Are they liable for those promises though? I am legitimately curious to know if they are contractually obligated to grow at a certain rate or be at certain valuation at this point in time.
Companies stop growing all the time: it happens all the time, and no company grows forever. A stock price is not just the value of a company's business today: It has future growth and risk priced in. What the stock market has been saying to Twitter is that the public believes that Twitter's ceiling is far lower than we thought in 2014.
In practice, this says that all the bets on hypergrowth were wrong, and the company must adapt: The stock grants that looked competitive before don't look competitive today, so top engineers leave. Staffing plans designed to keep a system operable at 10x of Twitter's current volume stop making sense, so projects change, and people are laid off.
So this has nothing to do with liability to promises (they've already IPO'd), but with the pain of becoming a less promising company. Twitter is too important to disappear in the near term; all you have to do is look at how big they are for journalists and presidential candidates to figure that out. There is, however, an opportunity for someone to make a competing product that fits the same needs and is easier to monetize.
If they are staying stable, do they really need those top engineers? The probably need a different set of engineers who can find a cheaper way of doing what they are already doing.
Staying stable finanically is okay, but staying stable and no optimization (better algorithms) might hurt. Hiring good engineers is surprisingly expensive and hard.
They are liable in the sense that they report to a board chosen by their investors. So if I bought or invested in company XYZ at a valuation that assumed a lot of growth and company XYZ suddenly stopped pursuing that growth I would probably vote out current management. So yes most companies are beholden to investors; don't raise money if you don't want a new boss.
I don't know that they're "liable" in the sense that people could win a shareholder suit- the bar for those is set pretty high and I doubt Twitter would qualify. My comment was more in response to the accusations that the market is somehow being "unfair" for "punishing" Twitter's lack of continued growth. They're only punishing Twitter for failing to meet the expectations Twitter itself set.
Even the word punishing is really too strong. The stock market isn't making a moral judgement. It's merely an estimate of the value of the company. As twitter's growth prospects decrease the value of the company goes down.
Well yeah. "They" would be fired, and new leadership would be brought in to do better. When you're reporting to the board or shareholders they run the show. And they want more money.
They are not contractually obligated to grow at a certain rate.
However, if the majority of your shareholders are members of the public looking to earn a return, they're your boss. You might be CEO, but if your priorities aren't their priorities, they'll replace you. Even if you own the majority voting control in the company, there's a certain amount of good-faith effort you need to put into growing the profits of the company. In most jurisdictions, a public for-profit company is organized with the belief that the company exists to create as much profit as it reasonably can and shouldn't be operating in a way that avoids that. That doesn't mean doing scummy things or things that might realize short-term profits at the expense of the brand, but sometimes it becomes clear that a company is no longer operating with its (potentially minority) shareholders in mind.
There's actually a type of corporation that specifically notes that maximizing profit isn't the goal of the enterprise (https://en.wikipedia.org/wiki/Benefit_corporation). Twitter could have been formed as a B-Corporation and told its investors that it might make profit, but that profit wasn't its only goal.
But the thing is that Twitter isn't just making too little money. It's losing money. It would be like a coffeeshop that sold coffee for 10¢ a cup with 50,000 customers/mo and rent of $8,000/mo. They'd bring in $5,000 from their customers and be $3,000 in the hole at the end of the month. Now, there are a few ways to change that situation. 1) Get more money per customer. Twitter could sell more or better ads or you could give them money. That's hard. 2) Get more users. If Twitter earns $X/user/month in revenue and they're able to get double the number of users, that's double the revenue. If costs don't go up linearly with users, their situation will get better. If the coffeeshop gets 100,000 customers/mo, they'd be making $2,000/mo. 3) Twitter can lower costs. They can fire excess employees working on marginal projects; they can get rid of app features that might be computationally expensive to deliver.
The issue with many startups isn't always growth or investors, but even keeping one's head above water.
Now, even if Twitter can keep its head above water, is that enough? If Twitter became a non-profit and just advertised itself as a public service to the world, would that be enough to keep users around? So many companies are gunning to take down Twitter. Would Twitter survive if it slimmed down its staff and just kept Twitter alive? Would users migrate to other services that offered new, cool things?
I feel like Wikipedia is the only really high-traffic non-profit, but they're doing something that requires a lot less engineering (ie. most of the page can be easily cached and is the same for all users vs. Twitter).
The thing is that it's hard to bootstrap services with huge network effects like Facebook or Twitter and keep a small staff. It's often a winner-take-all (or most) market. Remember Pownce? Probably not. There were lots of microblogging companies and Twitter destroyed them all. To do that, they needed to staff-up as you handle scaling issues and add features. Once you're big, you want to keep focusing on growth since layoffs are demoralizing and if you stop growing, what's to stop a new company from coming along and knocking you off?
It's easy to think that Twitter could be run with less of an eye for growth or profit, but given that it's losing money right now and that can't continue forever, it at least needs to get to a head-above-water place. The most promising ways of getting there are things like getting more users, cutting costs like staff, and figuring out how to get more revenue per current user. In fact, one could argue that the layoffs are part of Twitter not prizing growth above all else. They're trading growth (that could be driven by those employees) for cost (the salaries of those employees). Twitter is going the route of the less-growth, slimmed-down company looking to just keep chugging along. But even then, Twitter needs to get its head above water and this is kinda part of that (unfortunately).
I feel like Wikipedia is the only really high-traffic non-profit, but they're doing something that requires a lot less engineering (ie. most of the page can be easily cached and is the same for all users vs. Twitter).
WhatsApp comes to mind as an example of complex engineering (storing and delivering messages for millions) and they pulled it off with a small team at first. And more: once the core product is established/engineered, do you need as many people to maintain it?
Twitter and Wikipedia were created more than 10 years ago. It was way more challenging at the time.
Just think about the infrastructure for example. There was no SoftLayer/AWS to save your ass. You had to handle servers/hardware on your own. That alone could use a (small) company.
Who does "they" refer to in your sentence? Twitter management? If so, then it's not about a contract but about what the owners of the company (the shareholders) have hired them to do.
