It’s time for Twitter Inc. (TWTR) to stick or twist.
Last Sunday, the embattled social media company suffered a mass exodus of executive talent.
If you believe the official statement, Alex Roetter, Kevin Weil, Skip Schipper, and Katie Stanton all “voluntarily” departed.
Hmm… consider me suspicious.
The timing couldn’t be more ominous. Why?
Because Twitter is in dire need of a turnaround. User growth slumped to 8% in the third quarter of 2015, down from 22% a year earlier.
Take a look at this for an ugly trend…
The only logical reason for four executives to bail at the same time is if even worse user growth – possibly even negative growth – is coming when Twitter reports its fourth-quarter results on February 10.
As Pando’s Sarah Lacy writes, “If two executives leave at the same time then, yes, it might be a coincidence. But four senior executives all jumping ship at the same time spells nothing but trouble.”
So what is recycled, part-time CEO Jack Dorsey going to do about it?
If he’s smart, he’ll start soliciting takeover offers – stat! Here’s why…
Twitter’s Revolving Boardroom Door
Some bulls have tried to suggest that a good, old-fashioned management shakeup could be precisely what’s needed to spur positive change at Twitter.
Ignore them. They clearly haven’t been paying attention.
I can’t think of another company that’s endured more management turnover to date. Consider:
- Twitter’s had six heads of product in six years, three CFOs in four years, and three heads of engineering in three years.
- Since its November 2014 analyst day, the door to the company’s corporate suite has spun almost non-stop, with eight out of 13 executives departing. That’s 62% turnover.
Twitter’s Problem Isn’t the People… It’s the Product
That’s left the remaining bulls to insist that Twitter is a “unique property” that “needs to do only one thing right.”
That one thing, of course, is growing the platform’s user base.
Sounds simple, doesn’t it? Well, as the slumping growth figures show, it’s not.
So it’s a people problem, right? Not so much…
Twitter’s uniqueness – real-time access to breaking news, commentary, and data – is inherently limiting.
Sure, it’s crack for media types and financial pundits. They’re unashamedly addicted users. But this is a limited audience.
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For the billions of other people in the world, Twitter’s worth is questionable at best.
That’s evidenced by the one billion inactive Twitter accounts. These people aren’t even casual users!
It’s only natural, then, for Twitter to bump up against a permanent growth ceiling.
Sadly, this reality hasn’t stopped Twitter’s top brass from behaving like drunkards, fumbling in the dark for the light switch that will magically reveal “why people should use Twitter” and make it “easy for them to understand,” in the words of Dorsey.
Hence the incremental product tweaks, including creating curated news feeds (Moments), adding polls, changing the “favorite” star button to a “like” heart button, and removing ads for “high-value” users.
None have worked. Nor will any future ones work, either. Why?
Because as I’ve said for years, the stark reality is that Twitter is a niche product.
Management needs to accept it and change its philosophy.
Twitter Still Doing Its Best “Kid in a Candy Store” Impression
From a sales perspective, Twitter is storming along, with growth of 55% per year.
Unfortunately, though, the losses keep piling up, because the company refuses to stop spending on developing new products, in the hopes of hitting on something that will attract new users en masse.
It’s a risky – and expensive – strategy. If Twitter fails, it’s destined to become the next Yahoo! Inc. (YHOO) – a perpetual turnaround, constantly grasping for new ideas and new CEOs, and still failing to convince users and investors that it’s valuable.
In other words, a total bust.
Frankly, Twitter is well on its way to being considered such.
From its peak in December 2013, Twitter stock has crumbled by over 75%. And it’s down 36% from its IPO price of $26.
That’s prompted Global Equities Research analyst Trip Chowdhry to call the company “total junk” and even predict that shares could sink as low as $5 when all is said and done.
“The novelty effect of TWTR is fading, and it will be extremely difficult for it to regain its novelty,” warns Chowdhry.
Forget “extremely difficult.” It will be impossible.
If I were Dorsey, I’d fold now and sell out to the highest bidder while they’re still willing to pay up for Twitter’s 300 million users.
When the history books are written, I’m confident that such a decision would be viewed as a brilliant move to maximize shareholder value in a niche product.
And that’s much better than the alternative – going down as the leader of a total bust, a la Marissa Mayer at Yahoo!
If you care about your legacy, it’s time to make a deal, Jack!
Ahead of the tape,