Twitter (TWTR 6.35%) has slogged through a difficult past year. The stock price is down around 50%, there has been upheaval in the C-suite, and bears have come out in full force. Most of the concern about Twitter's future comes from people who may like it as a service but don't think management's execution with regard to user growth and monetization has been up to par. CEO Dick Costolo stepped down July 1 and co-founder Jack Dorsey, who is also CEO of mobile payments company Square, has been filling in as the company searches for a replacement.
I remain a long-term bull on the company and have been looking to add as the share price drops. To feel even better about my investment, I would love to hear the new CEO respond to these three questions.
1. How will you continue to build profitable partnerships?
People who use the Twitter service generally think it's a very good product. I was skeptical for years before finally signing up. After following a few people and being recommended many more, I began to see Twitter as a powerful real-time news aggregator and never looked back. It's generally the first thing I look at in the morning to prepare for my day. Getting users on the platform and then further engaged with the product can be achieved by building partnerships with existing brands.
Twitter recently extended a 2-year-old partnership with the NFL that includes content and advertising angles. The NFL will provide content including in-game highlights, breaking news and analysis, custom game recaps, infographics, behind-the-scenes content, and archival video. This feature should draw NFL fans who aren't yet on the service, while it gives current users even more reason to remain engaged.
Another recent partnership between Twitter and Square allows users to donate directly to political campaigns by tweeting. This feature follows the logical progression from in-person to telephone to email fundraising and shows one more way that Twitter is an important company for the future. The possibilities are limitless for these kinds of partnerships and I'm very interested to see what the new CEO has in mind.
2. What's the deal with Periscope?
Periscope, owned by Twitter, allows anybody with a smartphone and the app to live stream video instantly around the world. The possibilities for communication, sports, news, political insurgency, and myriad other areas seem limitless. Once again, the question for Twitter remains how to monetize this powerful asset with over 10 million accounts. Periscope is focused on building a user base and mind share while it battles a few competitors, of which Meerkat is the most prominent. I would love to hear from a new CEO the outlines of a plan to drive revenue in the future.
3. What would make you sell the company?
Whether to sell a public company is one of the most difficult decisions that a CEO and board must grapple with. They owe it to other shareholders to make the most prudent financial decision, but that decision is rarely clear in the moment. There have been rumblings for years that the biggest tech companies are interested in acquiring Twitter, both pre-IPO and after it hit the public markets. With its market cap back under $20 billion and more appealing to potential acquirers, those rumors should pick back up.
If the CEO believes that the public markets are dramatically undervaluing Twitter and that it can grow while remaining independent, putting the company up for sale would be a mistake. While it feels nice to open your brokerage account and see a stock up 30%-60% in a day based on an acquisition, investors then miss out on most of the future growth. If gobbled up by a much larger company, even if you receive shares of the acquirer, Twitter's growth wouldn't have the same impact on your wealth as it would have had it remained independent.
If the CEO believes that Twitter can be successful only by getting out of the public eye, being privy to an abundance of internal funding, and becoming a product for a larger company, then looking to sell might be the best thing. If it's truly the case that Twitter can never become a $100 billion-plus company on its own, then the best thing for current investors might be to get our premium, cash out, and look for something else with more promise. I just want to make sure the new CEO makes this decision for the right reasons and not simply to show a quick "fix," put a feather in his or her cap, and move on to the next job or a plush retirement.
The CEO selection may prove to be one of the board's most important decisions when the history of Twitter is written. I remain confident in my investment and think that a turnaround or sale have the greatest odds of occurring. There is always the risk of stagnation or outright collapse, but at these levels an investment in Twitter looks very appealing, and I will be looking to add to my position.