March1,2021 BARRON’S 9
FOLLOW-UP
How Twitter and Jack Dorsey
Proved Investors Wrong
“Why don’t we start with why folks
don’t believe in us,” Dorsey said to his vir-
tual audience. “It comes down to three
critiques: We’re slow, we’re not innovative,
and we’re not trusted.” He then explained
how Twitter decided to invest time in re-
building its technical infrastructure. With
that foundation now in place, the company
believes it can roll out products faster—in
weeks, instead of months.
New features are aimed at helping users
find topics of interest, without endless
scrolling. Aided by machine-learning,
Twitter’s discovery tools direct users to
new evanescent posts called Fleets and
audio conversations in Spaces, its answer
to popular app Clubhouse.
Dorsey reviewed efforts to improve the
transparency of moderation decisions, like
those that labeled, and eventually blocked,
misleading tweets by Donald Trump.
Twitter sees plenty of growth ahead. In
Thursday’s presentation, executives noted
that the company has less than a 3% share
of the estimated $150 billion digital adver-
tising market. Most of its ad revenue has
come from major brand campaigns. Going
forward, Twitter wants to draw half of its
ad revenue from the “direct response” ads
and e-commerce transactions favored by
smaller advertisers.
Chief Financial Officer Ned Segal told
Barron’son Thursday that Twitter’s build-
out of advertising features has moved from
brand campaigns to direct-response, since
Dorsey returned as CEO in 2017. “The
sequencing is to first improve the areas
that you’re best at, and best known for,”
Segal said, “and then build on top of it
when you’ve earned the right and the cred-
ibility to go further down the road map.”
This time, investors are giving Twitter
the benefit of the doubt. The company now
sports a market value of $61 billion, 11
times expected 2022 sales. That’s double
the sales multiple fetched by Facebook,
despite a similar top-line growth forecast
of 20% for both companies. Twitter’s
show-me story now looks fairly valued.B
T
witterwas center stage for the
Trump era’s conversations and con-
troversies. For most of that time,
though, the social media platform
remained a show-me stock. Well, co-
founder Jack Dorsey has shown ‘em.
Twitter (ticker: TWTR) rose 7% this
past week, closing Friday at an all-time
high of $77.06. The rally came after the
company used its first analyst day in four
years to unveil ambitious growth goals. By
the end of 2023, Twitter wants to increase
its average daily users to more than 315
million, from about 200 million today, and
double its annual revenue, to $7.5 billion.
Barron’swas early to Twitter’s turn-
around. In a bullish cover story last June,
Dorsey told us: “Some people don’t under-
stand why we haven’t realized our full op-
portunity. And to that I say, ‘We will.’”
Dorsey was responding in part to pressure
from activist investor Elliott Management.
Since our story, Twitter shares have
soared 121%, outpacing a 34% rise in the
Nasdaq Composite Index and a 12% rise
for social media rivalFacebook(FB).
Dorsey has led Twitter’s turnaround
while simultaneously running the elec-
tronic payments firmSquare(SQ). His
no-nonsense focus was evident throughout
Twitter’s analyst session. In a hoodie and
his gray-flecked quarantine beard, Dorsey
directly addressed the doubts that have
dogged the company for several years.
BY BILL ALPERT
TWTR / Nasdaq
Source: FactSet
Cover Story,
June 5, 2020
$34.
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- Jim Cullen, Chairman & CEO
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