Wall Street Could Be Twitter’s Undoing

Wall Street has placed some heavy expectations on Twitter and similar tech companies, making it difficult for them to rise to the occasion. Twitter has had issues with investors over the last year, struggling to get their earnings up to scratch. Now, there’s more pressure on the company to perform.

The most glaring issue with the company was their fourth quarter of last year. Typically, there are 320 million monthly active users, but in the last three months of 2015, that number dropped to 305 million, excluding those who receive tweets via text. It was far short of analyst expectations and has investors wondering if Twitter will be able to live up to its claims and attract a larger audience.

Right now, Twitter is still a popular website for individuals and businesses alike. It’s the way that individuals keep up with friends, family, entrepreneurs, and celebrities. For businesses, Twitter is a conduit for improving customer relationships, marketing, and raising brand awareness. It’s become indispensable for the hundreds of millions of monthly active users, but Wall Street is not satisfied.

Because of the criticism, the stock is down 68 percent over the last year. Since going public in 2013, the company was forced to lay off 8 percent of their staff, including dozens of high-level executives.

In an effort to save the company and its earnings, Jack Dorsey, who co-founded the company almost 10 years ago, deemed it necessary to step in and take over as CEO in an attempt to improve the performance. Dorsey has made a lot of changes to get the company closer to where investors want it to be.

Jack Dorsey was the co-founder of Twitter during it's startup. After it was founded, he moved on to another endeavor called Square, where he's the current CEO. Seeing that the company needed a boost, Dorsey returned and is now the acting CEO of both Twitter and Square. (Photo by Scott Olson/Getty Images)

But could it be that it’s not the people inside the company or the practices the company pursues that’s the problem? Could it be the fact that the company went public and let Wall Street have the control? Investors are looking for growth of disproportionate sizes. Facebook has the same amount of daily users as five Twitters. Even Instagram, which has only been around for half as long as Twitter, has already passed the mark of 400 million users.

Wall Street has come to expect companies like Twitter to grow to the size of Facebook, and if it’s not on track to do that, investors take issue. Still, it may not be all Wall Street’s fault that Twitter is struggling.

After the company went public, expectations for Twitter rose. Now, it's not performing up to investor's hopes, which is bad news for the company. (Photo by Andrew Burton/Getty Images)

With the added pressures from investors, the company has been taking its primary focus away from its users and the service as a core. It recognizes the prevalence of Facebook and the need to grow like that corporation, but it’s trying too hard to be like Facebook by adding in multi-media options and various advertisement options. The company has no chance of taking over the social media giant, and it’ll be better off expanding upon its own market.

In addition, the company is beginning to focus more on revenues than on those who keep the company running. They’ve beefed up their ad campaigns and put special emphasis on targeting non-users when they should be targeting the current active users.

“The issue is Wall Street expectations, but it is also Twitter’s resistance to accepting itself as it is,” says Emily Jane Fox, a contributor for Vanity Fair. “Its goal should be to keep its core users, who live and die by the service, happy, and not throw itself at the changing whims of an impossible-to-please Wall Street that may never be satisfied with what the company is able to do. That may mean that Twitter is better off delivering its utility under the umbrella of a larger company better able to appease investors, so that Twitter can focus on doing what Twitter already does best.”

As Fox describes, if Twitter stays under the thumb of Wall Street’s lofty expectations, it could very well be the company’s undoing.

[Image via Andrew Burton/Getty Images]