With Twitter’s acquisition hopes essentially dead, the company now seems it’s on its own to fend for itself and needs to figure out a way to build a reasonable and profitable business.
Today, it got a much-needed good Q3 performance by largely beating Wall Street’s expectations across the board. The company also confirmed that it would lay off roughly 9 percent of its staff as it looks to restructure itself into a company that can continue to run on its own and keep Wall Street happy. Those layoffs are targeted at sales, marketing and partnerships, the company said, confirming an earlier TechCrunch report.
Twitter reported earnings of 13 cents per share and revenue of $616 million, and the service grew to 317 million users. Analysts were looking for earnings of 9 cents per share on around $606 million in revenue, as well as 315 million monthly active users.
After the rare beat — and a rush of optimism — Twitter’s shares rose 5% in pre-market trading. Ironically, by Twitter standards, this isn’t that much of a swing, but it surely must be a breath of fresh air for the company’s executive team and employees which have seen the company’s stock continue to stumble for the past year.
As Twitter looks forward, the company isn’t even going to be reporting revenue guidance — a tradition for many technology companies as it looks to set expectations for Wall Street in the coming months. That seems largely because the company is going to be restructuring its sales teams as it “will move from three sales channels to two.” It seems that Twitter’s restructuring this time around is going to be a big rejiggering of the company’s core business driver, so we’ll have to see where things land next quarter.
Earlier this week it was reported that the company would lay off as much as 8% of its workforce — or 300 people — according to Bloomberg. We reported that, in these layoffs, the sales team in particular was being targeted. While for a long time business head Adam Bain was seen to have built a strong business, in recent quarters Twitter’s ability to grow its sales have become a question mark, especially as Facebook continues to add new users at a healthy clip and emerging platforms like Snapchat are growing like crazy and enticing advertisers.
Once again, it looks like the company’s sales is still not growing as fast as it needs to, especially as a company like Snapchat is looking to generate as much as $1 billion in revenue as it looks to IPO at a valuation as high as $35 billion next year. Twitter did better than Wall Street expected, but it needs to figure out how to re-ignite that growth engine.
Under Dorsey, the company has said it’s going to try to make the service as straightforward — and less confusing — as possible. But in his first year, not a lot has been done outside of taking away character count contributions for some media and most recently for @ mentions. Twitter’s largest problem, its trolls, haven’t also been addressed at a product level. That final problem even scared away suitors like Disney and Salesforce from buying the company.
Even a cursory look at Dorsey’s tenure doesn’t show much for the company’s potential. Its stock has fared very poorly since he took over a year ago, user growth has slowed to an absolute crawl, and revenue growth appears to be tapering off. One of Twitter’s additional largest problems is its stock-based compensation costs, which sits in the hundreds of millions, as it attempts to hold onto as much talent as possible.
Twitter’s paltry user growth continued today as it grew only a few percentage points, once again showing that the company still needs to figure out a way to capture new users. A lot of that is going to have to come from making the service less confusing and more palatable for on-boarding, but it still just isn’t quite there yet.
As its stock continues to tumble, so too do its hopes to attract as much talent as it can. For a company that rarely releases product updates — and often finds backlash when it does — Twitter needs to make sure it has the right people in place if it’s going to end up creating updates that its users are going to find valuable and fire the business back up again.
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