Twitter stock tanked on negative user growth, but CEO Dorsey thinks the company’s health efforts will pay off down the line.
Twitter needs to learn how to multitask.
That’s the general takeaway from Twitter’s second-quarter earnings report today, where the company reported a loss of 1 million total monthly active users, but alluded to a bigger loss to come in this fall. It blamed the decline in users on its efforts to improve Twitter’s “health” — removing bots and spam and improving other nasty parts of the service that have plagued it for years. Its stock was down almost 17 percent in pre-market trading.
Twitter’s decision to delete bots and spammy accounts isn’t only what’s driving its user base to shrink, though. The company says that “many of the removed accounts have already been excluded” from the user figures it reports. Instead, Twitter’s growth is hurting because the company isn’t focusing on much outside of its cleanup effort.
“We are making active decisions to prioritize health initiatives over near-term product improvements that may drive more usage of Twitter as a daily utility,” the company wrote in its earnings letter. “As we began 2018, we made deliberate decisions to allocate product and engineering resources that had previously been focused on product improvements designed to deliver growth in audience and engagement to projects related to preparing for GDPR and broader platform health.”
We have two thoughts here:
- This is good. Twitter’s “health” is by far the most important thing the company can and should be focused on. Without a network of people who want to use the product, and feel safe using the product, Twitter will always just be what it is: A great way to get news, but a terrible place to talk about and debate that news. The health of Twitter has been so bad in the past, it’s even hurt the company’s chances at being acquired. You can’t and shouldn’t blame CEO Jack Dorsey for making this a priority.
- But: Is cleaning up Twitter such a demanding job that the company can’t continue to make “product improvements designed to deliver growth in audience and engagement”? Twitter is not a new company. It’s been around for more than 12 years, and has more than 3,500 employees. It seems reasonable to expect Twitter to be able to do two things at once.
The best-case scenario is that Twitter’s cleanup work eventually leads to the kind of user growth it never would have achieved without it. That’s what Dorsey said on Twitter’s earnings call this morning. “It’s a growth factor over the long term,” he said of the cleanup efforts. When users don’t need to report bots or spam, or mute abusive comments and tweets, it makes the experience much better. It may even encourage users to tell their friends about using the service, Dorsey added. “We do believe ultimately over time, that this will help our growth story.”
It could already be working on existing users. Twitters daily active users were up 11 percent last quarter, its seventh straight quarter of double-digit growth. It’s a growth stat that Twitter loves to highlight, but lacks the kind of punch the company would like because it doesn’t share its actual number of daily users — just its percentage growth.
How long will Twitter’s cleanup take? That’s the next logical question, and the company doesn’t have a good answer. “We don’t think that this work will necessarily ever be done,” Dorsey said on the earnings call. “There’s still a lot ahead,” he added, but said Twitter could move at “a much more rapid pace” in the future. So, we’d ask, when will it re-prioritize those other feature additions?
Investors, of course, are not patient. (And, frankly, shouldn’t be the ones driving Twitter’s thinking.) But it might be worth the wait. Despite its troubles, Twitter has grown to 335 million users around the world, is the social network of choice of many of the world’s most influential people, like the President of the United States, and has incredible social impact.
What could a “healthy” version of Twitter look like? Dorsey hopes you’ll stick around long enough to find out.