Apr 27, 2017 ยท 7 minutes

As often as it's said, it bears repeating that Twitter has become an integral, if not quite indispensable, part of the public arena.

People outside of tech don't really roll their eyes anymore if you use the word tweet in a sentence, nor do you hear anyone saying they don't get Twitter, even if they still find it somewhat baffling. Too many things happen on Twitter – in sports, in entertainment, above all in the White House – for Twitter to be dismissed off hand now.

But there has been one, stubborn cohort holding out: Twitter's owners – or rather, the people who could be persuaded to own more of Twitter, preferably at a higher price. Twitter went public at $26 a share and had been spending the most of the last month trading below $15 a share. Suitors like Disney and Salesforce that had considered acquiring the company balked because of its high valuation and its seeming inability to address harassment by trolls.

Twitter's stock was slumping into that gray realm of the near dead where Yahoo and AOL were languishing before Verizon snatched them out, only with no clear savior in sight. So Jack Dorsey threw as much energy as a half-timer could into shooing away some of the trolls while making sure everyone else became more engaged with Twitter. And from the looks of the latest financials, he's gaining some ground.

Twitter's stock shot up as much as 12% Wednesday after it said its daily active users grew by 14% from a year ago. There were some bad numbers to nitpick in there as well, but it's been a while since Twitter shareholders had this exhilarating a day, so let's dwell on the good for now. DAU growth rates for the previous four quarters were 11%, 7%, 5%, and 3%, respectively. If you're on Twitter now, you're busier than you were.

This is welcome news because for thriving social networks like the ones run by Facebook, daily active users is a better measure of health than monthly active users. Twitter used to disclose to shareholders the ratio of DAU to MAU (it used to run between 45% and 50%), leaving them to extrapolate for themselves the actual number of daily users. Last year it stopped disclosing this ratio. Which was kind of weird, and a discouraging sign. It was like a doctor saying we don't need to take your blood pressure anymore, let's just sit here quietly for a moment and count the pulse on your wrist

Now that DAU growth is reliably up and to the right, Dorsey has made it a headline metric. He still won't say, or let us extrapolate, how many daily active users there are. They're just growing! News breaks on Twitter, and Twitter has become part of the fabric of news, and Trump shapes policy on Twitter, and more and more people read it and react. And along the way, they're engaging with more ads on Twitter, pushing ad engagement up 139% from the same quarter a year ago.

And this is welcome news, I guess, except by thinking about it we inevitably run into the nitipicky part of the analysis, which is that despite this deeper engagement, the value of those ads isn't so great. Cost per engagement fell by 63% last quarter. (Facebook, which has yet to report on its first quarter, saw price per ad rise 6% in the last quarter of 2016). Advertisers appear to be spending less on Twitter, which has long lagged Facebook in targeting users.

As if to steal thunder from Twitter's good news, Facebook said Instagram had 400 million daily active users and 700 million monthly active users. Twitter's MAU, by contrast, totals 328 million. Instagram surpassed Twitter in DAU nearly five years ago, that is, shortly after Facebook bought Instagram.

It's not clear whether Facebook was being churlish (and thus a bit insecure) about Twitter with this announcement. Or maybe it was just oblivious to Twitter's need to prove itself. Either way, it's hard to evade the reality that the price that advertisers are willing to pay for an ad on Twitter is a concern. Twitter's comeback has always involved striding on two legs: improve user engagement, improve ads sold to those users. It's only one stride on what's looking like a long road in a world increasingly governed by Facebook.

Twitter may rightly tout the long-awaited recovery in user engagement. A recovery that speaks to its engineers hard work in drawing in new users without pissing off the core base (who will always be pissed off – the trick is not driving them away). But that trend takes us back to one Twitter enjoyed before its IPO, when early users were flocking to the site but advertisers were staying away.

The decline in cost per engagement drove Twitter's advertising revenue down 11% (total revenue, buttressed by a 17% rise in data licensing revenue, fell 8%). In a strange and uncomfortable way, Twitter has returned to its pre-IPO status as a Tech Company That Matters but can't win over advertisers. When user growth had been flatlining in recent years, Twitter was doing a good job of monetizing them.

Now, not so much. Twitter reported a net loss of $62 million, or 9 cents a share, even though Dorsey managed to cut operating costs by 10%. Holding Twitter to Facebook's example feels tired, except Twitter must now accomplish a trick that Facebook aced – serving high-value ads to users new and old, without alienating them. Facebook achieved this by blunt force of scale – where else are its users going to go? Twitter's loyal users are more finicky, and even savvy enough to not mistake content shared by a respected colleague for a sloppily served ad.

Twitter's 12% surge mellowed into a more modest 8% gain by the end of trading Wednesday. Not to knock an 8% rise, but it merely put Twitter's stock price back to its level in early March. Nowhere close to where Twitter's early investors, let alone its underwriters, hoped it would be today when they launched this ship into the unforgiving waters of public markets. Tech turnarounds are a rare and under-appreciated beast. Twitter may be one. While I'll confess I find myself rooting for Twitter, there are a few things that hold my hope in check.

First, the GAAP losses. Second, a year after Dorsey's insistence on live video, we can be sure of two things: that Amazon now streams NFL's Thursday night games; and that Facebook, which elbowed its way into live-video leadership, is surely regretting its aggression today. Neither, slice it as you will, bodes well for Twitter. Also, the cost cutting that kept Twitter's loss from being lossier is a rusty blade in Silicon Valley. Countless lives have been saved in the operating room by the scalpel. Few, however, in the tech boardroom.

Lastly, there is the role in history that Twitter has found itself thrust into. The elephant in Twitter's conference call was mentioned only once in passing (“...we partnered with the PBS NewsHour to offer special coverage of President Trump’s address to a joint session of Congress, which reached 2.8 million unique viewers”). Otherwise, Dorsey credited his staff for the new engagement. They deserve their share of credit, sure, but it's disingenuous to suggest that the joint session was all Trump added to Twitter's renewed audience.

And here is where Dorsey's disingenuousness cum diplomacy breaks down into mere bullshit. Just say Trump helped you like he did CNN. And from there figure out where you went wrong. Would shareholders care? No. Would history judge you? Let's just say that when Dorsey was interviewed on Backchannel, Steven Levy asked whether Twitter would block President Trump “if someone complained about a Trump tweet.” Dorsey responded,

“We are going to hold all accounts to the same standards. Our policy does [account for] newsworthiness as well, and that was requested by our policy team. So we’re not taking something down that people should be able to report on and actually show that this is what the source said. It’s really important to make sure that we provide that source for the right reporting, and to minimize bias in articles.

Dorsey, the half-time CEO, is taking a short cut here, one meant to appease shareholders in the short term but that will haunt him in any historical legacy. Any rise in Twitter's financials will only groom it as a takeover candidate. Which is fine enough for current shareholders.

What Dorsey is confessing to here is that, yes, all users are held to the same standards – only different users are held to these unshakable standards in different ways. Be newsworthy troll, like Trump, and you won't be kicked off. Be a feckless troll who offends without enough ad revenue to Twitter, and you will be subject to the whims of some shadowy “policy team.”

It's so Trump of Dorsey. It's brilliant, actually, in the short term. Reckless in the long run. Dorsey may sell Twitter for more than its $11 billion valuation. But as long as Twitter houses trolls – especially privileged trolls that are deemed newsworthy – history will judge Jack Dorsey on the wrong side of what's right.