Twitter (N:TWTR) has been a major topic of discussion throughout the year. While many expected its hardship to be over by now, in my opinion, the decline on the stock is nowhere near its end. Today, we'll talk about why we can't expect to see much by way of positivity from TWTR any time soon.
What Led Up To Twitter's Declines
Before we get to the forward looking picture for TWTR, it's important to look back to get a clear picture of what happened to the stock in the first place. With that said, the massive declines we've seen on the stock revolve around a single problem, user growth. The bottom line is that in 2014, we started to see signs that Twitter was struggling to bring new users in and retain them as regular users on the social network.
As months passed and the problem continued, investors started putting pressure on then CEO Dick Costolo to resign. Investors saw a clear issue and considered the fact that Costolo simply couldn't come to a resolution. As a result, early in the year, Costolo resigned from his post, leaving Jack Dorsey in his place as interim CEO. Following the resignation of Costolo, TWTR went on a long search for a CEO that could effect change within the company. The only problem was that TWTR was a sinking ship and no professional that has built an incredible name for themselves would want to hop on a sinking ship as captain, following the vessel to the bottom. So, Jack Dorsey stepped up and took the position as the permanent CEO for the company.
Things Haven't Gotten Better For TWTR
When Jack Dorsey took the position as Twitter's permanent CEO, investors expected that the problems the company was facing would soon be behind them. Unfortunately that wasn't the case. In fact, a couple of months ago, the CFO of TWTR made an announcement, explaining to investors that we couldn't expect to see any overwhelming changes to the addition of users on the social network. This went over like a lead hot air balloon, sending the stock reeling downward as we've seen throughout the year. The bottom line here is that the one big problem that TWTR is facing is proving to be a problem that's too big for the company to solve.
It can be argued that TWTR is putting its efforts in the wrong place. While user growth is struggling, the company is focusing much of its efforts in another area... advertisers. In fact, we've seen several additions to the company's arsenal of advertising products throughout the year. The problem here is that advertising on a website is a balance on a thin line. Ultimately, too little advertising means that the company doesn't make money, too much advertising means that users will get frustrated. Unfortunately, Twitter seems to be walking on the wrong side of this line!
There's another issue that TWTR faces however, and it's one that few analysts are discussing. That issue is Jack Dorsey. When Dorsey took the reigns as the permanent CEO of TWTR, I become concerned immediately. The reality is that Dorsey held the CEO position in the past, and as many will remember, he did a horrible job. After two years, he was fired because he simply wasn't focused. This happened before he was the CEO of Square (N:SQ), a newly public company. My problem with Dorsey as the CEO is that if he couldn't find time to focus on TWTR in the past, how can we expect for him to find the time to focus on the company now, especially considering that he is also the full time CEO of another publicly traded company?
The Bottom Line
The bottom line here is that Dorsey isn't the guy for the job, and that's been proven over the last few months. Since Dorsey took the reigns as interim CEO of TWTR, we have seen no improvement in the problem that started the declines. Users simply aren't interested! Ultimately, for Twitter to see growth, the company is going to need to fix the user growth problem. Unfortunately, I don't see this happening any time soon!