Twitter Inc (NYSE:TWTR) shares experienced a brief pop after CEO Dick Costolo announced his resignation earlier this month, but now find themselves again mired at 52-week lows.
Investors seemed to believe for a moment that a change in leadership could lead to renewed growth in the social networking service. For many investors, the stock seems full of unrealized potential and has underwhelmed during its history due to mismanagement and the inability to communicate its value adequately to potential users.
Shares have dropped about 20% from its opening day closing price, a sign of investor dissatisfaction and disappointment, while the S&P 500 has jumped 21%.
Now, however, a new initiative could jump-start growth in a way that nothing has since the platform was first gaining popularity. One of Twitter's biggest problems has long been the noise factor. The site is a great way to gather information, but good luck sifting through endless tweets about things that aren't of interest to you.
Unlike Facebook (NASDAQ:FB), which uses an algorithm to deliver to users what it thinks will be the most important items in their news feed, Twitter simply lists tweets from people you're following in reverse chronological order. The result is an all-you-can-eat buffet of tweets that often turns off new users and frustrates regular ones. Early Twitter investor Gary Vaynerchuk went as far as to say that Twitter will die if it doesn't fix its noise problem, and claimed that the tweets posted 3-5 years ago were more valuable than the ones today, calling today's version "a massive firehose."
As Twitter has become noisier, its user growth has also slowed, which has become the biggest concern among investors. Last quarter, the year-over-year growth rate fell to just 18% and Twitter was recently surpassed by the younger Instagram in number of users.
Project Lightning, as the new feature is called, is designed to solve much of that problem. Lightning will have three new features that should more easily find the information they are looking for. First, it will track events instead of just posters. Currently, in order to keep touch with news coming out of an event, users would have to follow a hashtag or some other searchable indicator. This is an imperfect system as not all posts will carry that hashtag and users won't always know what term or tag to search for. Lightning will give users an easy way to track events with a button on the center of the home row to access information about events such as award shows, breaking news, or sports.
Second, the events will be curated by actual humans adding another layer to the way Twitter is consumed, which until now has only been chronology and search terms. Finally, the project will also feature user-added photos and videos attached to the post.
While Project Lightning will not solve all of Twitter's growth problems in one fell swoop, it is a big step in the right direction. Senior Vice President of Product Kevin Weil called it "a brand new way to look at tweets. This is a bold change, not evolutionary."
Twitter has long been criticized for its hesitation to change its user interface, unlike Facebook, which has revamped its way users consume its product, delivering steady growth all along. The lesson may be that a change like Project Lightning is long overdue. Not only is it likely to drive more users and increased usage of Twitter, but also presents a better platform for advertisers. Up until now, ads on Twitter are spliced into the timeline feed in a way that's often clunky and irrelevant to what the user is reading. Twitter already has important details about its users like age, gender, and location, and now it can combine with events-based pages that are attractive to advertisers as they resemble TV and can be customized according to the product being consumed. For instance, the ads shown on the NBA Finals page will be different from those shown during the Oscars. Previously, advertisers had no such way to differentiate on Twitter.
Lightning isn't due out for a few months, but Twitter investors should hope it's the first of several big changes to the interface. The potential of the company can indeed match Facebook's, but the stream of tweets must be better controlled in order to maximize its value to the consumer and give them the best experience possible.
Jeremy Bowman owns shares of Apple. The Motley Fool recommends Apple, Facebook, and Twitter. The Motley Fool owns shares of Apple, Facebook, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.