It’s not just the last-ditch efforts to make TWTR cool that give off an air of desperation. Through its seeming inability to actually fix its business and reignite flailing subscriber growth, Twitter has recently spearheaded a series of sad attempts to make itself relevant again.
Most of those initiatives have come since Jack Dorsey took the helm as CEO from Dick Costolo. I admit, Costolo wasn’t working, and Dorsey’s reign is still in its infancy.
And TWTR’s nearly 5% gain since its closing price on Oct. 2, the last full trading day before Dorsey was officially crowned as permanent CEO, makes Dorsey look like a golden child compared to ousted CEO Dick Costolo, who manned the helm during Twitter’s descent from $44.90, the closing price of TWTR after its first day of trading in 2013, to $26.31, its Oct. 2 closing price.
That’s more than a 40% loss. During the same time, the S&P 500 was up more than 10%.
But let’s not dwell too much on the ancient. Let’s dwell on the recent, and how Wednesday’s 2% pop shouldn’t inspire much confidence in TWTR stock.
Twitter Is a Dysfunctional Company
It’s a bad sign when the company’s co-founder is cast out then begged to return, but when that co-founder goes on to fire a ton of employees and bribe the remaining ones to stay on board with sweetheart stock deals, shareholders shouldn’t be overjoyed.
By the way, the above paragraph is relevant because it’s precisely what happened with TWTR.
Those are clear reasons no one should have confidence in Twitter stock. That, and the fact that the company has yet to post a GAAP profit, sort of speaks for itself. Then you’ve got Twitter’s outrageous valuation — shares currently trade for 43 times forward (adjusted) earnings, and nearly 9 times sales.
But I digress.
The emoji testing is a much more nuanced sign that TWTR stock is absolutely screwed. Like the “Project Lightning” secret project — it ended up just being Twitter’s new, underwhelming “Moments” feature — the decision to test emojis sounds desperate.
TWTR also recently decided to do away with the perfectly good “star” that allowed users to “favorite” a tweet, for a heart-shaped “like” button. Because that’s how you turn a company around, guys.
On top of all that, Twitter is growing its userbase slower than molasses, and its platform is already so polluted with advertisements further monetization will be extremely difficult. In fact, Morgan Stanley (MS) figures Twitter will have to grow its average revenue per user by a compound annual growth rate of 32% in order to reach its goal of doubling revenue by 2017.
Considering that Facebook (FB), the unrivaled king of social media, is only growing ARPU at 23% annually, Twitter’s revenue ambitions are ultimately nothing more than a pipe dream.
Is there a burning money emoji yet? If there isn’t, maybe Twitter should pioneer it. At least it would be relevant.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.