After exodus, Twitter is downgraded, stock falls 4 percent

Steven Loeb · January 25, 2016 · Short URL:

The company's struggles continue as its stock has lost over 26 percent of its value this year

With the rumors, and then confirmation, of a mass exodus of executives from Twitter on Sunday, everyone should have been expecting the company to have a bad day on Monday.

While Monday was not good for Twitter by any means, it could have been worse. A lot worse. So maybe that's something.

First, the company was downgraded by Scott Devitt, analyst at Stifel, who had only recently upgraded the company in the third quarter of last year, after being a "long-time detractor," because he thought that there was "the possibility that the company may finally be focused on fixing its product and strategy problem."

Now, with so many high ranking employees leaving, Devitt took the stock back to Hold.

"While we may not be the sharpest tools in the shed, we don't see how the departure of the heads of three major business divisions can be viewed as a positive in the middle of an attempted business turnaround," he wrote in a note, ending with "sorry."

Stifel was the only firm to downgrade Twitter, but it is far from the only one to express unhappiness with these developments.

“At best – for investors – [the changes] likely delay the timetable of any turnaround,” Citigroup analyst Mark May wrote in a note. He maintained his “neutral/high risk” rating on Twitter shares.

 SunTrust Robinson Humphrey analyst Robert Peck reduced his rice target on Twitter from $34 to $26 per share, but kept it as a buy.

"Investors we speak with are almost universally negative on Twitter and its prospects," he wrote in a note early Monday. "While we never like to see executive turnover and one could infer that there are product and media concerns in the [short term], we continue to think that [long term] Twitter presents an interesting opportunity for investors.”

As a result, Twitter saw its stock drop to $17.02, losing 82 cents, or 4.6 percent. That is the second lowest close in its entire history, beaten only by its close at $16.69 cent on January 19 of this year.

Twitter has now seen its price drop nearly 26.45 percent since the start of trading this year. It has lost over 75 percent of its value since hitting a high of $69.96 in December of 2013. It is down over 34 percent from its $26 IPO.

Executive exodus

Twitter lost five high profile employees on Sunday: Katie Jacobs Stanton, the company’s VP of global media; Kevin Weil, it's SVP of product; Alex Roetter, who is and SVP of engineering, and Brian “Skip” Schipper, Twitter's Vice President of Human Resources, and Jason Toff, general manager at Vine, all of whom chose to leave Twitter. 

This comes after Mike Davidson, Twitter's Head of Design, announced he was departing in December. In the two weeks prior to that Twitter had also lost engineer Utkarsh Srivastava, who helped the company build its ads business, and it also saw the departure of Glenn Otis Brown, who has been heading up Twitter’s video ad program. Srivastava left for Google, while Brown went to Betaworks.

The biggest departure of the past year, was, of course, that of CEO Dick Costolo in June. After struggling mightily to get Twitter back on its feet, and to get its user numbers back up, he was forced to resign his position over the summer. 

Newly appointed CEO Jack Dorsey has been trying to turn the ship around, but his efforts have, so far, been for naught. 

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What is Twitter?

Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests. 

Where did the idea for Twitter come from?

Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.

How is Twitter built?

Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes. 

We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.

How do you make money from Twitter?

There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.

In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet. 

At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.

Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on that were only accessible through the link in the @earlybird tweet.


What's next for Twitter?

We continue to focus on building a product that provides value for users. 

We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.