February 9, 2016    4 minute read

Twitter: The End is Near

   February 9, 2016    4 minute read

Twitter: The End is Near

Twitter’s initial public offering valued at $14.2 billion, was one of the most anticipated IPOs of all time. A couple of years ago, executives would talk bullishly about competing with Mark Zuckerberg’s juggernaut for global scale supremacy before its stock market flotation in 2013. While Facebook has powered ahead beyond 1.5 billion active users, Twitter has virtually stalled and there is now no contest. Can the company survive and what’s next for the biggest micro-blogging platform?

Struggling To Survive

Twitter's Share Price Decline

For over a year now, Twitter has serious financial issues due to a lack of growth. Its last set of results published more than a month ago after Jack Dorsey’s return immediately after the layoffs revealed that it has attracted only 4 million new active users in the third quarter, to take its tally to 320 million. This January, Twitter came under scrutiny when it revealed a new feature that would allow users to post tweets up to 10,000 characters long, up from its previous limit of 140 characters. Amid speculations that the company is planning to change how it displays users’ tweets by reordering tweets to prioritise those, it believes more users will want to see. Twitter share price declined by 7% when the report to switch algorithmic timeline was announced. The company has come under increasing pressure to boost user growth, striving to achieve advertising revenues matching the likes of Facebook. The hashtag RIPTwitter emerged and became the top trending topic this past Sunday on Twitter. Many users of the microblogging site believe that the changes will not be supported, leading to the demise of the company.

A Potential Takeover Target

A couple of months ago, private equity group Silver Lake and venture capital firm Andreessen Horowitz were keen on buying the micro-blogging site before both deals collapsed. Twitter shares leapt more than 11pc at that time but fell back after reports that the private equity group and venture capital firm were not interested anymore. The microblogging site witnessed a wave of executive departures in the last few weeks, where Jack Dorsey returned as CEO of the company. Investors have not yet responded the reappointment. Three years after it floated in New York, Twitter is struggling with growth and is quickly becoming viewed as a takeover target as its share price tumbles, making a potential deal more likely. The company’s market value is currently around $11bn, less than 25pc of its peak. Google and News Corp were both rumoured to be involved in a potential takeover bid, although the latter denied it a couple of weeks ago.

A Glimpse of Hope

Jack Dorsey had been hailed as Twitter’s returning hero, following the exit of Dick Costolo in June 2015, returning to the company that dismissed him seven years ago.

“Twitter is live. Twitter is real-time. Twitter is about who & what you follow. And Twitter is here to stay! By becoming more Twitter-y.”

Jack Dorsey, CEO and Co-founder of Twitter

This Tuesday, Twitter will announce its fourth quarter earnings, where it will potentially name two new members to replace a pair of outgoing ones. One thing has been apparent in the director search: the board of directors lacks diversity with pretty much a group of white men and only one woman. Dorsey is keen on diversifying and reinvigorating the Twitter board, hoping that fresh thinking will give the company a much-needed shot of energy. Although, it may not happen shortly, there is still a glimpse of hope that it could occur.

To compete with Facebook, Twitter needs to turn things around by showing strong revenue growth and improving active monthly user experience in the next coming months. The microblogging company should also listen to its users to avoid a potential collapse. Indeed, the company shares hit a new all-time low the 8th of February, plunging to a record $14.91 for the first time. Twitter’s stock decline arose amid a wider market sell-off on Monday, in which the Dow Jones Industrial Average dropped by more than 340 points in midday trading. Perhaps, the future of the company looks more uncertain than ever.

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