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This is bad, if not entirely unexpected, news. What is out of the ordinary is the public markets' reaction: the stock is down 3% in after-hours trading. Typica

by calcsam 11y ago

This is bad, if not entirely unexpected, news. What is out of the ordinary is the public markets' reaction: the stock is down 3% in after-hours trading. Typically when a company announces layoffs its stock goes up. More mature companies have sometimes slashed headcount on the way to a better market situation. But when younger companies announce layoffs, the markets stop assuming they have lots of growth ahead and adjust expectations accordingly -- usually resulting in a significant drop in stock price. Remember, back in July, Twitter announced earnings beating market estimates. This was at 4pm, its stock surged 4%. About half an hour later, CFO Anthony Noto said Twitter would not see "sustained, meaningful" user growth for a "considerable period of time." TWTR promptly plunged 10%. http://www.cnbc.com/2015/07/28/twitter-earnings-7-cents-per-share-vs-expected-eps-of-4-cents.html http://www.cnbc.com/2015/07/28/twitter-earnings-7-cents-per-...

jarsin 11y ago
Twitter is suppose to be a growth company. Layoffs and downsizing are not what growth investors want to see. Thats why it went down.
InclinedPlane 11y ago
I suspect that's just people having their delusions of rampant future growth and expansion of twitter being crushed in the gears of mundane reality. These moves are perfectly fine for a normal company that intends to continue operating at about the same level as it is currently indefinitely. But people view every tech company through the lens of apple, google, amazon, etc. They expect growth, they expect new stuff, and so on. The truth is that with modern technology you can build a company that has hundreds of millions of high-volume users and yet is not very expensive to operate. Companies, and their revenue, don't necessarily scale the way we're used to from the experience of industrial companies.
- kordless 11y ago
  They turned off their APIs to application developers. What they should have done is ramp that shit up and figure out how to monetize the query traffic or figure out a way to decentralize their infrastructure to allow everyone to run Twitter together.
  - jeff_marshall 11y ago
    >What they should have done is ramp that shit up and figure out how to monetize the query traffic or figure out a way to decentralize their infrastructure to allow everyone to run Twitter together So, I'm genuienly curious. How do they make money by "ramping that shit up"? I've seen a lot of companies that have 'get users' as their M.O., but I have no insight into the "profit!!!" phase. Opening their user base seems contary to "profit!!!", from a laymans perspective. It seems to me like API/User info availability is their leverage w.r.t. profitability, much as it pains me as a potential developer who would like that information for free. How does decentralization make them (and their investors) money? I can't see a way to do both given the incentives.
    - deleted 11y ago
      [deleted]
    - j42 11y ago
      While not stated eloquently, I do think there's some truth in that. 1. Open API's, good documentation and community engagement goes a long way in establishing developer trust. I don't believe developer trust is correlated significantly with revenue (directly), but it's absolutely correlated with acquisition. I'd argue that Angular or React were partially successful because of the stickiness of their communities, and that's a powerful self-perpetuating force. 2. Monetization is in the queries. Facebook and Google know this. Throwing aside all of their auxiliary services, emerging markets, hardware, et al... between 70-90% of their respective revenue is from direct advertising. If there's a way to scale or "ramp" their revenue model, this would be the portion to focus on.
      - inthewoods 11y ago
        Monetization of the queries doesn't appear to be a significant revenue opportunity for either Google or Facebook - why would this be different for Twitter? Not that this can't be a revenue source, but how big is it? An alternative: I agree with everyone that they should have turned the APIs back on - they just should have made it mandatory to carry advertising as part of the feeds in order to access the feeds. They could have also layered on federated advertising for anyone consuming the API - meaning, allow those folks to show their own advertising in-stream. They simply pay Twitter a cut. Both of these may have helped them both grow the audience and advertising at the same time.
- smacktoward 11y ago
  > The truth is that with modern technology you can build a company that has hundreds of millions of high-volume users and yet is not very expensive to operate. Investors had to dump more than a billion dollars into Twitter to get it to where it is today.
  - jliptzin 11y ago
    Uh, most of that money was from the IPO and that was probably done because founders/early investors wanted to cash in. I'd say the vast majority of that funding was not necessary to scale to where they are today.
    - MichaelGG 11y ago
      Really? Wikipedia shows they raised over a billion from investors before IPO (including individual rounds of $800M and $300M.) Of the $800M, half went to cash out. I'd agree though that at least technically, to deliver the core user product, this money simply wasn't needed. (It might have been needed for advertising or building up contracts, etc.)
    - eggie 11y ago
      It didn't help improve the interface much. For example, on this site the interface shows me quickly who is replying to whom. A billion dollars in and Twitter still can't do this. They tried to be the world's largest chat room and basically came up AOL.
      - cpeterso 11y ago
        And the UI changes they have made are demonstrably worse, such as their seemingly random threading, constantly losing page scroll position, and repeating earlier tweets.
  - trjordan 11y ago
    1) Operating is not the same as building, especially if you have to figure things out. 2) Twitter reported half a billion in revenue last quarter.
rdtsc 11y ago
> What is out of the ordinary is the public markets' reaction? But is it? Maybe the public is realizing that tweets were just a cool fad for a while. For twitter to be profitable, I am guessing, there has to be people that want to use it, and (very important) people believing that people want to use it (so they'd pay Twitter for advertising). Compare with Google. Google provides something momre back (gmail, search, calendar, docs, photo storage, directions + many other things I forgot about). Twitter provides 140 status messages. There is nothing wrong it, that is very cool. But I think there is a realization that it just isn't as cool as it was in 4 years ago. And it just became 3% less cool.
- joshkpeterson 11y ago
  I don't know, I'd be willing to bet twitter usage is up compared to 4 years ago. Also, stock price != coolness, and further coolness != making more money. Isn't that what this story is about?
  - bandrami 11y ago
    But then again stock price != making more money. Particularly for non-dividend-paying firms.
    - sinxoveretothex 11y ago
      Would you care to expand on this one? It seems to me that stock price is correlated with more money: if I have X stock options worth Y dollars each, I effectively have X*Y dollars worth of stock. If stock price increase by 1 dollars, I have X dollars more than I did before. No?
      - nikanj 11y ago
        I think they mean the stock price of the company is not well correlated with the amount of money the company is making
      - blumkvist 11y ago
incepted 11y ago
> the stock is down 3% in after-hours trading. Any fluctuation within 5% is perfectly normal and totally meaningless.
- austenallred 11y ago
  Especially when the stock was up the day before
bobbyi_settv 11y ago
> Typically when a company announces layoffs its stock goes up. They haven't announced layoffs. The article is very clear about this.

