Four ways Twitter can win back investors

Jack Dorsey

 

It’s no real surprise that Twitter’s CEO Dick Costolo has resigned.

Twitter’s huge potential still remains just that; potential not captured. It would not surprise investors if the next quarterly results continue with a string of disappointments. The expectation at this point is for lackluster performance.

Read MoreTwitter will have a tough time finding a new CEO: analyst

The interim CEO Jack Dorsey is a placeholder until the right executive can be found that can restore investor confidence. That confidence will only return when there is clarity about how Twitter will leverage its huge user base combined with a clear vision of how Twitter can continue to be relevant. The opportunity is there but Twitter cannot waste time as competitors continue to focus on growing their market share at Twitter¹s expense.

Twitter needs to do four things to re-engage investors and assure the investing public that the hope of Twitter as an investment is not a mirage.

Make changes to encourage repeat use of the platform

Twitter has a huge number of signed-up users that are dormant in terms of usage. Registered users need to be turned into frequent users.

Twitter needs to make the product easier to use with compelling reasons for repeat use. The key is encouraging engagement.

Innovate, innovate, innovate

Twitter has a huge user base with massive usage around the world. It would be easy to make small, safe adjustments in the platform to not alienate active users. However, that would be a mistake.

Read MoreTwitter would be ‘instant fit’ for Google: Sacca

Twitter needs to think with creativity. The announcement this week that the 140-character limit for direct messages has now been increased to 10,000 characters is the type of change that needs to occur. Twitter cannot be cautious. Time to break the mold and innovate.

Inform the public that MAU is not the only success metric

The investing public focuses on a metric that is not necessarily the whole story when it comes to the health of the business. Monthly Active Users (MAU) is one sign of the level of engagement for Twitter users.

Twitter needs to lay out a clear plan on how it plans to capture opportunity from logout users, Define the metrics that paint a more complete picture of the business.

Define a clear strategic plan

Twitter needs a much clearer strategic plan that needs to be communicated to the investing public. There¹s a reason why the stock has fallen below the closing day IPO price. Investors have lost confidence and that confidence needs to be rebuilt. Just a few of the questions that need answers include:

  • What’s the strategy to engage users?
  • How will Twitter compete against Instagram? Against Facebook? Against Snapchat?
  • How will Twitter increase advertising revenue without alienating users?
  • What is the specific plan to increase usability?
  • How will Twitter deal with cyber bullying?
  • How can Twitter become more of a timeline of events rather than one-off bursts of commentary?
  • How will the company measure its success beyond Monthly Active Users?

These and many other questions need to be thoughtfully addressed by management. Ambiguity won’t do; investors are demanding clarity and an operational vision that resonates. Investors are waiting and are quickly losing patience.

Read MoreHere’s Twitter’s biggest problem

Twitter’s user base is the envy of the Internet and they have the opportunity to leverage huge reach into huge revenues. Twitter has a great problem — hundreds of millions of users waiting for the company to give them another reason to be more active in using the product. The change of management is a first step towards resetting the company’s path and restoring investor confidence.

Commentary by Michael A. Yoshikami, the CEO and founder of Destination Wealth Management in Walnut Creek, California. He is also a CNBC contributor.

Disclosure: Michael Yoshikami does not own shares of Twitter and has no other business relationship with the company. But Destination Wealth Management may buy Twitter for clients.

Early movers: TWTR, BOJA, URBN, WSM, GOOG & more

Traders work on the floor of the New York Stock Exchange.

 

Twitter-Chief Executive Officer Dick Costolo will leave that job on July 1, with chairman Jack Dorsey serving as interim CEO. Both will appear on CNBC’s “Squawk On The Street” at 10:00 a.m. ET.

Bojangles-Bojangles reported adjusted earnings of 17 cents per share in its first report as a public company, coming in 2 cents above estimates. Revenue was slightly above forecasts for the restaurant chain, although its full-year revenue forecast was largely below analyst predictions.

Agios Pharmaceuticals–New data from a clinical trial for an Agios leukemia treatment showed a 40 percent response rate, including complete remission for several participants. Agios also released positive results in studies of two other drugs as well.

Mondelez International–The packaged food company’s stock was upgraded to “outperform” from “market perform” at BMO Capital, saying the company is doing well at navigating a challenging operating environment and outperforming its peers in that regard.

