Twitter is flapping frantically, but it can’t seem to get off the ground these days.
The company reported on Tuesday that it added 5 million new active users in the first three months of 2016, breaking a downward trend in growth that had thrown it into a panic and cast shadows over its future. And yet the reaction from Wall Street was drearily familiar: The company’s stock price plummeted 16 percent, threatening its all-time low.
This time, the gloom centered on Twitter’s advertising business, which until recently had been a bright spot. Revenue grew by an uninspiring 36 percent in the past year, missing analysts’ expectations. Twitter blamed the shortfall on sluggish spending by brand marketers, suggesting that the pessimism surrounding the company has begun to extend to its most important clients. On the earnings call, one investor asked if all the harsh media coverage of the company’s performance might be contributing to a vicious cycle. Twitter executives sidestepped the question, but its premise rang true.
The negativity is understandable from the standpoint of early investors, who thought they were latching onto a startup that was bound for the stratosphere, only to watch it stand up and amble down the road. By now, however, it should be clear to everyone that Twitter isn't about to spread its wings and soar. After nine straight quarters of disappointing user growth, the surprise and anguish with which Wall Street greets each new lackluster earnings report is frankly baffling. It's like buying an emu that you thought was an eagle and howling in fresh consternation each time it fails to fly.
Even less logical is the media's consistently hysterical coverage of the company, which has been so Cassandran that one analyst on Tuesday’s call asked if the media itself might be scaring advertisers away. It's one thing for investors to pound the drum for growth and complain when it doesn't materialize. But the business and tech press have taken the negging to another level, treating each quarter’s earnings report like a death knell. Even the New Yorker has declared the “end of Twitter.”
Twitter still failing, Horribly slow 2.6% user growth from 302M to 310M YoY. Unprofitable. Missed revenue targets https://t.co/Uk37gWJyRI— Josh Constine (@JoshConstine) April 26, 2016
Twitter earnings call live stream pic.twitter.com/G3LwCwox2P— Mark Gongloff (@markgongloff) April 26, 2016
There's a funny inconsistency here. Some of the same tweeting heads who keep crying “bubble” and squawking about the technology industry’s excesses are perpetuating those same excesses each time they ridicule a company like Twitter for expanding too gradually. To equate Twitter’s slow progress with death is to buy into the most brutish elements of the Silicon Valley ethos, the ones that preach exponential growth at any cost. Here we have a very large—and growing!—company whose core product is used by some 310 million people every month, many of whom not only use it but love it. And yet it is “dying,” “failing,” and “doomed” because that number isn't 400 million, or 500 million, or 1.6 billion. Adding 5 million active users in three months is “weak,” nay, “sad.”
I'd like to say the reality is that Twitter is doing just fine, despite the overwhelming perception to the contrary. But reality and perception aren’t so easily separated, especially when that perception extends within the walls of the company’s headquarters. Twitter has reacted to the perceived crisis in its business by going into crisis mode. In the past year, the company has replaced its CEO and almost its entire top executive team, scrapped iconic features such as the favorite button, trotted out a “Moments” section that has been largely mocked and ignored, and implemented an opaque feed-ranking algorithm that everyone claimed to hate but few now seem to notice and even fewer understand. Morale at 1355 Market St. is as tenuous as the value of the company’s stock.
By some minor miracle, through it all, the company has been wise or cautious or maybe just ineffectual enough in the face of investor and media pressure to keep the core product largely intact. Which is why Twitter is still the venue of choice for people to gather and throw stones at Twitter every time it tries and fails to reinvent itself.
Twitter may not be an eagle, but that doesn’t necessarily mean it’s a dodo. It’s a creature sui generis, a massive, real-time global news and opinion ticker that anyone can customize and contribute to. For all its shortcomings, it’s still the closest thing the internet has to a public square, and that has a value no earnings report can capture. The fundamental constraint on Twitter’s growth is simply that not every private citizen needs or wants a soapbox and a megaphone.
There was no guarantee that such a service could find a way to turn a profit without compromising its purpose, but Twitter has, and it could turn a lot more if it ever wanted or needed to—which is to say, if it ever stopped reinvesting all its revenue in pursuit of growth. But that won’t happen until or unless it downshifts from startup mode and accepts that it is essentially a mature company.
It’s still possible that Jack Dorsey and company will find or acquire the magic potion that gets Twitter growing again. It’s even possible, given the latest modest numbers on monthly active users, that they already have. Clumsy as its implementation is, I wouldn’t be surprised if that ranking algorithm really is boosting engagement and making the app easier for people to use. Maybe streaming NFL games will provide a model for the company to lure users who view tweeting as a waste of time. Maybe live video really is the future and Periscope will be the app that makes it happen, although I sort of doubt it on both counts.
Or maybe the company will finally succumb to the pressure to remake itself entirely and leap hopefully off a cliff with a brand-new set of wings. And then at last we’ll have either the eagle everyone seemed to want or a lifeless pile of feathers and blood. Either way, we won’t have the Twitter that many of us know and love today.