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Twitter has stopped attracting new users, and Wall Street isn't happy about it

Twitter CEO Jack Dorsey.
Twitter CEO Jack Dorsey.
Photo by Kimberly White/Getty Images for Vanity Fair

Twitter is at a crisis point in the wake of an earnings report that showed its number of users has stopped growing. At the same time, depending on how you count Twitter employees' stock options, the company is either still continuing to lose money or only modestly profitable. The thin ray of good news is that revenue grew — if that continues, the company's profits could improve steadily over time. But investors who bought Twitter shares back in 2013 were expecting explosive, Facebook-style growth, not modest profitability.

This brings Twitter to a key decision point. Does CEO Jack Dorsey push for fundamental changes in how the service works in hopes of dramatically increasing Twitter's user base, even though big changes might alienate current users and completely destroy the company? Or does he decide to try to make do with what he has, keeping current customers pleased and focusing on optimizing revenue and trimming costs in pursuit of a decent near-term profit?

That's why a small change Twitter rolled out this week is attracting so much interest in financial markets and so much anxiety among hardcore Twitter lovers.

Twitter is for power users. Facebook is for everyone else.

If you walk by the desks of software developers here at Vox — or at any other company — there's a good chance you'll see them using a Unix command-line interface that dates back to the 1970s. Geeks continue to use the Unix command line because once you know how to use it, it's a powerful way to perform complex computing tasks.

But most users don't need the power, complexity, or hassles of using a Unix command line, which is why it never caught on with ordinary users. Until recently, most people used Windows PCs or Macs with a more user-friendly graphical user interface. Lately people have been shifting toward even simpler computing technologies: smartphones and tablets. These mobile platforms provide fewer capabilities than a conventional PC — it's hard to write a blog post or manage a complex spreadsheet on an iPhone — but they're easy to learn and demand little of users.

The older, more complex computing platforms didn't die. Certain kinds of professionals still use them. But most people use the simplest, most user-friendly platform available: smartphones.

A similar principle applies to social media technologies: The most popular services tend to be the ones that demand the least from their users. And Twitter demands a lot more of users than Facebook does.

To make Twitter manageable, you have to carefully curate the list of people you follow to avoid being overwhelmed. The rules for Twitter conversations — for example, the fact that starting a tweet with someone's username will hide it from anyone not already following that user — are not intuitive to someone dropping by the site for the first time, or even the 10th. And many users find it intimidating to write tweets that anyone in the world could read.

Twitter helps users sift through a lot of information efficiently, which makes it invaluable for a media professional like me. But most people aren't interested in sifting through large volumes of information. They just want to look at pictures of their friends' weddings, vacations, and babies with a minimum of hassle. And Facebook makes this really easy.

The result: Twitter's growth has stalled at the same time other social networks such as Facebook and Instagram are continuing to grow. And that has created a lot of friction between Twitter's management and Wall Street.

Many investors bought Twitter stock hoping that it would grow to become a Facebook-size behemoth. But it now looks like Twitter will wind up being much smaller than Facebook, which will mean it generates a lot less ad revenue — and ultimately profit — than Facebook.

Twitter might adopt a key Facebook feature

Last week, BuzzFeed reported that Twitter was about to change the order in which it showed tweets to the user. This might seem innocuous, but it could have profound consequences for Twitter's user experience.

When you log in to Twitter, the service has traditionally shown tweets in strict chronological order, with the most recent tweets at the top. This means you only see tweets that occur at times when you happen to be paying attention. If a friend announces an engagement or pregnancy at a time when you're not online, for example, you might never scroll back far enough to see it.

Facebook takes a different approach: It shows the posts that a special Facebook algorithm thinks you will find most interesting. Facebook hasn't explained how its algorithm works, but we know it uses a wide variety of factors to gauge how interesting a post is. Posts about weddings, pregnancies, and other major life announcements tend to show up at the top of the Facebook news feed, as do posts with a lot of likes and those from your closest friends.

