By most forms of logic, Twitter should be one of most successful social media companies on the planet.
President Donald Trump largely communicates with the American people through Twitter. He has 43 million followers between the @realDonaldTrump and @POTUS accounts, and other national politicians, media members and stock traders pretty much have to follow him as part of their job. His tweets have even moved markets (although Wall Street seems to be wisening up), and last week, Trump said Twitter was integral in getting him elected.
So why can’t Twitter turn itself into a functional company with a healthy stock price? The company’s stock closed Tuesday at $14.54 a share, well off its 52-week high of $25.25 — and significantly south of its 2013 IPO price of $26 a share.
Blame CEO Jack Dorsey and his team, said Ross Gerber, the president and CEO of Gerber Kawasaki Wealth and Investment Management and a frequent CNBC commentator. “It’s an increased value asset that’s getting more valuable every day,” Gerber told TheWrap. “And management is unable to capitalize on it.”
The company’s market cap sits at about $10.5 billion — less than half of Snapchat parent Snap Inc. In its most recent quarter, Twitter reported a year-over-year 5 percent dip in U.S. advertising revenue and only increased its monthly active user base by 4 percent. That’s despite becoming more important than ever to people involved in the information economy, Gerber said.
Twitter did not immediately respond to TheWrap’s request for comment on its fortunes in the President Trump era.
“There’s no doubt in my mind that Trump and the way Twitter is being used now has increased its value,” Gerber said. “Everybody in the media is on Twitter. It’s the place where news breaks the fastest. When something’s going on in the market, I don’t Google it — I go on Twitter. The Bloomberg terminal is old news.”
The company’s management acknowledged the Trump effect in its most recent earnings call, saying his use of the platform “shows the power of Twitter.”
“When he tweets, it sparks conversation and discussion,” Dorsey said on the call.
But Trump hasn’t sparked increased profitability or share price. “The magnitude of the impressions of the platform is so large, it’d be very hard for an event or a single person to drive sustained growth in impressions growth,” Dorsey added on the call.
Gerber said that Twitter’s “biggest issue” is its “mess” of an advertising platform, which leaves the company unable to really capitalize on its central role in public discourse and significant levels of engagement.
Though he spends six figures a year advertising on social media, Gerber said the return on investment on Twitter ads is very low compared with rivals like Facebook. “The problem is the way the platform works,” he said. “Most ads are display ads, and they have low value. They just half-ass it.”
He also criticized the company’s inability to introduce meaningful product improvements, mentioning an edit feature long sought by rapid-fire typing journalists.
“The fact that user growth is falling is disgraceful, with all the action on Twitter,” Gerber said.
Twitter’s user growth rate has declined each year, although its daily active user growth has actually improved in recent quarters, up 11 percent year-over-year in the fourth quarter — much better than its anemic monthly active user growth rate. That still lags behind more mature services like Facebook, which increased its daily active users 18 percent year-over-year. Also, Twitter does not provide an aggregate number for its daily active users.
It seems logical that Twitter would consider charging a super-premium price to place ads directly in the feeds of highly influential — and engaged — users like the 45th president, in order to better leverage its power users and provide advertisers the type of hyper-targeted campaign that’s impossible over traditional channels. Gerber said that’s currently a possibility, but the company’s muddled strategy makes it a lot less effective.
As a result of these realities, there is mounting pressure on Dorsey, who returned in 2015 to the company he co-founded with Evan Williams. (Twitter has had a revolving door of chief executives over the last decade.) “Obviously, Jack can’t run a company,” Gerber said. “A board of directors’ job is to do what’s best for shareholders. He should be fired and it should be sold.”
A digital giant like Google with an established advertising infrastructure would be a logical buyer, Gerber said.
Gerber also took issue with the company’s compensation of its executives and what he described as a “selfish” culture. “When you’re giving $600 million in options to employees when they’re doing a poor job, who’s implementing these strategies?” he said.