Tough times for Twitter, but CEO optimistic

Twitter chief executive Jack Dorsey (in grey jacket) wants to bring the focus of the business back to what it does best: live events. Here, he is live-casting a video outside the New York Stock Exchange.
Twitter chief executive Jack Dorsey (in grey jacket) wants to bring the focus of the business back to what it does best: live events. Here, he is live-casting a video outside the New York Stock Exchange. PHOTO: REUTERS

SAN FRANCISCO • It does not take more than 20 characters to sum up the social networking site's current state of affairs: Twitter is in trouble.

Since taking over the reins as its full-time chief executive, Mr Jack Dorsey has rolled out measures to make the company more mainstream. But if the fourth-quarter results announced last week are any indication, his efforts have borne no fruit.

Figures show that in the quarter ending Dec 31, monthly visitors to the website totalled 320 million, the same as the previous quarter.

Revenue growth per quarter continued to decline as the company's inability to draw more users hurt advertising revenue. Expenses soared to US$591 million (S$826 million), up 52 per cent from a year earlier. Its shares, which slipped below initial public offering levels last year, are now down 47 per cent since Mr Dorsey took office four months ago, according to Forbes.

The only bright spot for Twitter, which has never earned a profit, is that the company saw losses narrow to US$90.2 million from US$125 million a year earlier.

But the market was focused more on its user growth and with a disappointing revenue forecast by the company for the current quarter - between US$595 million and US$610 million - its core business is coming under threat.

"This is the critical period for Twitter and they need to show more than just optimism," Mr Rob Sanderson, analyst at MKM Partners, told Bloomberg.

"It's very vulnerable right now and, especially if we are heading into a recessionary environment, those ad dollars are going to become more difficult to get - for everybody."

But the chief executive is optimistic and wants to see Twitter become the "planet's largest daily connected audience".

Mr Dorsey, who co-founded the company in 2006 but was ousted two years later, started his second term in Twitter last October after then chief executive Dick Costolo resigned amid pressure from Wall Street over slowing growth.

The new CEO started off by trimming a "bloated" company and appointing a new chairman.

He also rallied the team to make the site more accessible and useful for following news stories and live events.

"We're focused now on what Twitter does best: live," Mr Dorsey said last Wednesday. "Hearing about and watching a live event unfold is the fastest way to understand the power of Twitter."

He also outlined other priorities such as making the main product easier to use, giving creators and influencers better tools, investing in making Twitter safer and supporting developers.

This will include lifting the 140-character limit in posts, a possible change to the '.@' feature in its reply structure and tweaking the timeline from chronological to one based more on the importance of individual posts.

"They definitely need to do something in order to boost new user growth," said Ms Orli LeWinter, vice-president of strategy and social marketing at digital marketing agency 360i. "Hopefully, this is it."

But the chief executive has a tough road ahead. Competitors, such as Instagram and Snapchat, are amassing a larger following. Facebook and Google also pose tough competition for ad revenues.

Twitter is expected to capture 9 per cent of worldwide social media advertising spending this year, compared with Facebook's 65 per cent, according to EMarketer.

Analysts say Twitter's stock price, which has reached record lows, is unlikely to rise until the company shows significant user growth. "They've been a public company long enough where they should have been able to increase the user base and fix a lot of the product issues to appeal to a larger audience," said Mr Blake Harper, an analyst at Topeka Capital Markets.

A version of this article appeared in the print edition of The Straits Times on February 15, 2016, with the headline 'Tough times for Twitter, but CEO optimistic'. Print Edition | Subscribe