The first earnings announcement for a newly public company is often traumatic. Just ask Dick Costolo and the team at Twitter, which saw the company’s shares plummet 20% after announcing results yesterday. A glorious IPO a few months ago made being a public company seem so easy. Now what?
Well, for one thing, reality is setting in for Twitter. The afterglow of the IPO has dimmed. Investors are no longer the cozy insiders that nurtured a young private company over several years. They are now a demanding bunch of institutions that want results – and assurances about the future – right now.
Twitter made a few missteps on its first earnings announcement, but they are not fatal. Yes, it’s painful to see the stock fall (especially when it is such a big lure for hiring talent), but it’s hard to see how Twitter could have maintained a valuation of 30 times revenue when its peers, like Facebook and LinkedIn, are trading at about half that level. Perhaps a sharp correction is best for Twitter in the long run.
Here are some things Twitter can do to make the next earnings announcement go a little more smoothly:
- Rehearse your answers to difficult questions in advance. CEO Dick Costolo seemed taken aback by basic questions posed to him on the investor call about Twitter’s subscriber growth and defections. No IR team should let that happen.
- Go easy on the gimmicks. Yes, it was fine to have live tweets from Twitter’s IR department, but they didn’t add much. And setting it up – as anyone who’s managed a live stream knows – can distract the team from more important preparations. The IR team made good use of the stream to distribute parts of the investor presentation as infographics. Look for more of that in the future.
- Have a stronger core narrative. Just where is Twitter at this point in its evolution? Is it a growth company determined to add new users? An entrenched media player driving toward profitability? It was hard to tell from the call. A solid narrative helps drive everything from how analysts frame their commentary to the way the media report the news.
How Twitter adjusts in the next few months will determine if these are growing pains that are quickly forgotten or a sign of more serious business and management issues at the company. Keep watching – and tweeting.