Twitter Inc (NASDAQ:TWTR) stock is facing the biggest challenge since its initial public offering (IPO). But if the company manages to get over this hurdle, Twitter stock could become attractive again.
Allow me to explain.
There is no other way to put it: Twitter’s user growth has slowed and investors do not like that. After early adopters and technology enthusiasts signed up, the company is having trouble finding new users.
The reason is simple: Twitter is yet to convince the mass market of its value.
For user growth to pick up again, the company needs to improve the product and convey its value to the mass market. Luckily, that’s exactly what the company is doing.
Twitter Improving Product Appeal
The steps might be small. But if you look at the recent features added to the social media platform, you’d see that they could make Twitter more appealing to both existing and new users.
For instance, Twitter introduced an algorithmic timeline. In the past, tweets were always displayed in reverse chronological order. Now, if you open Twitter after being away for a while, the top Tweets you see are those that Twitter believes you care about most. The rest of the Tweets will be displayed underneath in reverse chronological order, just like before.
Not all users are going to like algorithmic timelines. But you can easily turn off this feature in your account/app settings.
Note that Twitter is not the first social media company to adopt algorithmic timelines. Facebook Inc (NASDAQ:FB) has been using algorithmic timelines for its users’ newsfeeds for years and has grown tremendously during the process.
In fact, according to Bret Taylor, former chief technology officer at Facebook, people love algorithmic timelines.
“Algorithmic feed was always the thing people said they didn’t want but demonstrated they did via every conceivable metric. It’s just better,” Taylor wrote in a tweet.
Twitter is also building a new feature that would allow users to post much longer tweets. Instead of limiting tweets to 140 characters, the company could extend the limit to as many as 10,000 characters. (Source: “Twitter Considering 10,000-Character Limit for Tweets,” Re/Code, January 5, 2016.)
Some users might be unimpressed by this move. However, the new feature could really improve Twitter’s functionality and perhaps bring new users to the platform.
Let me give you an example: When Twitter co-founder and CEO Jack Dorsey wanted to put out a statement on Twitter regarding several executives’ decisions to leave, he had to post a picture of the text because the 140-character limit would not allow for such a long statement.
Moreover, allowing longer tweets would open up the service to an entirely new group of audience. In the past, Twitter has always been known as a microblogging platform. If it were to expand the character limit considerably, people who post longer essays on Facebook can also use it. But, of course, it still needs to keep that timely feel.
Small steps like these might not seem like much. But at least they indicate that the company is willing to do whatever it takes to address the most critical issue—the lack of mass-market appeal.
Improving product features is one thing, communicating the value of the product to consumers is another. And on that front, Twitter has just hired a veteran from Apple Inc. (NASDAQ:AAPL).
Natalie Kerris, a longtime communications executive at Apple, will be Twitter’s new vice president of communications, according to Jack Dorsey’s tweet on Monday.
Kerris has a solid track record as a public relations executive. She worked on the launches of iconic Apple products, including the “iPod,” “iPhone,” “iPad,” and the recent “Apple Watch.” For the past three years, Kerris was named to Business Insider’s top 50 PR people.
This is a big hire for Twitter because one of the company’s biggest challenges is to communicate the value of Twitter to consumers. With new product features and a new PR boss, Twitter might be able to expand its appeal.
The Bottom Line on TWTR Stock
Note that despite all the concerns about Twitter’s growth, the company did grow both its top line and bottom line in the most recent quarter. Revenue totaled $710 million in the fourth quarter of 2015, up 48% year-over-year. The company also made $0.16 in adjusted earnings per share, beating Wall Street’s expectation of $0.12 per share. (Source: “Twitter Q4 and Fiscal Year 2015 Shareholder Letter,” Twitter Inc, February 10, 2016.)
With new strategies in place, Twitter might be able to bring back user growth. Combining that with the company’s improving financials, the outlook for TWTR stock suddenly becomes brighter.