Twitter should focus on what it knows best

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Twitter tried to cover up stagnating user growth with forward-looking statements during its earnings results last week.
Twitter tried to cover up stagnating user growth with forward-looking statements during its earnings results last week.

Twitter does 'live' best of all social networks, as the micro-blogging site is where news breaks first, and local analysts say this is what the company should focus on to jump-start user growth.

Last week, Twitter reported its revenue rose and net loss shrank in Q4 2015, but user growth stagnated at 320 million - the first time since the company went public in 2013.

World Wide Worx MD Arthur Goldstuck says: "Twitter is still growing in countries like South Africa because it is seen as a platform for both expression and keeping up with current news and opinion."

However, last week, Twitter announced it changed its timeline to show a customised, algorithmic-driven feed of tweets, rather than all tweets in reverse chronological order. This sparked outrage from users, who took to the platform to bemoan the changes using the hashtag #RIPTwitter.

"The problem comes when Twitter makes inappropriate changes to its platform that chase off a significant portion of that existing user base. While it is growing, it can afford such mistakes, but not while it is stagnant. It needs to find ways of attracting new users while adding ever-more value to existing users," says Goldstuck. "Tinkering with the feed will do neither."

Five-point plan

Twitter CEO Jack Dorsey focused on plans for 2016 during the company's earnings results, in the hopes of squashing investor fears of plateauing network numbers.

Dorsey broke down the company's priorities for this year into five focus areas:

1. Refine core service and make everything more intuitive.
2. Invest in being a leader in live streaming video.
3. Give creators and influencers the best tools to build and connect with audiences.
4. Invest in making Twitter safer.
5. Support developers to build and grow their businesses with Twitter.

Johannesburg-based portfolio manager at Vestact, Sasha Naryshkine, says he does not believe Twitter is in trouble. "It is a very valuable service that is used extensively by the world of media; it is an integral part of information dissemination." He says shareholders have no choice but to wait before they see value.

After reading Dorsey's plan, Naryshkine says: "Periscope integration should be key ? people just have to figure out the usefulness of the service."

Periscope, owned by Twitter, was launched last year and went on to become one of the more popular live-broadcasting apps. The term 'live-broadcasting' has taken on a different meaning - referring to a mobile user live streaming themselves over video to a private or public audience. The broadcast happens in real-time and provides the viewer with a first person view of the person or event.

Dorsey said during the results: "We're focused now on what Twitter does best - 'live'... Twitter has always been considered a second screen for what's happening in the world. And we believe we can become the first screen for everything that's happening right now."

He added: "Hearing about and watching a live event unfold is the fastest way to understand the power of Twitter."

Users vs investors

Goldstuck says at the moment, the social network is in trouble mainly from an investor perspective: "Even stagnant numbers indicate high usage if those numbers are as high as 320 million.

"Twitter needs to show it can grow in the short-term in order to instil confidence in its long-term prospects," says Goldstuck. "The potential traction of any social platform is based on extrapolating from its current growth. If there is no current growth, there is little on which to base prospects for future growth."

"Users and investors are two different things," says Naryshkine. "User backlash leads to lower advertisements, which means the share price suffers as a result of lower cash generation."

Buyout option?

"Twitter's ability to monetise is not aided by shifts in usage patterns; for example, the observation that younger people are moving away from Twitter towards alternative 'instant sharing' platforms such as Snapchat," says Brian Neilson, director at BMI-TechKnowledge.

"If they can't conquer the monetisation challenge, the suggestion that Twitter is likely to become an acquisition target for the likes of a Google may prove sensible, as Google may be able to unlock synergies that would assist in monetising Twitter's large user base."

Neilson notes Google has experience in leveraging across platforms after acquiring video-sharing platform, YouTube.

Goldstuck says: "The fact that Twitter's share price has plummeted should be the inkling of a signal that drastic action is required, rather than platitudes. Twitter must ask not what investors can do for Twitter, but what Twitter can do for investors."

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