Twitter 2016 may still be looking for love in all the wrong places

Jack Dorsey, the CEO and cofounder of Twitter, is interviewed on the floor of the New York Stock Exchange, Thursday, Nov. 19, 2015 as his other startup Square goes public.
Image: Richard Drew/Associated Press

Twitter is a company that can't stop making resolutions.

In 2015, Twitter swapped CEOs and much of its executive team, began ripping apart the fundamentals of its service and invested in its first big TV commercial in a high-stakes effort to entice more users to the social network and prove to Wall Street that it can still achieve something resembling mainstream success.

Those product changes include doing away with the iconic 140 character limit (at least for direct messages), replacing the fav star with a heart and most recently tinkering with the chronological timeline. All of that has yet to move the needle for Twitter. Its user numbers have flatlined just a hair above the 300 million mark, far, far away from rival Facebook's 1.5 billion.

And the company is moving fast to make changes under new CEO and cofounder Jack Dorsey — including shedding jobs.

The question, as with all resolutions are: Will Twitter stick to them? And if it does, will it be a smarter, better-looking company?

"This is the year that we’ll see whether Twitter can finally get its growth going again," says Jan Dawson, an analyst with Jackdaw Research. "Is it going to be stuck as a roughly 300 million user company, or is it going to take itself into the mainstream?"

If the company doesn't show signs of jumpstarting growth after all this — and there is no shortage of skeptics who think it won't — then Twitter is in for a world of hurt.

"Turnarounds take time and people are willing to be patient if they see progress," says Arvind Bhatia, an analyst who covers Twitter for Sterne Agee CRT. "But if it's going in the wrong direction, then by the middle of next year there will be more calls for bigger changes," including greater scrutiny of Dorsey and a renewed push for Twitter to "get sold."

Jack Dorsey at his other job as CEO of Square.

Jack Dorsey at his other job as CEO of Square.

The worst cast scenario

A lot of tech companies have outlived the prophecies of doom targeted at them. Facebook was supposedly doomed on smartphones and tablets. Google spent too wildly and wasn't as profitable as it should be. Twitter couldn't attract enough users to justify its lofty valuation.

Facebook and Google each eventually debunked these narratives with strong quarterly performances.

Twitter, on the other hand, has yet to prove Wall Street wrong.

The Twitter faithful are sometimes fond of saying there's nothing wrong with the social network. It has 300 million users, which includes some of the most influential figures in the world including senators, presidents and even the Pope. Instead, supporters say, Twitter's problem is that everyone wants it to be Facebook.

That's true enough. But while Twitter's problem starts on Wall Street, the fallout from a failure to grow will extend all the way back to Silicon Valley.

The doomsday scenario next year isn't just that Twitter's stock will fall further.

The doomsday scenario for Twitter is it could stop growing its user base, which will in turn mean less profit from advertisers looking for mass audiences and tech-savvy millennials. Twitter is already trying to forestall this by asking marketers to pay to reach Twitter viewers who don't actually use Twitter.

So if Twitter can't grow its user base, the jig is up.

"If things continue to go in the wrong direction, it will be tough for them to hire anybody," Bhatia says. "The market cap will continue to erode and along with that there will be more pressure from investors."

Twitter might remain a 300 million-400 million user social network — again, an enviable feat by almost any sane standard — but it would be a worse social network in some sense than it was before. It would be a service gutted and reworked for the sake of appealing to an audience that never arrived; it would be a service with less resources and clout available to hire talented staff and invest in the future for the people who never left; it would a service with its own future very much in doubt.

Image: Mashable, Christina Ascani

Nothing is sacred

That, in a nutshell, is why you can expect to see Twitter gutting itself in the coming year: Nothing is sacred when you're scared.

"I’ve challenged our teams to look beyond assumptions about what makes Twitter the best place to share what's happening," Dorsey said on an early conference call with analysts after taking charge of Twitter again.

Those efforts, which began under Dorsey's predecessor Dick Costolo and ramped up in earnest in 2015, have included (not in chronological order because Twitter isn't about that any more): Moments, for curating news stories on Twitter; While You Were Away, to recap news you may have missed; Periscope, to shift from text to live video; and expanding the character limit for Direct Messages to get a piece of the broader messaging market.

And it's not stopping there.

"They are going to change the way tweets work. They have to. That's part of the problem," says Brian Blau, an analyst covering the major social media companies for Gartner. "They are going to get rid of the 140 character limit. They are going to change the timeline algorithms." (Twitter has already teased both options, making it that much more likely.)

In short, Blau says, Twitter's team is "going to make it more accommodating for people who have tried Twitter and didn't like it."

It is in essence the very definition of desperation: to change every aspect of yourself in order to court someone who has already rejected you.

More to the point: it's anything but guaranteed to work. Twitter has already made a bad first impression on the millions of people who tried it and left. Why should they come back?

The contingency plan, according to multiple analysts, is simply boosting the number and types of ads it serves to make more and more money off the users Twitter already has and show some kind of continued growth, at least for the time being. To that end, Twitter is now testing ways to advertise to the hundreds of millions of people who check Twitter, but don't sign in.

The downside here is obvious. A company that overhauls its product to court people who never come, while bombarding the people who actually do use it with more and more ads is basically asking to piss off its most loyal users. On this point, at least, Twitter watchers aren't particularly worried.

"They will stick with it," Blau says of the users. "There aren't a lot of alternatives."