Text can lose clarity before compression even starts. A screenshot of a design canvas may include a scaled preview instead of the exported artwork. A title copied out of a chat attachment may have been compressed already. Compare your source at its actual pixel size: if the letter strokes are fuzzy there, a new export from the design editor is the right repair.
This page starts with a PNG export and no sharpening so you can assess the resize without adding a halo. PNG is useful for flat colours and hard edges, although it can produce a much larger file when the thumbnail includes a photograph. The choice is about the contents of your image, not a blanket rule that PNG always looks better.
The tool resizes complete artwork. It cannot change a font, move a word, increase text contrast independently, or replace a long headline. Make those decisions in the editable design. Give the title enough room that the important strokes still have visible width after the thumbnail is reduced for browsing.