The rise, fall, and fall of Twitter Inc (NYSE:TWTR) continued over the holidays with the departure of several key executives, including the head of its China operation, Kathy Chen. Chen left with a 12-tweet message (just six were needed in Chinese) which called her reign from Hong Kong a success because of a 400% revenue increase in “Great China,” which includes Hong Kong, Macau and Taiwan. TWTR itself is banned in China proper.
In addition to Chen, who had only been managing director for the China region since April, 2016, chief technology officer Adam Messenger and chief operating officer Adam Bain also left the firm. Twitter stock held firm amid the chaos, though, and were set to open 2017’s trading at $16.45 per share.
What Silicon Valley Does Not Know
Twitter’s problems illustrate a larger problem for Silicon Valley: a profound ignorance of media with enormous repercussions for the world.
Like Facebook Inc (NASDAQ:FB) and Alphabet Inc (NASDAQ:GOOGL), Twitter has long maintained it is not a media company at all, but a “social networking” company whose content is entirely user-generated. This occurred even as politicians like Donald Trump essentially hacked the services, controlling the media to get elected.
Social networking turns out to be both a communications mechanism and a media outlet. Even during TWTR’s glory days, its primary use was for celebrities and brands to reach fans and buyers. It was never really a two-way street. It was a one-to-many medium.
Media companies like New York Times Co (NYSE:NYT) and even InvestorPlace know they’re media companies. Their decisions reflect political calculations as well as the public interest, which must be balanced for a media company to maintain credibility with a variety of publics, its own users, politicians and the financial community.
Twitter ignored all this, seeing credibility as irrelevant and news management as an unwelcome cost. One result is the Trump presidency. Another result is poor financial performance — revenue growth for 2016 is expected to go down to 10%, and the company has never made a profit. Another is awful performance for TWTR stock.
As a financial investment, Twitter peaked long ago, and its board held onto the asset too long, just as many Silicon Valley unicorns remained private until results started falling and they were forced into “down rounds,” selling more stock at a lower valuation, to get the cash needed to continue operations.
Can Twitter Be Saved?
Yes, there is salvation for Twitter … but only as part of something larger.