Why All's Not Well In The Twitter Land

by CXOtoday News Desk    Jun 29, 2015

social media

Rishi Garg, a top Indian-origin executive and VP for Corporate Development and Strategy at micro-blogging site Twitter has reportedly resigned. His exit is the latest in the recent string of departures from the company including that of CEO Dick Costolo. At  Twitter, he was in charge of the Mergers & Acquisition strategy and, joined the organization exactly a year ago.

While Garg, an MBA from the Harvard Business School who had previously worked as M&A chief for fellow Jack Dorsey company Square, Garg tweeted amicably that “After an amazing ride as Twitter’s VP Corporate Development and Strategy, I’m saying farewell,” a spate of high level exit over the last few months have made analysts think, what all is wrong with the company.

The exits and worries

The sluggish growth of the microblogging site for the past several quarters have not gone well with analysts. Other high-level departures over the last 18 months include product chief Daniel Graf, COO Ali Rowghani, and CFO Mike Gupta as well as Twitter CEO Dick Costolo’s stepping down at a time much earlier than expected, raise several questions in the industry. Investors were growing impatient with Costolo, which they believed quickened his departure.

Read more: Here’s Why Twitter’s CEO Dick Costolo Quits

Even though Costolo has been replaced by co-founder Jack Dorsey on an interim basis, the company now warned that Jack Dorsey would have to give up his post at Square if he wants to become permanent CEO of Twitter. “It is only considering candidates who can make a ‘full-time commitment to Twitter,” it said. He previously served asTwitter’s president and CEO from May 2007 to October 2008.

Twitter’s Board has formed a Search Committee to lead the search for a permanent CEO that is chaired by the Board’s Lead Independent Director, Peter Currie, and includes Peter Fenton and Evan Williams and they are currently looking into the matter, however some experts believe the team, albeit a high-profile board, it is by and large ineffective in nature.

No visible gain

The problem is unlike several other startups that struggled to turn their loss-making venture into a success, Twitter which started on a profitable note eventually is losing investor support. According to The Telegraph UK, Since its high-profile New York listing back in November 2013, Twitter’s shares have lost their shine with Wall Street after failing to turn a profit. In fact, Twitter continues to lose a lot of money.

Twitter currently has over 300 million users worldwide. But that’s a far cry from outgoing chief executive Dick Costolo’s 1bn target and less than a quarter of Facebook’s 1.4bn. Twitter’s direct competitors seem to be so successful. Photography app Instagram (acquired by Facebook in 2012) surpassed Twitter’s monthly users in December. Also Snapchat is gaining fast on Twitter, and so it’s not hard to see a world where Twitter is becoming the ‘lesser’ choice for advertisers looking to spend money on social.

Read more: Twitter struggling to make money from global users

Of course, Costolo did some good in his time as CEO. taking a company with no revenue, valued at 1 billion dollars, and helped steer it to billions in revenue, a $24 billion valuation, and a successful IPO, said a Business Insider report. Last year, the company forked out $691m on research and development, a 16pc increase on the year before.

However, on the accounting aside, Twitter’s biggest stumbling block – the reason why many analysts are doubtful about its prospects – is because it lacks mass appeal.

Lacking mass appeal

Experts believe, it’s still not a mainstream platform as few users regularly tweet. Most people are probably active Facebook users. 

Last year, 44 percent of accounts had never posted a single tweet, according to a report. And even then, many users only tweet sporadically. Unlike Facebook, Instagram or Pinterest, Twitter doesn’t really hook its users. People will often sign up, tweet for a few months, and therefore it’s difficult to build momentum in a business where there is lack of engagement.

One reason why Twitter lacks mass appeal is its limiting nature. Twitter allows users to publish text messages – a tweet – of just 140 characters, note experts. That’s great for politicians, celebrities, journalists and news junkies, but it doesn’t really resonate with the masses, many of whom simply want to keep up with friends and family by sharing news and pictures.

Unlike Facebook, Twitter also lacks an algorithm to bring content that is important to the user to the top of their Twitter feed. That means that nothing gets filtered out. Users are therefore bombarded with hundreds, if not tens of thousands, of tweets each day. 

Weak ad sales

Advertising sales growth has also been patchy in recent years and some of that might be down to the limiting nature of the adverts, mentions WSJ. They’re pretty dull, merely tweets promoting a user’s stream. They lack the dynamism of those on Facebook, Snapchat and Instagram. No wonder, research firm eMarketer projects that Twitter’s monthly user base will grow at 14.1 percent this year, compared to more than 30 percent two years ago. 

“Twitter’s direct-response advertising has failed to live up to expectations, including management’s own. Last quarter, the company had to adjust its earnings guidance downward after blaming direct-response advertisements for slowing revenue growth. As a result, investor confidence in management has plummeted, which directly impacts the stock price.

These disappointments and lack of confidence stem from management’s inability to “tell its own story,” Venture capitalist Chris Sacca was one of the earliest investors in Twitter told Motley Fool in a recent interview.

As a Bloomberg report rightly mentions, Twitter needs someone to be in charge, someone who can makeTwitter more accessible to newcomers while keeping core users engaged. Unless that happens the company will continue with its age-old struggles.