Cakmak, with Monness Crespi Hardt & Co. For his part, Dorsey said afterward in an interview that he enjoyed his debut. “I relish any opportunity to tell our story,” he said. “I think we are communicating where we are presently, that we understand our challenges ahead.” One of his recent television appearances, on CNBC in June after the announcement of his return to Twitter, got one-star reviews — and not only because he sported a full mountain-man beard, which even his mother disapproved of, with a post on Twitter. Former Twitter CEO Dick Costolo was replaced this month on an interim basis by co-founder Dorsey, who also runs Square Inc, a mobile-payments company.

When Chief Financial Officer Anthony Noto explained boldly on Tuesday that it would take a considerable amount of time to gain users, the stock tumbled. We don’t have clues on what to look for with Dorsey.” Since its November 2013 initial public offering, Twitter has taken different paths to try to boost its credibility with Wall Street as its results lagged. In the interview, he dodged questions about whether he wants to head Twitter or stick around at Square, saying, “I’m going to do what I think is best for both companies.” When asked in June if he would become the permanent CEO if asked, he said on CNBC: “My focus right now is to make sure our product cadence and momentum of execution continues within the company.” That’s a tweet-ful of gibberish worthy of an unfollow.

On a conference call, executives quashed any initial optimism generated by the report by confronting Twitter’s underlying problem: It’s much smaller than the competition. Noto said Twitter changed its tone on the call because growth slowed so meaningfully, the company wanted to explain how it’s working to address the deceleration. “In the past we may not have had the growth that investors wanted us to have, but it was still quite strong. And this quarter we barely had any growth.” The company is working to introduce a marketing campaign to explain the value of using Twitter to the masses, Noto said. In the time since Twitter went public in November 2013, growth has stagnated while rival social applications, including WhatsApp and Facebook Messenger, drew hundreds of millions more people. One current plan, internally named Project Lightning, is meant to create channels for whatever is happening live, including videos running simultaneously with what’s showing on television.

For the full year, the company forecast revenue of $2.2 billion to $2.27 billion, compared with a previous company estimate of $2.17 billion to $2.27 billion. Todd Jackson, who helped Twitter debut its Highlights product, is leaving for Dropbox., while Christian Oestlien, who helped drive growth, is going to Google’s YouTube. Verified email addresses: All users on Independent Media news sites are now required to have a verified email address before being allowed to comment on articles.

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