Urban Outfitters–BB&T Capital Markets upgraded the apparel retailer’s shares to “buy” from “hold”, citing a pullback on what it calls “overblown” worries about a slowdown at the company’s Anthropologie unit.

Williams-Sonoma–The housewares retailer’s stock was upgraded to “outperform” from ‘perform” at Oppenheimer, which said the company is well-positioned to capitalize on improving demand trends in the industry.

United Rentals–Hedge fund Jana Partners took a six percent stake in United Rentals, saying it believes shares of the industrial equipment rental company are undervalued.

Dish Network–The satellite TV service company is talking to banks about funding a bid for wireless services provider T-Mobile US, according to reports. The deal being discussed would leave current T-Mobile parent company Deutsche Telekom with a significant minority stake.

Honda–The automaker will restate its financial results for the past year, adding about $360 million in costs related to an expanded recall involving Takata-made airbags.

Google–The search giant was ordered by French regulators to expand its implementation of Europe’s new “right to be forgotten” rules.

Eli Lilly–The drug maker’s shares are on watch following a 10 percent increase so far this week, as investors await new long-term data on an experimental Alzheimer’s treatment. The release of that new information is expected on Monday.

BlackBerry–The smartphone maker may put Google’s Android operating system on one of its upcoming units, according to a Reuters report.

WIngstop–Wingstop will debut today on the Nasdaq under the ticker “WING”, after the chicken wing restaurant’s initial public offering priced at $19 per share. That was above an expected range of $16 to $18, which had been raised from $12 to $14 earlier this week.

LeapFrog Enterprises–LeapFrog reported a fourth quarter loss, with the maker of educational games predicting that growth will resume in fiscal 2017’s holiday quarter. LeapFrog calls this year a “year of rebuilding” as it moves to bring its games to devices made by other companies.

Activision Blizzard, Take-Two Interactive–Activision’s “Call of Duty: Advanced Warfare” and Take-Two’s “Grand Theft Auto V” top the list of digital video game sales for consoles and PCs last month, according to SuperData Research.

Bob Evans Farms–Bob Evans is considering either converting to a real estate investment trust, or selling and then leasing back its restaurant properties. The company will make a final decision within a few months.

Toyota–Toyota is close to unveiling the 4th generation version of its best-selling Prius hybrid car, according to North American CEO Jim Lentz.

Here is Twitter’s biggest problem

180652915MT001_Twitter_Anno

 

Twitter’s future is a subject of hot debate at the moment. Wall Street is disenchanted and, as a public entity, the company is going through a painful adolescence. It has its supporters, and it has its harsh critics. One who is both, Chris Sacca, a very early Twitter investor and advisor (who self-admittedly “bleeds aqua”), recently published an 8,500 word dissertation entitled “What Twitter Can Be,” where he outlines a detailed proscription for the company’s most immediate ills.

Most concerning for Twitter is the stalled growth in new users, and even more so, the nearly one billion users who have joined and never come back. Sacca notes that, for most people, Twitter is too hard to use, Tweeting is scary, and Twitter feels lonely.

I think Twitter’s woes can be summed up in one word: community… or, more specifically, the lack thereof.

Getty Images
Counter-intuitive, isn’t it? One could argue reasonably that Twitter is the largest, most dynamic, most connected community on the planet. But is it really? I don’t personally experience a strong sense of community when I’m on Twitter. I feel more a part of something when engaged, for example, in the comments section of a favorite blog. I know this is also true for many others who do not measure their followers in the tens or hundreds of thousands.

Read MoreTwitter would be ‘instant fit’ for Google: Sacca

So, why is it that, with its hundreds of millions of monthly active users, all connected by the same network where anyone can talk to anyone, Twitter struggles to generate any real sense of community?

First, Twitter is fundamentally unidirectional. Everything flows downhill, passing from user to followers, in a cascade of information much more resembling a bullhorn than a conversation. What flows uphill from followers to “followees” is considerably less visible. Even Twitter’s language reinforces this. We are “followers.” Following by its very nature creates hierarchy, not community. Communities are built from people who have some common interest — people who might live in the same town, work in the same industry, or share an interest.

Twitter is fundamentally people-centric, and this does not facilitate the development of communities. For the truly dedicated, we try to find community through the use of hashtags and awkward search mechanisms that are not well designed to help us follow our interests efficiently. Twitter forces us to follow people to get to the topics we’re really interested in, when instead we’d much rather follow topics to find the people we’re interested in.

