After reporting worse-than-expected user growth and guidance when it released its third-quarter earnings report last week, investors are pondering what to make of Twitter's (TWTR +0.00%) future. Key to understanding the company's potential is an understanding of how management views the Twitter's current situation. With that said, here's a look at some key quotes from the company's most recent earnings call.
Twitter's new Moments product. Image source: Twitter.
Moments is just the beginning
Just as the company's third quarter closed, Twitter launched a new product called Moments, which makes finding and following key events easier. While the product marks a major step for the platform, the company says there are more changes to come.
"Moments is just the start of bolder simplification efforts you will see on Twitter," said CEO Jack Dorsey during the call.
He continued: "I've challenged our teams to look beyond assumptions about what makes Twitter the best place to share what's happening. I'm confident our ideas will result in the service that's far easier to understand and much more powerful."
User growth potential: better than you may think
The company's less than 1% sequential user growth of monthly active users when excluding its SMS Fast Followers prompted more concern about the company's user growth when it reported third-quarter results. Even Facebook (FB +0.23%), with its 1.5 billion monthly active users, compared with Twitter's 320 million, is growing faster. During Facebook's second quarter, the company's monthly active users grew by 3% sequentially -- handily trumping Twitter's user growth ex-SMS Fast Followers and even more than doubling Twitter's sequential monthly active user growth when including SMS Fast Followers.
Chart source: Twitter.
Adding to the pressure, Facebook's other platforms -- WhatsApp, Instagram, and Messenger -- are all growing faster than Twitter, too.
But Twitter remains optimistic about the company's addressable market for further user growth. Noto reminded investors during the call how the company thinks about its user growth potential.
With Tweets and Twitter handles displayed on television, and tweets embedded in articles all over the Internet, Noto said the company benefits from "over 90% global brand awareness" in its most important global markets. And in those markets with over 90% brand awareness, Noto said Twitter has less than 30% penetration with monthly active users.
"[I]t's our opportunity to turn those numbers of monthly active users into where our awareness is," Noto explained.
In other words, the company believes its addressable market in its most important global markets is three times the size of its current monthly active user counts in those regions.
The overarching strategy remains the same
The company says it will address its slowing user growth with the strategy it has been communicating with investors clearly since Dorsey returned as CEO:
"[W]e have to simplify the product," Noto said. "We have to have very clear communications of value. And we have to execute discipline to bring that all together."
Management noted that Moments, which required a cumulative effort from all of Twitter's teams -- even including marketing and communications -- represented a new, nimble, and fast-paced product rollout approach. Going forward, the company wants to execute with this same precision.
Expect big changes
Management knows it's going to take more than a simpler product and better marketing to reinvigorate user growth.
"[U]ltimately our products need to change in a fundamental way to appeal to that next cohort," Noto said during the call.
Expect Twitter to make some big changes going forward. Could lifting the company's 140-character limit be one of these changes?
Combining a big vision for more growth, a revitalized cadence for product launches, and a willingness to make bold changes, the company has a stock whose recent sell-off is beginning to look like a buying opportunity.
