Can Twitter avoid being the next MySpace?

Twitter beat expectations with its latest earnings report and the stock bounced temporarily. However, the stock quickly dropped as management outlined the clear problems facing Twitter and predicted stagnant user growth. They went on to state that they do not believe user growth will accelerate until they make fundamental adjustments in the service. Believe it or not, Twitter is already a turnaround project.

While 300 million users is certainly significant, it pales in comparison to Facebook and the engagement level on a relative basis for Twitter continues to suffer. Prior management simply did not recognize that the company needed to make significant changes to the service to increase usability. Twitter is too difficult to use and many who sign up for the service fail to engage Twitter on a regular basis.

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Twitter needs to think like a start-up to succeed but it has simply not made creative adjustments to cope with competitors. The company continues to suffer from a lack of direction, and the resignation of two key executives prior to the earnings call further demonstrates that a talent drain remains a major problem. This is beginning to feel like Yahoo! before Marissa Mayer took over as CEO.

For the first time in an earnings call, new leadership (headed up by CEO Jack Dorsey) is saying out loud what the rest of the technology world already knows: Twitter has issues. Non-journalists, celebrities, politicians and public figures need a compelling reason to use Twitter. You cannot be a mouthpiece for just a small segment of the population and expect to be a company with broad reach.

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I'm encouraged that management now is tackling problems head-on rather than attempting to justify the positives in the business. Everyone sees the positives; that's not the problem. Instead, bold leadership is needed to make Twitter more relevant and help it avoid becoming the next MySpace. The choice of CEO will be an important one for the board. Twitter needs a leader with a willingness to look at all operations with a fresh perspective.

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With 300 million users, Twitter has a huge opportunity. At present, that opportunity is being squandered. Twitter desperately needs to innovate; investors expect nothing less. Any procrastination or failure to constructively address the issues will result in stock-price erosion. We are getting close to a time where investors capitulate and give up on the company. Twitter can make a comeback but the time for action is now.

Commentary by Michael A. Yoshikami, the CEO and founder of Destination Wealth Management in Walnut Creek, California. He is also a CNBC contributor.

Disclosure: Michael Yoshikami does not own shares of Twitter and has no other business relationship with the company. But Destination Wealth Management may buy Twitter for clients.