Read MoreCramer: Sacca Twitter note ‘misinterpreted’

Another problem is the fundamental nature of the timeline, which remains Twitter’s dominant discovery and navigation mechanism. Timelines are incredibly inefficient discovery vehicles. As any kind of “tour guide” for finding the content we are really interested in, they are downright miserable. They are filled with noise, and the Tweets that come across them are fleeting, so, we spend most of our time with content we don’t care about, and stand a good chance of missing much of the content we do. It’s true that real-time notifications of relevant news can be useful to any community; however, the vast majority of what communities are interested in does NOT necessarily happen within the last hour. Even if it did, the pressure would be far too great to keep pace with the ever-flowing stream just to be able to participate.

Communities tend to be filled with discussion of their common interest. They want to share opinions and views; they want to learn more, get under the covers and into the details. This cannot happen through a timeline. While Twitter offers other mechanisms, like collections, these mechanisms are awkward, buried and far from central to the core Twitter experience.

Thinking back to the one billion lost Twitter users, it’s easy to see how Sacca is right. For new or casual users, Twitter is difficult, intimidating and lonely. If, upon their arrival, those users had been immediately connected with other users who shared one or more of their interests, things would have been markedly different. When we come into community with others, we tend to stand on the sidelines for a while and just watch. Once we’ve gotten comfortable with the vibe of the community, then we might send or reply to a tweet to see what happens. If we get any feedback from other members, then we’re encouraged to participate more. But if we get dead air, we are discouraged and disconnected. Even more so if we can’t find the community in the first place.

If it hopes to return itself to strong new user growth, and re-attract those one billion lost users, Twitter needs to create much more of a community vibe. First, Twitter should organize itself around topics. This does not have to replace the people-following model, it just provides a different lens. Twitter has started to do this with its new logged-out home screen, but it’s far too light and the topics are too broad. Twitter can’t be the chooser of the topics — Twitter users must be. A better approach conceptually is the recently launched Twitter-curator, but so far this is only for very advanced users (specifically media companies).

Read MoreTwitter shows money men are grabbing more power

Second, Twitter needs to enable a community to draw a circle around itself. A community needs to be able to define and identify itself; it needs its own “space.” Its members need to be able to share and discuss issues among themselves as a community, as peers rather than as an oligarchy. Members need to decide what is important to be shared and discussed, not Twitter.

Lastly, Twitter needs to introduce a much better model for curation. Not just Twitter’s own algorithmic curation, but also curation by community members. Curation is a form of engagement that can have tremendous value for a community. Curation can be a simple up/down voting to rate Tweets and other content, or it can be something more involved, like creating a story from an assembly of tweets using a tool like Storify. Again, Twitter’s current “collections” provide some of this ability, but without the other community-enabling elements it does not have nearly the value or impact it should.

There are good models for the kind of community facilitation that could make a big impact on Twitter. One of the best is Reddit. While Reddit may intimidate many novice users for its own reasons, it has the community thing nailed. With Reddit, communities self-identify and self-organize around subreddits. Communities have moderators, but they are chosen by the community and more importantly it is the community members not the moderators that make the contributions, curate and decide what gets visibility. A new user has little problem quickly surfacing one or more subreddits that interest them, where they can stand on the sidelines to watch for a while. In fact, a new user’s entry point to Reddit is quite often a subreddit. If Twitter’s entry point for new users were a subreddit-like community of other users in active dialog about some common interest, many more of those users would likely stick around.

As Mr. Sacca aptly puts it, “Twitter can afford to build the wrong things. However, Twitter cannot afford to build the right things too slowly.” One of those things Twitter cannot afford to get wrong is community.

Commentary by Stephen Bradley, founder and CEO of AuthorBee,a social media aggregation platform. He has been involved in digital media since he ran research at Gartner and was later involved in the early growth of Pandora and Skillsoft. Follow him on Twitter@AuthorBee.

Twitter CEO Jack Dorsey’s big task: Pleasing advertisers

Twitter CEO Jack Dorsey's big task: Pleasing advertisers

 

SAN FRANCISCO: Twitter Inc’s next chief executive officer faces a crucial challenge as the company seeks to appease Wall Street after this week’s management shakeup — helping disaffected advertisers connect with users.

And many advertisers, analysts and investors say Twitter already has the right person for the job: not interim CEO Jack Dorsey but Adam Bain, the company’s president and head of revenue, who has emerged as an early favourite.

