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After the IPO, Twitter Can’t Rest on its Laurels

Once a company goes public, there might be a lot more work ahead to keep investors interested. This is especially true for tech companies who are in a fast-changing global market where competition, acquisitions and the Internet change daily.

As I think of the many stages of development that the Internet itself has gone through, I am reminded of the pop music market. Record labels are often pushing young talent to adapt as they and their audience base matures. Tech companies can learn from this business tactic and continually re-invent their companies to stay on top.
 
Let’s look at what Twitter’s done since their recent entrance into the stock market, just this past November....

In their 2014 first quarter report, Twitter announced that revenue had more than doubled but monthly active users showed only a modest increase of 5.8%. By the end of April, Twitter shares fell more than 10%. Since Twitter’s sales come from advertising, there was concern over the lack of user growth and the ability to continue selling advertising.

This past February, even Twitter acknowledged an issue with their user base growth and that new users find the Twitter service difficult to use. They planned to make modest changes with the intent to make it easier for these new users. In response, they added Twitter profiles, like Facebook, and prior to that they had enabled tweets to have photos and videos. But some have said these efforts have not been enough to make the service more engaging or easier to use.

The bottom line is that tech companies need to come up with ways to reinvent themselves so they can stay on top of the market and respond to consumer needs. Maybe Twitter will see the need to make more than just ‘modest’ changes to increase its user base and satisfy investor confidence.

Marc Fogarty, Audit Partner and a member of EisnerAmper's Public Companies, Cleantech and International Services Groups. Marc is experienced in public accounting, serving public and private organizations and has presented on IFRS to professional groups.

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