After years of underperforming, a buzz is beginning to build around Twitter. Could certain pivots pave the way for real progress in the company?
Aug. 10, 2020
You’ve probably seen hundreds of articles with the title “If you invested $1,000 in Apple (NASDAQ: AAPL)/Netflix (NASDAQ: NFLX)/Insert Big Company Name Here at the time of its IPO, you’d be a quadrillionaire right now”. Well playing this game with Twitter (NYSE: TWTR), if you invested $1,000 at the time of its IPO, you’d now have slightly less than $1,000.
It’s a bit of a head-scratcher to see the growth of the importance of the platform in those seven years, juxtaposed with the relative stagnation of its stock price. While the great hack which had the CEOs of Amazon (NASDAQ: AMZN) and Tesla (NASDAQ: TSLA) panhandling for bitcoin last month was less than ideal for Twitter stakeholders, it shone a light on how pivotal a platform it really is to global communications. When we consider the extent of the security breach and the potential geopolitical and financial outcomes that could have arisen, $100,000 in bitcoin is not a bad price to pay. So much political, financial, and marketing messages meet their audience for the first time in the form of a Tweet. Imagine the fallout if the hackers at the helm had more sinister intentions at heart. Which brings me to my point: for a long time there has been a disconnect between the power of the platform and the ability to monetize it.
The constant comparisons with big brother (this wording is as deliberate as you think it is) Facebook’s (NASDAQ: FB) ascendancy are also damning. The problem with Twitter is a seeming lack of impetus. Perhaps the most meaningful innovation to come from the company in the past five years is upgrading the length of a Tweet to 280 characters. When we compare that to the acquisitions and new products launched by Zuckerberg & Co, it’s laughable. Love him or hate him, the guy had the balls to attempt to launch a global crypto-currency in his spare time, in between being hauled in front of congressional hearings. It seems that if Twitter’s board had half this gusto, we’d be looking at a much bigger company right now.
Is the tide turning?
Two recent news stories indicate that there may be a turning of the tide in Twitter HQ. The first is the exploration of a subscription model. This feeds into my point earlier about the power of its platform without an ability to monetize it. Twitter’s disappointing ad revenue could be supplemented by a subscription offer that would capitalize on some of its most devout users. CEO Jack Dorsey, who also has a side gig running high-flying payments company Square (NASDAQ: SQ), has said that it is in “very, very early phases of exploring”, such a model. While such a decisive and bullish testimony isn’t going to initiate a buying frenzy, the sentiment of exploring new revenue streams is a welcome one for the downtrodden long-term holders of Twitter stock.
The second story is Twitter adding its name to the inexplicably short list of suitors vying to purchase TikTok. The Wall Street Journal broke the news that preliminary talks were held between Twitter and TikTok over ‘a possible combination’. Given the advanced stage of talks between the Chinese-owned social media company and Microsoft (NASDAQ: MSFT), as well as Twitter’s relatively meager market cap of $29 billion bringing a few questions marks over how they’d pay for such a deal, it’s fair to say it’s an underdog in this race. However, the initiative in attempting to pounce on such an acquisition inspires confidence for shareholders where there hasn’t been for quite some time. The fact that the company discontinued Vine, the social media company that walked so TikTok could fly, makes the talks all the more ironic.
It seems that activist investor Elliot Management has lit a fire under the Twitter board since it took a stake in the company back in March and the results are encouraging. While it is all just talk at the minute, it seems that there is a sense of long-missed gusto behind the originators of the Blue Tick and I’m excited to see where it leads. While I don’t own any shares in Twitter, it’s now one I’ll be watching closely for the rest of the year.
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