Twitter (NYSE:TWTR) has finally confirmed that co-founder Jack Dorsey has been appointed as the company's permanent CEO, a position he has been occupying on an interim basis for several months. This is big news for investors, because it dissipates a lot of uncertainty regarding the company's leadership and strategic direction. Now that Dorsey is taking the reigns for good, let's take a look at his vision for the company.
Twitter needs to do much better
Twitter is producing solid revenue growth, but that's mostly because of increased monetization. User growth has been downright disappointing during the last several quarters. Based on data for the second quarter of 2015, Twitter has 304 million monthly active users when excluding SMS Fast Followers (those who access Twitter exclusively via SMS). This represents an increase in users of 12% year over year, and only 2 million new users were gained versus the first quarter of 2015.
Even worse, the company delivered no growth whatsoever in the U.S. user base. Twitter ended the second quarter of 2015 with 66 million users in the U.S.; the number was flat in comparison to the first quarter.
While many corporate executives tend to look for excuses when things don't go as expected, Dorsey is not going down that road. He fully acknowledges that current performance is well below Twitter's potential, and that the company needs to do much better on the user front.
During Twitter's earnings conference call for the last quarter Dorsey said:
We've been very successful at monetization, with a strong Q2, delivering over $500 million in revenue and more than $120 million in EBITDA. However, product initiatives we've mentioned in previous earnings calls like instant timelines and logged out experiences have not yet had meaningful impact on growing our audience or participation. This is unacceptable, and we're not happy about it.
Identifying the problem
Dorsey and his management team believe that Twitter needs to build a simpler and more enjoyable user experience. Many users find the Twitter language and overall platform functionality too complex. Besides, Twitter needs to send a clearer message to potential users as to why they should open an account and engage in the platform.
In Dorsey's words:
We need to do three things. One, we need to ensure a more disciplined execution. Two, we need to simplify our service to deliver Twitter's value faster. And three, we need to better communicate our value.
Elaborating on the company's problems, Chief Financial Officer Anthony Noto explained during the latest conference call:
This low level of penetration implies that we have only reached early adopters and technology enthusiasts, and we have not yet reached the next cohort of users known as the mass market. We believe the reason is that we have failed to do two critical things. First, we have not clearly communicated Twitter's unique value, and so that's reflected in everything we do across product, content, and marketing, and as a result, non-users can ask why should I use Twitter?
Additionally, we have not delivered on meeting the new potential user's expectations of Twitter when they try the product. Simply said, the product remains too difficult to use. As Jack mentioned, we need to simplify the product so everyone gets value from Twitter faster. In short, we have not communicated why people should use Twitter, nor made it easy for them to understand how to use Twitter. This is both a product issue and a marketing issue.
Dorsey has a clear idea about what Twitter stands for, and what the company can do to realize its potential. In his own Twitter account, the executive recently wrote:
Twitter stands for freedom of expression. We stand for speaking truth to power. And we stand for empowering dialogue.— Jack (@jack) October 5, 2015
Our work forward is to make Twitter easy to understand by anyone in the world, and give more utility to the people who love to use it daily!— Jack (@jack) October 5, 2015
In this context, the company launched its Moments initiative on Tuesday. The concept is actually quite simple and straightforward: Users can tap on the Moments tab to see a collection of the day's top stories, curated and organized by the company's editorial teams in New York and San Francisco. Twitter is also allowing a small group of select partners, including Bleacher Report, Buzzfeed, Entertainment Weekly, Fox News, Getty Images, Mashable, MLB, NASA, the New York Times, Vogue, and Washington Post to publish Moments on the app.
The stories combine text-only tweets, photos, and video, and they have well-defined beginnings and endings. Moments also allows for temporary follows, meaning that you can follow some accounts for a short period of time. For example, you may want to know about a football game or a political debate, but as soon as the event is over, the accounts you are temporarily following disappear from your timeline.
The main idea is that you don't need to be a power user to enjoy Moments. Even if you don't know who to follow, or how to separate the noisy conversation from the truly valuable content, Twitter is providing an easier way to use the platform and extract more juice from it.
Whether or not Twitter can deliver sustained user growth under Dorsey's leadership still remains to be seen. However, it's good to know that the company has a clear and coherent plan to jump-start performance in this crucial area.
Andrés Cardenal has no position in any stocks mentioned. The Motley Fool owns shares of and recommends 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.