Twitter Outages Send Stock Plummeting; Latest Example Of How TWTR Is 'Dropping The Ball'

Tuesday morning came with another stumble for Twitter. The microblogging site experienced a global outage that left the system malfunctioning for a full six hours.

Rewind to five years ago, and it might have not been that big of a deal. In fact, service interruptions were a rather common occurrence for Twitter, but it didn't matter because the service was still scaling users and it was still a shiny object on Madison Avenue.

But as the company struggles to please investors on Wall Street (indeed, Wednesday morning its stock (NYSE:TWTR) fell under $16 a share, a record low) and marketers fawn over Facebook and Snapchat, the outage is another black smear on the company’s reputation.

Now, Wall Street and Madison Avenue are being a little less forgiving:

“This latest outage is just another example of how Twitter continues to drop the ball. The company needs a grand gesture soon, otherwise we can expect more trouble ahead,” said Matthew Tuttle, CEO of Tuttle Tactical Management.

“It is unacceptable for a tech company of its size to have outages like this if they wish to retain user trust,” chimed in James Gellert, CEO of Rapid Ratings. “Arguably they need to regain trust, and this is clearly moving in the opposite direction.”

“Twitter, and every other internet company for that matter, needs to have an emergency backup plan to ensure their site stays up at all times," said Adam Sarhan, CEO of Sarhan Capital​​. "If they can't figure that part of the equation out, how can they possibly figure out how to monetize and grow their business?”

“Poor timing for any sort of disruption,” said Brad O'Brien, director of paid social for digital marketing agency 3Q Digital. “In a time where user experience and user engagement are in need of some major improvement, this is somewhat of a step backwards.”

Tuesday was Twitter’s third service interruption in the last five days. While the company provided no reason for the first two outages, Twitter issued a statement for the third on its support page: “The issue was related to an internal code change. We reverted the change, which fixed the issue. Thank you for your patience.”

Twitter declined to elaborate or comment on any further questions regarding what the change was, how the company maintains its servers or how it communicates with its users.

Prior to the official announcement of the fix, Twitter users had their own theories on what had occurred. After the site was restored, some tweeted that the outage was due to a sanction on Twitter being lifted in Iran:

Others thought the code tinkering had to do with Twitter testing new major product changes, such as lifting the 140-character limits on tweets. “Twitter's main enemy in the fight for eyeballs is not Facebook or Instagram, which both have their own audiences, but text messaging,” said stock analyst Phil Davis, CEO of Philstockworld.com. “If Twitter makes some changes and increases their market share, they are going to look like a bargain again.”

Product improvement was supposed to be the highlight of Jack Dorsey’s return. When the Twitter co-founder accepted the position as interim CEO back in June, he told CNBC that “beautiful products” were soon to come. Since then, Dorsey has rolled out Twitter Moments, which provides a curated feeds around live events. His team has also overseen ambitious marketing deals, such as a partnership with a CBS News presidential debate and a deal in Times Square for New Year's Eve. Twitter also began running TV advertisements.

Dorsey may be holding true to being the product visionary and taking the time to get to know and reassure employees, but still, the company has not impressed externally. Dorsey chose to give up one-third of his Twitter stock, about 7 million shares, and hand it to his employees back in October.

At that time, the stock was worth about $30 per share. Now, three months later, each share is less than $17. The stock’s value, in total, has dropped by $91 million.

“Twitter has been in a very steep bear market for many months. It's below its IPO price, and virtually everyone who has bought the stock since the IPO has lost money,” Tuttle said.

With site outages, the company is also losing precious revenue. It’s difficult to pin exactly how much since it depends on the time of day. Back in 2012, Ray Wang at Constellation Research estimated to VentureBeat that an outage could mean a loss of $25 million per minute. That was for an outage sitewide. Tuesday’s service breakdown lasted between 3:40 and 9:50 a.m. ET but was not universal.

On Twitter, advertisers are charged only if a user sees an ad for at least three seconds in full-view on the screen or if a user engages — clicks on, retweets or favorites — the tweet.

The outage may not have deterred advertisers, at least not yet. “As long as this doesn't become a habit of Twitter's, I don't see any of our advertisers at 3Q pulling out of Twitter ad spend,” O’Brien said.

Twitter is hardly alone when it comes to outages. In September, Facebook went down three times. Facebook provided a reason for the third outage, saying it was a configuration issue. “People are quick to judge, but even quicker to forget. In the lifetime of Twitter, this is still a blip on the radar,” O’Brien said.

“The difference between it tarnishing your reputation long term versus coming out stronger is on communication and support. If you communicate effectively, you can take your naysayers and turn them into fans,” said Alex Taub, CEO of SocialRank, a social media analytics company that relies on Twitter's API.

However, a reputation for service reliability is perhaps something even more crucial for Twitter as it has positioned itself as a real-time platform. “We are a service that people turn to in moments of joy, and also when things are going horribly wrong in the world. So I feel a personal commitment, as does I think does everybody that works here, to having a service that’s available when anyone needs it,” said Christopher Fry, Twitter’s former senior vice president of engineering, in an interview with Wired in November 2013.

Fry, who left the company in 2014, said Twitter had chosen to retire the “fail whale,” the image of a floating whale that appeared when the site was down, in the summer of 2013, and called it “a thing out of the past.” Twitter replaced the whale with a tinkering robot. Three years later, it's still tinkering.