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The Switch

Twitter needs to grow to thrive. And that may not be so easy.

By Hayley Tsukayama

January 26, 2016 at 5:59 PM

With a major shakeup among Twitter's top ranks sending the social network's stock sliding, many analysts are again asking: What's going on with Twitter?

The stock opened at $17.22 a share on Tuesday, after suffering a 4 percent drop Monday following the announcement of the departure of some top executives. The price is far below the $26 a share price for Twitter's initial public offering in 2013, when there was plenty of optimism for the stock.

In the years since, the company has been through a lot of turnover at the top, as it has struggled to turn its smaller-scale success into a social network with broad appeal — which would give it a shot at more lucrative ad dollars. Last year Jack Dorsey returned to the helm of the company he founded after investors seemed to sour on the business plans of his predecessor, Dick Costolo. A flurry of headlines proclaimed that Dorsey had returned to "save Twitter" from investors' greatest concern: the company's slowing user growth.

That's been Dorsey's top priority since he became interim chief executive in July 2015, and he has doubled down on those goals since his official appointment. While interim chief executive, he pushed the launch of Twitter Moments, then code-named Project Lightning, which provides users with a digest of top trending Twitter items. He has also tried to improve the company's relationships with developers, going so far as to reinstate a site, Politwoops, that Twitter had previously banned.

But one of the main problems Twitter still faces in trying to broaden its appeal is that the people who use Twitter tend to like it as it is. And much of what Dorsey has done since his return has not sat well with its power users. A decision, for example, to change the "Favorite" star to a heart caused an uproar among Twitter's 320 million users. Similarly, even reports that the company may expand its 140-character limit have been cause for consternation.

Meanwhile, rivals such as Facebook have tried to move into an area of real-time conversation that has been Twitter's distinguishing feature. Last week, Facebook launched Sports Stadium, a product focused on making Facebook, not Twitter, the second-screen of choice while watching major games.

And then bidding farewell to the heads of Twitter's media and product departments, as well as top people from human resources and engineering — all of whom Dorsey insists left by choice — did little to assuage investors' worries about the company's stability. Constant changes among Twitter's executives have already spooked those watching the company, with many wondering how a company with so many leadership changes can survive the highly competitive world of online advertising.

Yet despite all of this, at least one analyst has said that Twitter's product is still unique enough to make an appealing pitch to advertisers.

"Much of the concern around this turmoil has seemed unnecessary to us," Brian Wieser, an analyst for Pivotal Research, wrote of the staffing shakeups. He said that as long as Twitter continues to stand out from its rivals, it can "convince advertisers to retain Twitter in their media mix and develop ad products that allow marketers to spend money on the platform." He added that then "the company can continue to grow above the pace at which global digital advertising is expanding."

But it's still too early to tell whether any of Dorsey's efforts to date can jumpstart the growth investors want. Twitter shares fell sharply in October after its third-quarter earnings call. Despite strong revenue growth, Twitter reported it added 4 million users over the quarter, a growth of 11 percent year-over-year. In the same quarter in 2014, the company had reported year-over-year growth of 23 percent.

Dorsey has made it clear that he thinks Twitter can weather its growing pains and become a company that "remains relevant but thrives and continues to redefine what came before it," according to remarks he made when he took the chief executive position last year. He may look at these newest departures as a way to clear a path for new grand plans.


Hayley Tsukayama covers consumer technology for The Washington Post.

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