Twitter Inc has been facing strong headwinds lately as investors expect improved performance from the firm. The Motley Fool provides a rare insight into the untold part of the story about Twitter’s struggling user growth. Twitter knows that it has a problem and the firm seems to be moving fast to get a new CEO into the drivers seat.
Analyst Robert Peck of SunTrust Robinson Humphrey believes that Twitter is desperate for a new CEO and that the firm could make a pick as early as next week. In his words, “While we have previously written that we thought a permanent CEO decision would occur right after Labor Day, we now think that the decision is more imminent.” Finding a new CEO, and fast, is critical to Twitter’s ability to turnaround its ship towards growth and profits.
User growth is worrisome
In the second quarter, Twitter added a mere 2 million monthly active users on a sequential basis – minus “SMS Fast Followers” who use the platform solely through SMS. The worst part is that daily users when seen as a percentage of monthly active users dropped from 48% to 44% in the top 20 markets where Twitter operates.
In Q4 2014 when 48% of Twitter users logged on the site daily, it had 140.2M users. In the last quarter when 44% of its 316M users logged in, the firm had 139M users logging in daily.
Twitter’s CFO Anthony Noto didn’t provide much comfort that the dismal user growth will change for the better. In his words, user growth is not a priority now, he says, “that’s something in 2016 that we will consider more.” He also waters down the poor user numbers saying, “We have not historically focused on driving daily active user growth”.
However, user growth is important and Twitter is deluding itself if it thinks otherwise. The key difference between Facebook and Twitter is the level of user engagement.
Facebook has almost 1.4B DAUs and Twitter has the potential for a similar number because Venture capitalist and early Twitter investor Chris Sacca says about 1 billion people have signed up for Twitter and abandoned their account.
A new CEO should bring change
Twitter is in the middle of a finding a new CEO and a number of names had been put up for the position. It is unlikely that interim CEO, Jack Dorsey will be named as the permanent CEO considering that Twitter wants its CEO to take the job fulltime and Dorsey is also CEO as Square.
Facebook’s Sheryl Sandberg and Renée James, the current President at Intel Corporation are the top picks for the CEO seat at Twitter . In due time, the market hopes that Twitter gets its CEO decision right so that the firm can start living up to expectations.