IPO success? Nice. But Twitter still needs to cure what ails it

CEO Dick Costolo recognizes the malady: Twitter remains "confusing and opaque" for newbies. If it's going to grow into a long-term success story, Twitter needs to truly open up to the masses.

Twitter CEO Dick Costolo
Twitter CEO Dick Costolo speaks on CNBC ahead of Twitter shares hitting the NYSE. CNBC/Screenshot by CNET

Even as Twitter's share price soared on the company's first day of public trading, its CEO proved that he has both feet firmly planted on terra firma. Speaking with CNBC from the floor of the New York Stock Exchange, Dick Costolo freely allowed that Twitter still needs to figure out how to attract more users to the service.

"One of the fascinating things about Twitter is that the language of it, the scaffolding within it, is really an evolution of how users have learned to navigate within that 140-character space," Costolo said Thursday. "But that language and scaffolding can be confusing and opaque to users who come to the service for the first time. So it's about developing processes and capabilities that allow the flexibility and power for users to navigate within that space, so making it very clear and simple for the new users coming to the platform."

Translation: Most people still find Twitter too hard to understand.

Removing "confusing" and "opaque" from the Twitter newbie experience, especially for people who aren't naturally inclined to consume a firehose of real-time bursts of short messages, is likely to prove a significant challenge. With more than 230 million active users, Twitter has a substantial presence around the world. Still, that remains a fraction of Facebook's far larger audience of nearly 1.2 billion. What's more, only about 18 percent of U.S. adults use Twitter, compared with nearly 70 percent who use Facebook, according to a survey by the Pew Center.

Twitter and Facebook monthly active users
Twitter and Facebook aren't growing exponentially but have steady increases in monthly active users. However, much of the growth is outside the US, where the revenue per user is much lower. Twitter/Facebook SEC filings

Costolo had to be stoked at the stock's first-day performance , but he knows that longer-term success or failure will depend on how quickly Twitter can grow in users and engagement. The good news is that 30 percent of Internet users in the US between the ages of 18 and 29 use Twitter. But dig a little deeper and you'll see the challenge in black and white: the quarterly percentage growth of active users has declined since the beginning of 2013.

In the first quarter of the year, Twitter's user growth increased 10.3 percent; the next quarter the increase was only 6.9 percent. At the same time, while Twitter user engagement has been increasing, most of that growth has come from low revenue-yielding countries outside the United States. That's significant because the US, which accounts for less than a quarter of Twitter users, generates 75 percent of Twitter's ad revenue.

Twitter should have no problem maintaining its high public profile, as @ signs and hashtags have become integral to marketing everything from TV shows to dry cleaners. It's also cultivating influential, celebrity tweeters to bring more people along with them. The notable actor Patrick Stewart, of "Star Trek: The Next Generation" fame, wasn't selected at random to ring the bell at the New York Stock Exchange to commence trading for Twitter's IPO on Thursday. @SirPatStew has 723,000 followers.

Twitter @ signs and hashtags are becoming standard promotional vehicles for brands and personalities. ABC

All that should help, but Twitter remains an acquired taste, especially when compared to Facebook. While Facebook can be noisy and cluttered, the experience is easier for newcomers to understand. In contrast, novices on Twitter can be excused for being overwhelmed by the machine-gun rapidity of tiny data chunks sprayed across their screens.

In a bid to become friendlier and more visual a la Facebook, Twitter has added photo and video previews. It also now allows users to recommend interesting accounts. But those features still don't alter the core nature of the service. As described by the company, Twitter is "a service for friends, family, and coworkers to communicate and stay connected through the exchange of quick, frequent messages."

It's a welcoming statement for new users, but vague. For most of the Twitterati, the service is more about following interesting people they don't know -- but want to.

The leading Twitter accounts. Twitter

Twitter for mere mortals
So what to do? The company knows it can't yet achieve its big ambitions without growing beyond the young, urban professionals, news junkies, celebrities, politicians -- and even revolutionaries around the world -- who frequent the service. How about trying a traditional marketing approach that's worked quite well for other companies?

Twitter isn't going to open hundreds of stores or launch floating barges, but it could partner with companies that reach the masses to attract new users. This would be Twitter Promotions instead of Promoted Tweets. For example, why not turn to Starbucks stores and baristas for Twitter evangelism? It could be as simple as putting a screen with a Twitter feed in every store and point-of-sale promotions as Starbucks does for CDs. Starbucks would get some amount of free, highly targeted Promoted Tweets in exchange for its Twitter promotion. Order a caffe latte grande, and the barista might offer a digital coupon for a discounted drink if they sign up for Twitter and follow @Starbucks. 

Starbucks CEO Howard Schultz is no stranger to Twitter. He spent a year the board of Square, Twitter co-founder Jack Dorsey's payments startup, and invested $25 million to use Square's cashless technology to process credit card payments in Starbucks stores. In addition, Starbucks has Tweet-a-coffee, which connects a user's Twitter and Starbucks account so they can send $5 Starbucks Card e-gifts to Twitter friends and followers.

CNET/McDonalds

But Starbucks may be too much preaching to the choir of urban professionals -- those buying $3.65 caffe lattes and already savvy about Twitter, or SnapChat or Weibo. If Twitter wanted to reach even more of the masses, why not hook up with the likes of McDonald's with its massive global network of more than 34,000 restaurants in 116 countries? Now, don't expect Twitter to give away superhero action figures with Happy Meals, but an inspirational tweet from @justinbieber or @KingJames printed on the delicious french fry packaging? Why not?

Maybe Twitter will never become an outlet for the vast majority of humankind -- or perhaps those billions will take a very long time to warm up to the service. We're still too early in Twitter's history to know whether it can connect with the masses. If Costolo is going to draw in the next 100 million to 200 million users, he knows he'll need to do a lot more than order a language tweak to the home page or follow Facebook. In the meantime, the company just raised $1.8 billion from its IPO, so it has bought some time to get things right.

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