Twitter, Inc. (TWTR): Better Off Keeping Things Simple?

Twitter Inc (TWTR) needs to innovate, not overhaul its business model

by Josh Selway

Published on Dec 31, 2014 at 10:45 AM
Updated on Apr 20, 2015 at 5:32 PM

Twitter Inc (NYSE:TWTR) needs to innovate, just like all companies. But I think investors and media members need to pump the brakes a bit on their expectations. If Twitter does too much too soon, it could ruin the product that people have come to enjoy. I love Twitter as much as anyone. I'm on it constantly. But even I have become annoyed with the myriad changes I've seen throughout this year. For a while there it seemed like my Twitter had an update daily. Not all the changes were bad, per se, but they were too frequent. Twitter was trying to please shareholders, trying to do too much, too quickly. And by doing so, it jeopardized its identity.

TWTR doesn't need to fire CEO Dick Costolo. Twitter doesn't need to think about selling itself, or changing the direction of its company. And it doesn't need to worry about diving into virtual reality or anything remotely close to that. Twitter doesn't need to make any monumental changes. At least not yet. It just needs to keep being Twitter.

People enjoy Twitter for its simplicity; a live feed of short messages that you can personalize to your liking. One second you could be reading a serious tweet about the Dow Jones' latest movement, the next second you could be reading … whatever this is:

Twitter is a great product that has a very useful place in our society. Journalists use it all day, every day. It has helped writers launch their careers and has helped brands grow. Twitter's design has allowed users of all kinds to take advantage of it in all kinds of ways. However, great products don't always make great stocks, as has been the case with Twitter.

Since going public in November of last year, TWTR shares have been all over the place. Now, it's normal for young stocks to see volatility, but the sentiment on the Street surrounding Twitter has seemed to change each week -- one second it's the next big tech stock, the next it's just another social media fad.

For the most part, though, Twitter has struggled on the charts, dropping 42.6% year-to-date, and underperforming the S&P 500 Index (SPX) by a painful 72 percentage points in the last three months. Clearly, Twitter needs to do something. But instead of overhauling its entire platform or completely giving up -- which have both been suggested by analysts and media members alike -- Twitter should keep getting better at what it's already good at: providing a useful, simple tool to a loyal user base.

Twitter's black eye has been its lack of user growth, with shareholders scoffing at its last earnings report in October. But Twitter's success doesn't depend on user growth -- it depends on getting the most out of the users it already has, and allowing advertisers unique ways of reaching them. Oh, and by the way, it's doing that -- its ad revenue continues to increase.

The "major" changes that Twitter should make are the things most people don't see or even understand -- algorithms that help marketers, increasing exposure for brands, things like that. If I get on and think that I accidentally signed on to Facebook Inc (NASDAQ:FB), things are going in the wrong direction. It hasn't all been bad, though. I felt that the "buy" button was an interesting tweak that could lead to larger possibilities, without disrupting the user experience. There are some other areas where small changes could make a big difference, allowing Twitter to innovate while maintaining its simplicity. One idea is to allow even more personalization on users' timelines, perhaps by allowing them to create different feeds for different types of handles -- i.e. feeds for "Comedians" and "Sports Writers." Users can already create "lists" which they can name and add handles that fit whatever criteria they like. The problem is that maneuvering between lists is messy -- you have to cycle through several screens just to view your different lists. Streamlining this process would provide a better experience.

The other part of Twitter that could be updated is the search function. One of the coolest aspects of Twitter is that it is allows you to see what others around the world are saying in real time. However, it doesn't seem like the search function has been a major focus for Twitter. Updating this part of the platform would make Twitter a much more powerful tool, without disrupting the main user experience.

Obviously there are plenty of other things Twitter Inc (NYSE:TWTR) could do to enhance the user experience, but those don't need to include selling itself or completely changing the direction of its business. Maybe down the road it could consider those possibilities and others, and maybe then it could get rid of Dick Costolo if he still hasn't delivered. But for now, let's give Twitter some more time to be Twitter, and see what happens.


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