Why Twitter is shrugging off active-user decline


This quarter, Twitter seems to be attempting to pivot the perception of itself from a social network to a broadcast platform. In fact, CEO Dick Costello mentioned on the earnings call, "the broader billions of users who are consuming tweets off the platform."

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And so, rather than having Wall Street focused on monthly active users (which has declined steadily), Twitter seems to be looking to change the message. The new message seems to be that Twitter is a place where many people, including celebrities, newsmakers, and corporate accounts create content that is consumed both on the platform and beyond. That Twitter is a newswire that creates stories that spread to people beyond the actual platform.

In other words, there are a low level of contributors but a high level of content CONSUMERS.

Costello even referenced Youtube video views to tweet consumption during the Oscars. To my mind it sounds even a bit like Yelp, where relatively few people write the reviews and most just consume them.

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Twitter's new bull story

With strong revenue growth, adjusted Ebitda (earnings before interest, taxes, depreciation and amortization) margin expansion, and even further revenue opportunities in monetizing the billion devices running Twitter's ad network MoPub, the user growth and still lofty stock price seem to be the only remaining issues. There is plenty of growth in the financials and plenty of upside there.

If Twitter can succeed in being a broadcaster as opposed to social network, I think this monthly-active-user metric can come to be thought of as a view into the amount of content being created on the platform, rather than its complete reach. Easier consumption experiences, in conjunction with publishers that receive syndicated tweets, or even through Twitter, perhaps building a consumption app like Flipboard, further solve this from a product standpoint.

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Price is also coming in a bit. On Evercore's 2015 numbers, Twitter still trades at an enterprise value/Ebitda of approximately 40. However, it's price-to-earnings ratio (excluding stock-based compensation) on a growth-adjusted basis is lower than LinkedIn and Facebook, but by almost any measure, the stock is expensive. As price comes in a bit, and this pivot is executed, the stock may become attractive once again.

Commentary by Jon Steinberg, president & chief operating officer of BuzzFeed. He is responsible for all business management, company operations, finance, and social advertising operations. Follow him on Twitter @jonsteinberg.

Disclosures: Twitter is a BuzzFeed business partner.