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The Fall of Twitter Inc (TWTR) Stock Continues With China Shock

Twitter is going through yet another turnover of top management. But TWTR's real issue is the lie it keeps telling itself.

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.

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And only if CEO Jack Dorsey (or whoever runs it) recognizes their responsibilities as operators of a media company and take control of it.

That starts with respecting truth and filtering out lies, as well as responding to political controversy actively, as a media company would, rather than passively as a phone company does. It means understanding the one-to-many nature of media, accepting something called social responsibility and seeking to maintain editorial balance.

Chen often was criticized for having worked for the Chinese military, for having been a political officer and a political hire. Every real media company makes such hires to balance their own editorial direction with that of the society and markets they serve. Every successful publisher reflects the business interests of their readers, and every successful editor balances it.

When the people running a medium fail to run their own medium, others will run it for them. That’s what Donald Trump did. Trump is the real CEO of Twitter, and of Facebook. He will remain in charge until those who own it take responsibility for what they have created.

TWTR had power — even while it denied that it had power. Twitter’s only hope for survival is to acknowledge that power and use it responsibly, as a media company would.

Dana Blankenhorn is a financial and technology journalist. His latest novel is Bridget O’Flynn vs. Something Big & Ugly. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2017/01/twitter-inc-twtr-stock-china-shock/.

©2017 InvestorPlace Media, LLC