Twitter's stock just hit its lowest point. Here's why.

Twitter's shares have been plunging recently, reaching their lowest point since the IPO. But with the company beating earnings expectations in its recent results, with revenues of $502.4m, up from $312.2m one year earlier, you might expect stock prices to be on the increase. So why, with all this supposed good news, are shareholders getting cold feet?

A bit of background

Twitter, from a revenue perspective, has been reasonably successful. From a brand and advertising perspective it continues to be gaining ground. In an isolated environment where we look at just the financial and activity of the present, Twitter is doing pretty well. 

But investors are never too concerned with the present. They want to be able to envisage their investments growing on a massive scale over the next few years. To do this Twitter needs to grow its user base vastly, and this is where the root of the problem is. 

Starting around 10 months ago, there began to be serious concern as to Twitter's user growth rate. It just didn't seem like the platform was attracting many new users - people were finding Twitter too intimidating a prospect and too difficult to get into.

To put this into perspective, in the last quarter Facebook gained over 32m users, a 3.47% growth on the previous quarter. Twitter is paling in comparison. Last week its latest results suggested a user growth of just 8 million (2.6%).

This slow growth led to the previous CEO, Dick Costolo, stepping down in June. In his place co-founder Jack Dorsey became Interim CEO. Share prices rose by 3% at the news that new blood might reinvigorate stagnating growth, but at this point all eyes were already on the forthcoming results. 

That's when things really came to a head. Despite promising revenue numbers the results still showed a lack of momentum from the company. If you're interested in watching the earnings call that started it all, check it out here. 

As Jack Dorsey said himself: "we are not satisfied with our growth in audience". In fact, the whole call was a bit of a bummer for any investor. Dorsey and Chief financial officer Anthony Noto were both very straight talking, with very downbeat comments about the immediate future of the company. 

“Product initiatives we’ve mentioned in previous calls haven’t yet had meaningful impact on growing audience and participation,” interim CEO and co-founder Jack Dorsey said on a conference call with investors. “This is unacceptable, and we’re not happy about it.”

Noto said the company is in “turnaround” and that efforts to ignite user growth could take “considerable” time.

What does "turnaround" mean for Twitter?

In the earnings call Jack said: 

In order to realize Twitter’s full potential we must improve in three key areas: ensure more disciplined execution, simplify our service to deliver Twitter’s value faster, and better communicate that value.
— Jack Dorsey, Interim CEO, Twitter

Dorsey has various ways in which he plans to tackle this. The most bold of which is changes to the timeline most associated with the channel. Currently ordered by most recent first, there are suggestions that this might change: "We need to balance recency with relevance". A controversial move for many but one which will look to help tackle the value issues that Dorsey mentioned. 

Twitter already made a step towards this with the "While you were away" feature, which displays the most engaged and important tweets from those you follow that happened while you were offline. 

An upcoming product called "Project Lightning" will also offer live events-based curated feeds when it rolls out later this year. Buzzfeed reports that "The new tool will give the company a way to show the best of Twitter to both logged-in and logged-out users on a variety of platforms. It will have instantly loading videos and rich images, and will occupy a front-and-center location in an upcoming version of the Twitter app."

Dorsey said himself though, these changes will take time - and while Twitter continues to grow and is still a vital channel for brands, big changes may be round the corner to help cement its place alongside Facebook.