Quick Thoughts: TWTR: Jack’s Back, What Now?

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Quick Thoughts: TWTR: Jack’s Back, What Now?

After nearly four months of equivocating, the final hold out director on the Twitter board has finally capitulated and the company has announced what had already been discussed ad nauseam across its investors’ timelines – founder Jack Dorsey will be the permanent CEO, concurrent with his position as CEO of imminent IPO Square. This part-time arrangement was obviously the sticking point in the protracted process, but ultimately @jack’s performance in the interim role won over the skeptics. In contrast to his first run as Twitter CEO a few years ago, Dorsey has articulated a clear vision for the company and strategies to fulfill that vision. He has the enthusiastic support of a talented executive team that can compensate for his split responsibilities. The timing of the announcement, just a couple of weeks before earnings also shows confidence that the initiatives that he has been driving forward to address a stagnant registered user base and unenthusiastic reviews of the company’s consumer application are on track.

What is Dorsey’s vision? He tweeted out some of that this morning:

“Twitter is the most powerful communications tool of our time. It shows everything the world is saying …10-15 minutes before anything else. We’re working hard at Twitter to focus our roadmap on a few things we can make really great. And we’re strengthening our team along the way. 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!”

Toward that end, Dorsey and his team have been working on improvements to Twitter that are expected to roll out over the next few months. Project Lightning will offer a constantly changing choice of curated content focused on the hot topics of the day, enabling both registered users and visitors to immerse themselves in the best commentary, images and video related to those events, bypassing the “onboarding” headaches of finding the right tweeters to follow and learning how to find the right hashtags. The curation is a big aspect to this, as Twitter has assembled a team of editors ready to construct relevant event channels on the fly, freeing users from slogging through extraneous content while they are focused on a specific topic.

Twitter is also talking about ending its longstanding limit of 140 characters per tweet. Enabling a click on a short snippet to open up long form comment directly will put more of the content directly on Twitter, keeping the users within the app and speeding their experience. This will also help content partners stay in front of their audience and open up shared revenue for embedded advertising. The ability to present more compelling product descriptions could also combine with Twitter’s ongoing buy button initiative, which was recently opened to a much wider range of merchants via agreements with Shopify, Demandware, and Bigcommerce.

A search has also been underway for a chief marketing officer, with the company suggesting that a hiring announcement is close. The CMO would immediately begin presiding over a long overdue drive to educate would-be users on the value of the service and to promote the move to make Twitter easier to use. This on-going campaign could be the breakout vehicle that sets the company back on a track of strong user growth.

While investors are obviously impatient to see that user growth, they have little to complain about with monetization. Despite stagnant registered monthly user numbers, revenues continue to grow at a better than 60% clip, as advertisers recognize Twitter’s powerful native formats. The executive responsible for that growth, COO Adam Bain remains on board as Dorsey’s #2 and a critical reason why we think the part time CEO approach could work. Bain was rumored as the primary rival for the top position, but his friendship and respect for Dorsey and his enhanced responsibilities appear to leave him enthusiastic for his future with the company. This is a very good thing. The hashtag #adambainissonice trended well this summer among Twitter employees as an indicator of morale.

So Jack Dorsey now steps into the footprints of Steve Jobs and Elon Musk as visionary founders with their hands on more than one creation. Even when he was out of the day to day operations of Twitter, his position on the board kept him close to the organization, and the last 4 months an interim leader have left him comfortable and effective in the dual roles. Square headquarters in San Francisco are a short walk from Twitter, making it easy for Dorsey to spend a morning in one office and the afternoon in another, delegating execution to the strong teams on hand in both locations.

We believe that Twitter is ready for a serious breakout. The coming quarters should show continued powerful revenue growth as the fruits of Project Lightning, the marketing campaign and other initiatives re-start the growth in the user base. This could be Jack and Twitter’s “Steve Jobs” moment.

©2015, SSR LLC, 1055 Washington Blvd, Stamford, CT 06901. All rights reserved. The information contained in this report has been obtained from sources believed to be reliable, and its accuracy and completeness is not guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein.  The views and other information provided are subject to change without notice.  This report is issued without regard to the specific investment objectives, financial situation or particular needs of any specific recipient and is not construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results.

 

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