Social media darling-turned-dog, Twitter Inc (NYSE:TWTR), is making “major” headlines this week.
According to a Bloomberg source, the company is preparing “a major shift in how it counts characters in Tweets.”
No longer will Twitter count photos and links as part of its 140-character limit for messages. The change is expected to go into effect in as little as two weeks.
I know… try to contain your excitement.
The company is also making headlines for appointing a new director to its board – the third appointment in the last two months, mind you.
This time, Twitter has selected Debra L. Lee, the CEO of Viacom B Inc (NASDAQ:VIAB)-owned Black Entertainment Television.
So what’s the big deal here?
I’m afraid there isn’t one.
And beware – because any stock rally on the latest news promises to be short-lived. Here’s why…
It’s Time to Innovate or Die
Ever since returning to Twitter in October 2015, part-time CEO Jack Dorsey has talked about making innovative changes to re-energize user growth.
We’re still waiting!
And with the stock down a portfolio-crushing 50% since his return, it’s fair to say that it’s now time to innovate or die for Dorsey.
And this – loosening up the character limit by about 23 characters – is the best he could come up with?
Cue Ray Charles: “Hit the road Jack and don’t cha come back no more, no more, no more, no more.”
Seriously.
As I explained on CNBC’s Closing Bell earlier this week, this latest change merely eliminates an annoyance on Twitter – but does nothing to make the platform more appealing.
Less Is More
Frankly, easing character limits to any degree is a terrible idea anyway. After all, the limit is what sets Twitter apart from the competition.
It forces users to be pithy – a trait Mark Twain acknowledged as desirable long ago when he said, “If I had more time, I would have written a shorter letter.”
No one wants to read long-winded diatribes or James Joyce-esque stream of consciousness narratives.
Case in point: Earlier this year, Twitter was reportedly considering raising the character limit to a staggering 10,000.
Protests ensued over fears that a verbal diarrhea epidemic would overrun the platform, which thankfully prompted management to scrap the proposed change.
If Twitter is going to re-invent itself, it needs to do so in ways that are appealing to more users, not repellent.
That’s where a strong board of directors comes in, right? Not so much…
Better Board = Better Product?
As I mentioned, the other “big” news from Twitter this week is the appointment of another independent director to the board in Debra Lee.
Now, I’m not diminishing the significance of Lee’s addition. Twitter is actually lucky to have her on board. She’s incredibly qualified, having enjoyed success in the C-suite at an entertainment company for twice as long as Twitter’s been in existence.
She’s also the first African-American on Twitter’s board. Corporate America – and the tech sector in particular – is in serious need of more diversity.
For instance, only 9% of directors at the 200 largest S&P 500 companies are African American – well below the overall percentage of the U.S. population that’s African American.
My issue with Lee’s appointment is the company’s false belief that a better board will solve Twitter’s problems.
Twitter’s got a product problem.
As I’ve shared before, “Mom, dad, even grandma understand Facebook Inc (NASDAQ:FB) But they don’t have a clue what Twitter’s for.”
And better boards don’t make better products.
So the appointment is really a non-event in terms of improving the company’s underlying fundamentals and, in turn, the stock’s investment appeal.
So what will do the trick?
Time’s Up for Twitter
“We think only significant product improvements could re-ignite growth, which has virtually stalled domestically and has slowed to a crawl internationally,” says MKM Partners’ Rob Sanderson.
The clock is ticking, though.
With each passing day that Twitter fails to come up with any meaningful innovations, the company’s mass-market potential diminishes.
Like Sanderson, I believe an investment in Twitter involves taking on “significant execution risk” and the possibility of a “network collapse.”