Twitter’s outgoing chief executive, Dick Costolo, resigned abruptly Thursday amid pressure from investors to increase the user base and improve what’s known as direct response advertising, the most lucrative type on the micro blogging site.

Those ads prompt users to take an action, such as signing up for a website or buying a product. Improving them is central to Twitter’s ability to make more money.

Before joining Twitter in 2010, Bain served as president of the Fox Audience Network where he was responsible for monetizing advertising platforms across News Corp’s web properties. At Twitter, he has helped aggressively grow the advertising platform. He holds many of the company’s most valuable relationship with advertisers and understands the media business, advertisers said, and could help redirect Twitter so it meets advertisers’ demands and makes more money.

For now, advertisers hope the management change will “light a fire” under Twitter, said Adam Epstein, chief executive of adMarketplace, which works with search advertisers. Even though they have discussed ways to improve advertising with Twitter executives, the company has been slow to change.

“When you talk to Twitter, you can throw some great ideas on a whiteboard, but there seems to be a lack of urgency,” Epstein said.

They also hope Twitter makes the site easier to use so that more people become regular users and click on ads. Advertisers also want Twitter to provide data that allows them to gather more information on consumers.

Twitter would not make an executive available to comment.

Among the challenges of advertising on Twitter are the site’s fast-moving news scroll, which makes it less likely users will stop to click on an ad. Facebook and Instagram, by comparison, showcase photos and videos in ads and display them more effectively to users, making it more likely users will click on them.

In April, Costolo said Twitter was forced to cut rates for direct response ads after they failed to deliver as promised. That led the company to cut its revenue forecast for the year as it anticipated making $4 million to $5 million less each quarter.

Half a dozen ad executives interviewed by Reuters said they spend more money on rival platforms, such as Facebook and Google, because they have more users, better capture attention and provide more data on how advertisers can target consumers.

Dorsey, who served as CEO from 2007 to 2008 before management ousted him, said the CEO search has not yet begun but has not ruled out his interest in the job permanently. He said he would not change the company’s strategy.

Untapped potential
Twitter’s user base has been eclipsed by its competitors. It has 302 million users, compared with Facebook Inc’s 1.4 billion and WhatsApp’s 800 million.

Advertisers said the main problem lies in what they called Twitter’s “untapped potential” in reaching its millions of users.

About 80-90% of users scan Twitter content but don’t tweet, according to Affinio, which measures community engagement on digital platforms. Even though about 1 billion people have tried the service, most do not become regular users.

“Twitter needs to be able to build a product that consumers know and love and stay in,” said Maura Tuohy, social director at Eleven Inc, an agency that helps brands advertise.

Twitter has taken steps to meet some ad buyers’ demands. In April, it announced a partnership with Google’s online advertising service DoubleClick and marketing technology company TellApart, which helps advertisers measure ad views, clicks and calculate investment returns, to provide more data to advertisers. But it has not announced when those partnerships will go into effect.

But illustrating the complexity of the site’s relationship with ads, a study conducted by Twitter found that some of its key attributes, such as including a hashtag or mentioning another account in a tweet, were actually harmful to advertisers.

Barry Lowenthal, president of Media Kitchen, a media planning and buying agency, said he uses Twitter for product announcements, such as a new fragrance, but does not regularly turn to Twitter for advertising.

“It has a very particular role,” Lowenthal said. “We don’t use it regularly like we do Facebook and Instagram.”

With so many twists, will Twitter soar or crash?

 

With so many twists, will Twitter soar or crash?

NEW YORK: The Pope is on Twitter, along with the Dalai Lama, world leaders and, of course, Kim Kardashian.

The short-messaging service can bring fleeting fame, instant ignominy and get you fired. It has been credited for sparking revolutions and, like Facebook, transforming the way the world communicates.

But despite the buzz generated by thousands of chatty journalists, athletes and celebrities, Twitter has never turned a profit. Its user base of 302 million is dwarfed by rivals such as Facebook, which counts 1.44 billion.

Facebook has grown into an internet powerhouse, while Twitter in many aspects remains a niche social network, unable to convince the masses that they need its service to keep up with what’s happening in the world. Lots of people sign up but not a lot stick around.

That likely had much to do with last week’s announced exit of Twitter Inc CEO Dick Costolo, who gave way to co-founder, and former CEO, Jack Dorsey while the San Francisco company looks for a new leader.

