Twitter Inc is set to release its third quarter (Q3 2015) earnings after the market close today and Wall Street is watching like a hawk to see how the firm has fared in the last three months. In the last quarter, a lot of changes have happened at Twitter. The firm has dropped a CEO, brought up an interim CEO, and it has confirmed Jack Dorsey as CEO against the earlier position of the firm on the need to have a full-time CEO.
Jack Dorsey has been at the helm as the interim CEO and as the actual CEO; hence, the Q3 earnings could be likened to a grading of how Twitter has fared under his watch. Twitter seems to have gotten a better sense of direction under Dorsey – especially in the last couple of weeks after he was confirmed has CEO. The firm has begun to lay-off about 8% of its workforce, Jack Dorsey dropped $200M of his personal wealth to motivate workers, and a change is in the offing at the board as a former Google employee becomes the executive chairman.
Twitter is for dads
Some analysts are less than impressed, despite the growing optimism about the effects that the recent changes happening at Twitter would have on the top and bottom lines going forward. For instance, George O’Connor, technology analyst at Panmure Gordon says Twitter might continue to grapple with the issue of stagnating user growth because it is geared more towards businesses and older users.
He thinks Twitter would never catch up with Facebook on the user-base front because “Twitter is more of a business-y play. So for example, my children do not use Twitter. I use Twitter. It’s a tool for dads.” In comparing Twitter to Facebook, he says, “Facebook is Facebook and one of the big drivers that we are seeing is that there’s this wonderful sort of consolidation about the power of the market leader and Facebook is the consumer big play,”
Twitter should focus on monetizing current users
Last week, analysts at Morgan Stanley downgraded Twitter to “underweight” and they gave the stock a $24 price target. User growth has been a bane of Wall Street’s love for the firm has it has struggled to attract and keep new users on its platform. In Q2 Twitter 304M MAUs to mark a 12% year-over-year increase; yet, it wasn’t much of a growth over the 302M MAUs that the firm had in the first quarter.
Twitter is still a niche product that might never appeal to the wider audience. It is best suited to journalists, celebrities, sports fans, and people who love to argue or follow stories. Yet, Twitter might be able to keep Wall Street happy even if it doesn’t solve the Rubik cube on user growth. If Twitter can show that it is on track to making money out of its current crop of users, the gods on Wall Street should be appeased even if the firm doesn’t add many new users in Q3.