Crunch time for Twitter

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It is a big week for Twitter. The company will unveil its latest profit result on Wednesday, New Zealand time.

The earnings report will be a real test of whether founder Jack Dorsey is reviving Twitter's financial fortunes.

It might surprise you, but although Twitter has been hugely influential, it is struggling to impress investors.

There is no doubting the impact Twitter has had in its ten year history. It has become a vital forum for people during any major news event.

It has also allowed its 310 million users to communicate directly with celebrities and politicians and companies. A tweet can be a more effective way of resolving a customer dispute issue than contacting a company's call centre.

But investors are increasingly sceptical about Twitter.

Twitter is generating over two billion dollars a year in revenue, but is not profitable.

Its share price has fallen 50 percent in twelve months to just over US$18 a share.

Why?

Twitter's user numbers sound impressive until you compare it with its competition.

Twitter has 136 million active daily users, according to analysts at SunTrust Robinson Humphrey.

That is dwarfed by Facebook's 1.65 billion users.

Instagram, which is owned by Facebook, has around 300 million users.

Snapchat has around 150 million users.

Twitter's user numbers have grown around three percent in the past year.

Tech investors will forgive a lack of profit. But they won't forgive a lack of growth.

Twitter needs to grow its user numbers to grow its revenue.

It is not for lack of trying.

Twitter has introduced an algorithm so that when you first open the app you see what Twitter thinks are some of the more "interesting" recent tweets, rather than simply seeing the very latest tweets.

Some users like the change, others do not.

Twitter is also stepping up efforts to combat online abuse. That's been one of the major factors that has seen many people abandon the site.

The criticism of Twitter is that rather than encouraging dialogue it has simply encouraged group think. Critics say that people follow only users who share their views. Dissenting views are not tolerated, they say. Twitter can at times resemble a giant echo chamber.

Whether it is a fair criticism or not, it is a factor in many people abandoning Twitter.

To encourage people to return, Twitter's been pushing further into innovations like live streaming.

It has signed a deal with the National Football League and is streaming the Republican and Democratic party conventions.

The challenge for Twitter is that its rivals are also doing the same.

People are spending more and more time on social media. But with more and more options Twitter is being squeezed by its rivals.

So investors will be looking closely at the user numbers and the revenue figures.

Some are wondering whether Twitter might become a takeover target. Perhaps Apple or Facebook might buy the company?

Twitter's current market capitalisation values the company at US$13 billion.

How much of a premium would investors be willing to pay?

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