The microblogging service more popular with its 140-character "tweet" feature, Twitter, is celebrating its one-year anniversary as a public company. Employees of the company threw a "massive party" in the office to celebrate. Then they went off to private parties hosted by Twitter alumni. With a stock soared 58 percent from its debut, the company caught the appreciations from many investors. However, its performance is less than expected.
Twitter's performance in the stock market as a public company is still above many other technology companies such as social games maker Zynga, or deals site Groupon. Twitter's stock price has jumped incredibly high in its first day of trading, opening at $45.10, the price rose 73 percent from its $26 initial offering.
And after a year, Twitter has doubled its revenue, making it sit on plenty of cash. The company also outperformed Facebook in its early days of IPO, but that however has been reversed. Facebook's stock that went down 31 percent from its debut price, has soared on the success of its mobile advertising business.
The microblogging service that first announced that it would file an IPO in September 2013, touted its global reach and potential during its pitch to investors, asking them to focus on monthly user numbers. However, the numbers ended up slowing. CEO Dick Costolo is dealing with the backlash, even as the company's digital-advertising business is performing well.
After a year, the share price is lower at roughly $41, sunk to a new low as investors are becoming worried that the company's growth has come to a halt. And beside the near record-low enterprise value of 19.8 times trailing 12-month sales, the company also continues to spend money faster than it can gain sales.
Twitter's lack of performance is seen from beginning when the company shifted its workforce. Costolo replaced many of Twitter's top executives since the IPO. Included in the process was: Chief Operating Officer, Chied Financial Officer, Head of Engineering, and Head of Product.
While sales climbed 114 percent to $361 million, Twitter has loss $175 million in the third quarter of 2013. The reason for this was because Twitter spend more money to hire new engineers and for its venture to expand internationally. When the expenses doubled, users rose 23 percent, or down from 24 percent growth in the prior quarter.
After the soaring share price, "Larry the Bird" has its wings clipped. Twitter's initial success was disguising the fact that the company is still searching of a direction for its product. The social media industry is 'hot', and that means popularity can go incredibly high or incredibly low very quickly.
The Three Circles for a Shift of Strategy
Over the week, Dick Costolo has called a series of meetings with his managers. He described three circles on a whiteboard. "This is how the company should be described going forward," he said, referring to what he called "geometrically eccentric circles."
One circle represents core users of the social media; the second circle is for those who visited the site but didn't log in; and the third circle was for people who saw Twitter's content embedded on other websites.
Costolo wanted to capture all three groups rather than just targeting active users. This is a change of strategy by Costolo. Early this year, when Twitter came to 6 months after IPO, he said that the company needed to emphasize its broader audience, beyond those who logged in at least monthly. His goal at that time was to stop investors from comparing Twitter to Facebook that has five times as many users.
This may work in Twitter's early years where the company is still building its presence. But after the IPO, Twitter that is now valued at $35 billion has become a powerful communication tool. And any changes, from necessary to the minor ones, can reflect massive changes.
With the new strategy, close people to Costolo saw him as lacking the consistency vision for business. His new management style described his as a reactive thinker who can quickly jump from one idea and conclusion to another. As Costolo struggled to define the company's vision, people are starting to lose confidence in him.
Despite Costolo isn't one of the founders, and he doesn't have a controlling Twitter's stake, many people see Costolo's way of leading the company is further handicapped by having a founder that lacks the vision for the product.
Huge Potential Waiting to be Unleashed
Twitter has a huge amount of potential. With massive user base and active people sharing daily, Twitter has the ability to perform well, and can ever par with Facebook in term of influence. The problem is only whether the company can monetize all that traffic for greater goods.
As a start, many new Twitter users have found it hard to figure out how to use the service. Twitter isn't helping much because its lack of guide throughout its platforms. Moreover, Twitter is under fire for having an abuse problem, particularly against women. And beside being slow in moving out, the company is also slow in solving problems.
Employees have long debated about what Twitter needs to be. Some has expressed disappointment in Twitter's way to become more like Facebook.
Twitter still have more work to do in term of resolving what the people in the company want to do. Twitter is missing its understanding of success, and a clear plan to build on that success without undermining it. Since Twitter wasn't trying hard to be successful, the company has no fear of changing anything for a long term vision.
To become what had once made Twitter popular and reliable, Twitter must figure out what it needs to be. And soon, "Larry the Bird" can eventually has its wings healed.