Facebook's approach is better for casual users. To get started on Facebook, you just have to identify your real-life friends and "like" posts that interest you. Facebook takes it from there, sifting through thousands of things your friends post to identify content you're likely to find interesting. You don't have to worry that friending too many people — or the wrong people — will turn your timeline into an unusable mess.

Twitter has been taking small steps toward a more Facebook-like service. Last year, the company introduced a feature called "While you were away." If you log in to Twitter after being away from the service for several hours, Twitter will show you older tweets that its software thinks you'll be interested in. However, it only shows a handful of older tweets — if you scroll down further, you get back to Twitter's standard reverse-chronological tweet order.

Then on Wednesday, Twitter announced a new feature called "Show me the best Tweets first" that seems to be very similar to "While you were away." The post doesn't explain how the two features differ, but it seems like the main difference may simply be that the new feature shows more "best tweets" than the old one did.

Why showing "best tweets" is controversial

This might seem pretty innocuous — and it is. But when rumors of this feature first started circulating, it was pretty controversial among Twitter users.

The reason is that Twitter's current approach of showing tweets in chronological order means that most of the people who see a given tweet will see it within a few minutes of posting. This makes Twitter a real-time platform in a way that no other social media platform really is.

Twitter is the perfect place to banter about the Super Bowl, the Oscars, or a presidential debate. You can tweet about what just happened and assume that many of your followers will immediately understand the context. This real-time character makes the service especially useful to journalists, who want to always be up to date on the latest developments in their beats.

This kind of thing simply doesn't work on Facebook, because you never know if your Facebook post is going to be read an hour, a day, or a week from now. That means you can't assume that most readers of a particular Facebook post just saw the same thing you did. The real-time nature of Twitter also enables a type of sprawling real-time conversation among many users that's not really possible on any other platform.

Facebook's approach also gives more power to Facebook, since Facebook ultimately decides what users see. On Twitter, by contrast, what you see is entirely determined by whom you follow and when you're logged in. Naturally, power users who have put a lot of effort into curating whom they follow don't like the idea of ceding more power to Twitter over which tweets they see.

The big fear of Twitter users, then, was that Twitter would go full Facebook and totally replace its real-time feed with a Facebook-style news feed that shows the best tweets rather than the newest tweets. Or, at a minimum, that a Facebook-style feed would become the default, eroding Twitter's distinctive real-time culture.

But so far, that seems to have been a false alarm. Twitter is trying to help out infrequent users by showing a few high-quality tweets while staying firmly committed to reverse-chronological order as the main way people read tweets.

Still, if the "best tweets" experiment goes well, Twitter could gradually shift to Facebook's model over time. All they'd have to do is expand the number of "best tweets" they show, to the point where most people don't bother scrolling back to see the live tweets.

Twitter might just have to accept that it's not going to be as big as Facebook

Underlying recent debates over Twitter's future has been a basic assumption that Twitter needs to resume the growth of its user base to be considered a success. That assumption is driven by Wall Street investors, who bought shares in the company's initial public offering in the hopes that the company will continue to grow.

Instead, Twitter's user growth has ground to a halt. And while Twitter will undoubtedly experiment with new ways to expand its audience, the company might ultimately have to admit that it's never going to be anywhere close to Facebook's size.

Twitter has more than 300 million users, and many of those are passionate daily users. That should be a large enough user base for a highly profitable business. Probably not profitable enough to justify the $30 billion valuation the company had a year ago, but perhaps profitable enough to justify today's company value of around $10 billion.

And Twitter may be able to find ways to play to the unique strengths of its user base. It doesn't have as many users as Facebook, but it can count among its users a large number of prominent investors, entertainers, academics, journalists, and other influential people.

These are people that some advertisers may be more keen to reach than the much broader audience reachable using Facebook ads. So if Twitter can figure out how to position itself as a premium advertising platform for precisely targeting its highly influential user base, it could earn a lot of money.

At the same time, it's not obvious that making Twitter more like Facebook would allow Twitter to grow to Facebook's size. People who like the Facebook experience can already get it on Facebook. Aping Facebook could easily alienate core Twitter users without attracting many new ones.

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