Despite the executive turmoil and a stock price that has fallen 30% since late April, industry experts — not to mention loyal users — see potential in the company.

But first it needs to address some of its biggest problems. Here are some of Twitter’s most pressing challenges, along with possible fixes.

Where are the users?

Its user growth is stalling and there are a lot of competitors. Besides its old rival Facebook, Twitter is feeling the heat from mobile messaging apps such as WhatsApp, Line and Viber, not to mention Snapchat, Instagram and a bevy of others only your cool middle-school niece might have heard of. Twitter grew from 204 million active users in the first quarter of 2013, to 255 million a year later and 302 million in the first three months of 2015. In comparison, Facebook-owned WhatsApp announced in April that it has reached 800 million monthly active users.

Make it easier to use

Almost one billion users have tried Twitter and not stuck around, according to tech investor Chris Sacca, a longtime Twitter backer who wrote a lengthy critique of the service and posted it online this month. Sacca suggested the service could offer more features to engage visitors — including special channels or tabs focused on live events, topics of interest or even a user’s geographic location. He also recommended more “nudges,” including feedback, polls and other interactive features that would make newcomers feel less “lonely.”

Deal with trolls

Twitter has long had a problem with trolls, the online bullies and blowhards whose abuse has been an ongoing issue that has alienated established and potential users. It has tried to make it easier to report threats and in April updated its policy against violent threats to include not just specific threats but people promoting violence against others. It’s too early to say if this has helped.

More apps and options

Twitter is well-known around the globe, but it must do more to capitalize on its own brand, said Brian Blau, a tech analyst at the Gartner research firm. Twitter could be offering users more specialized apps for various activities, in the way that Facebook has built a stable of apps for messaging, consuming news and sharing photos, he said. Twitter’s Periscope app, which lets users share live video, is an example of “exactly the kind of thing Twitter should be doing,” Blau added. But he noted that Facebook, Snapchat and other companies have invested heavily in direct-messaging capabilities, which can make money by showing ads, selling animated adornments or enabling users to play one-on-one games. Twitter, meanwhile, has only tinkered around the edges of its direct-messaging function.

Demonstarte strengths to advertisers

Twitter knows something about its users’ interests, but Facebook knows far more about its users’ likes and habits, while Google and Pinterest can more readily predict what users might want to buy. That, coupled with Twitter’s slowing user growth, has made advertisers are more likely to spend their money on other sites, analysts say. Twitter’s strength, however, is drawing people’s attention during live events, such as sports championships, breaking news and popular television shows, said Debra Aho Williamson at the e-Marketer research firm. Reaching casual users on a routine basis is harder, but Twitter may succeed if it can “engage advertisers in that `real-time’ story,” she said.

Show investors it’s serious about business

The new CEO must show Wall Street that Twitter is focused on building revenue and delivering on financial targets, added Scott Kessler, a tech stocks analyst at S&P Capital IQ. “Their single biggest shortcoming is really about the ability to consistently communicate and execute against their strategy,” he said.

Twitter to forgo 140-character restriction for direct messages

Twitter to forgo 140-character restriction for direct messages

NEW YORK: In a piece of good news for Twitteratti, Twitter has decided to increase the word limit for direct messages (DMs) to 10,000 characters from the present 140.

Twitter’s product designer Sachin Agarwal informed developers of the news ahead of the change, which will be rolled out to users in July, Venturebeat.com reported.

No official date has been decided for the change though.

The move does not remove Twitter’s design choice of constraining tweets to 140 characters – only direct messages.

“It’s a beautiful constraint that has inspired a whole new form of writing,” Twitter investor Chris Sacca wrote in a blog post earlier this month about what Twitter can do to improve.

Sacca did not say he had a problem with the 140-character cap on DMs – and that is what’s changing.

Direct messages in other social networks, like Facebook and LinkedIn, do not have length limits.

But Twitter’s affinity for the 140-character limit goes back to Twitter’s earliest days, when Twitter sent tweets in text messages.

Now those days are long gone, and Twitter can evolve to meet the needs of its users and investors.

However, before you start fretting at the prospects of receiving unsolicited extra long messages there is some more news for you. You can stop people you do not follow from sending you these new, extra-long DMs.

You can do that by unchecking the “Receive Direct Messages from anyone” box in the Security and privacy sections in Twitter’s settings.