With takeover rumors swirling and its stock price at an all time low on expectations of yet another quarter of disappointing user growth, Twitter, Inc. has become a lightening rod for investor anxiety.
Some analysts say time is limited for CEO Jack Dorsey to prove that new products and partnerships will revive growth in the micro blogging site’s subscriber base and spur more daily, active engagement.
“Jack has a short window,” said inside.com founder Jason Calacanis. “Sideways equals death in technology.”
According to the consensus of four analysts as compiled by Bloomberg, Twitter will report 324 million monthly active users with its fourth quarter earnings release late Wednesday, implying a 1.3 per cent increase over the previous three months.
Stifel analyst Scott Devitt, who has a sell recommendation on Twitter stock, said in a note to clients that Twitter growth is at risk of turning negative in 2016 “due to a lack of product innovation and limited sense of urgency.”
Adding to the angst has been the departures of four vice presidents on a single day, along with possible changes that would expand character counts for messages and shift algorithmic timeline features so that tweets are displayed according to relevance rather than in chronological order.
Many analysts believe a new feature that lets users see the most important messages over the past 24 hours is positive, suggesting that Twitter’s real time environment is a strength but also a weakness, since new users may feel they can’t keep up.
Twitter’s waning growth and a drop in the ratio of daily active users versus those who engage monthly has depressed the stock’s value even while the San Francisco-based company’s revenue has been strong on ad pricing increases.
And while some experts believe Twitter can succeed as a niche offering catering to a core of high end devotees able to support premium advertising the fear is that slow growth will fuel the loss of users to competing message boards.
Analysts at MKM Partners say the company is already losing “influencer” users to Facebook.
Twitter’s struggles come amid a shift in investor sentiment against tech stocks in general and social media offerings such as business networking site LinkedIn on signs of plateauing growth.
Whether Twitter can expand into a mass market platform remains unclear, with some suggesting the only hope is via an acquisition by Google, Facebook, an activist investor such as Carl Icahn or a buyout firm like Silver lake Partners.
In any case, according to inside.com’s Calacanis, Dorsey needs to remove himself from his role as CEO of mobile payment company Square, Inc. to focus solely in Twitter.
Calacanis added that the company’s mobile video push has potential to spur engagement. Wedbush analysts said in a note slow fourth quarter growth would mean new features such as Moments that highlight top tweets have had limited impact.
One of the reasons may be the Twitter platform, which can seem complicated to new users, a fact that Wedbush says has discouraged potential sign ups.
Many observers say Twitter needs to make its content more accessible, perhaps by mimicking the newspaper reading experience, but Dorsey has said his approach is to become even more “Twitterish,” emphasizing annotations and other features that make the site unique.
According to early Twitter investor Chris Sacca of Lowercase Capital, Twitter can realize stronger user growth but only if it makes tweets effortless to enjoy, if it becomes easier for all to participate — and if the company can “make each of us on Twitter feel heard and valuable.”
Twitter, he said in blog post, also needs to do a better job of measuring and defining its audience in categories including communicators, media and general viewers.
He said the audience should be offered “channels” of pre-packaged people to follow, with targeted content and ads, adding that Twitter needs to spend to invent appropriate content marketing and ad formats. Twitter should also focus a consultative sales team on Facebook’s top agency partners, Sacca wrote.