Watch Twitter’s stock nosedive after Jack Dorsey starts talking

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.Twitter Inc. shares are down about 13 per cent in early trading after Tuesday’s earnings report, which revealed a slower pace of user growth in the company’s second quarter.

SAN FRANCISCO — Twitter shares plunged 10% at the open Wednesday after interim CEO Jack Dorsey said during the company’s earnings call on Tuesday that user growth was sluggish and that a turnaround will take time.The famous Twitter timeline, in which tweets from everyone you follow are displayed in reverse chronological order, is no longer getting the job done, Dorsey said on an earnings call with investors Tuesday evening. Twitter’s central challenge is the same one it has struggled with for years: It must overhaul the service that many find too complicated and clunky to make it far more appealing to the mainstream. Until it does, Twitter says not to expect too much. “We don’t expect to see sustained, meaningful growth…until we reach the mass market,” Noto said. “We expect it to take a considerable period of time.” Twitter executives placed the blame for Twitter’s predicament on problems with the product itself and with how it’s marketed. He called for a “questioning of our fundamentals,” including the reverse-chronological timeline, in order to “balance recency with relevance.” For those who don’t speak social media, that’s code for “we need to get more like Facebook.” Whereas Twitter’s timeline ranks tweets by recency, Facebook’s News Feed ranks posts by relevance, as determined by complex algorithms that adapt to each user’s behavior and preferences.

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. Most investors probably didn’t expect a sudden improvement on this yesterday, but they probably had high hopes that Twitter would set somewhat ambitious growth goals for the rest of the year. Another forthcoming feature, code-named “Project Lightning,” will employ human editors to collect top tweets about trending news topics and live events as they unfold. 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. Twitter is about one-fifth the size of rival Facebook, which has nearly 1.5 billion users. “Twitter’s leadership is going to have to answer once and for all the question of whether it’s going to be stuck at 300 million users or so forever, or whether they really can get back to growth,” said Jan Dawson, chief analyst at Jackdaw Research. “Twitter is getting increasingly good at monetizing the users they have, which is a very good thing since they seem to be increasingly struggling to add users,” Dawson said. “The number of users they added was by far the lowest they’ve ever reported, and the trend is downward.” Wall Street had expected Twitter TWTR to report $481.3 million in revenue.

But he suggested “While You Were Away” and Project Lightning are only the first steps toward an eventual shift away from reverse chronology. “There’s a lot more to do there,” Dorsey said. We already knew the company was heads-down focused on improving discovery, but Jack Dorsey added some color during the call: There’s a lot that we can do to increase the relevance of what we’re seeing. From a business perspective, the Dorsey-led earnings call amounted to a blast of #realtalk from a company that under Costolo was at pains to reassure investors it was on the right path. 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.

There are opportunities where we can place this in our traditional model such as at the top of the reverse chronological timeline, or in another tab as with Project Lightning. He warned investors that the user growth they’ve been clamoring for likely won’t come “for a considerable amount of time.” An inability to grow beyond its core of loyal users has dogged Twitter since it went public in November 2013. He came off as unenthusiastic on CNBC, his critics said, and came out as supportive of sticking with Twitter’s strategy, which is not what investors wanted to hear about a company under pressure to improve its results. “He took that interview a little too lightly,” said Robert Peck, an analyst at SunTrust Robinson Humphrey.

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.” Costolo had sought to shift investors’ expectations for the company, arguing that Twitter could reach more people than Facebook even without persuading them to log in regularly. Todd Jackson, who has been director of content and discovery since Twitter bought his mobile app startup, Cover, in 2014 said he was joining Dropbox as head of product.

As I’ve explained, Costolo saw Twitter’s future as that of a media platform rather than a social network, with syndicated tweets gaining wide audiences beyond Twitter itself. Dorsey, in contrast, hinted that Twitter will return to its earlier mission of becoming a daily destination for the majority of people on the Internet—like Facebook. In addition to being a window to the world, he said, Twitter should be “the most powerful microphone in the world.” Key to all of these goals will be convincing people that they need another social network in their lives. Asked whether he is a candidate to take on the top post at Twitter on a permanent basis, Dorsey said he had “no update to provide.” But he sounded like a man gunning for the job.

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