by calcsam 11y ago

jarsin 11y ago

Twitter is suppose to be a growth company. Layoffs and downsizing are not what growth investors want to see. Thats why it went down.

InclinedPlane 11y ago

I suspect that's just people having their delusions of rampant future growth and expansion of twitter being crushed in the gears of mundane reality. These moves are perfectly fine for a normal company that intends to continue operating at about the same level as it is currently indefinitely. But people view every tech company through the lens of apple, google, amazon, etc. They expect growth, they expect new stuff, and so on. The truth is that with modern technology you can build a company that has hundreds of millions of high-volume users and yet is not very expensive to operate. Companies, and their revenue, don't necessarily scale the way we're used to from the experience of industrial companies.

kordless 11y ago
They turned off their APIs to application developers. What they should have done is ramp that shit up and figure out how to monetize the query traffic or figure out a way to decentralize their infrastructure to allow everyone to run Twitter together.
- jeff_marshall 11y ago
  >What they should have done is ramp that shit up and figure out how to monetize the query traffic or figure out a way to decentralize their infrastructure to allow everyone to run Twitter together So, I'm genuienly curious. How do they make money by "ramping that shit up"? I've seen a lot of companies that have 'get users' as their M.O., but I have no insight into the "profit!!!" phase. Opening their user base seems contary to "profit!!!", from a laymans perspective. It seems to me like API/User info availability is their leverage w.r.t. profitability, much as it pains me as a potential developer who would like that information for free. How does decentralization make them (and their investors) money? I can't see a way to do both given the incentives.
  - deleted 11y ago
    [deleted]
  - j42 11y ago
    While not stated eloquently, I do think there's some truth in that. 1. Open API's, good documentation and community engagement goes a long way in establishing developer trust. I don't believe developer trust is correlated significantly with revenue (directly), but it's absolutely correlated with acquisition. I'd argue that Angular or React were partially successful because of the stickiness of their communities, and that's a powerful self-perpetuating force. 2. Monetization is in the queries. Facebook and Google know this. Throwing aside all of their auxiliary services, emerging markets, hardware, et al... between 70-90% of their respective revenue is from direct advertising. If there's a way to scale or "ramp" their revenue model, this would be the portion to focus on.
    - inthewoods 11y ago
      Monetization of the queries doesn't appear to be a significant revenue opportunity for either Google or Facebook - why would this be different for Twitter? Not that this can't be a revenue source, but how big is it? An alternative: I agree with everyone that they should have turned the APIs back on - they just should have made it mandatory to carry advertising as part of the feeds in order to access the feeds. They could have also layered on federated advertising for anyone consuming the API - meaning, allow those folks to show their own advertising in-stream. They simply pay Twitter a cut. Both of these may have helped them both grow the audience and advertising at the same time.
smacktoward 11y ago
> The truth is that with modern technology you can build a company that has hundreds of millions of high-volume users and yet is not very expensive to operate. Investors had to dump more than a billion dollars into Twitter to get it to where it is today.
- jliptzin 11y ago
  Uh, most of that money was from the IPO and that was probably done because founders/early investors wanted to cash in. I'd say the vast majority of that funding was not necessary to scale to where they are today.
  - MichaelGG 11y ago
    Really? Wikipedia shows they raised over a billion from investors before IPO (including individual rounds of $800M and $300M.) Of the $800M, half went to cash out. I'd agree though that at least technically, to deliver the core user product, this money simply wasn't needed. (It might have been needed for advertising or building up contracts, etc.)
  - eggie 11y ago
    It didn't help improve the interface much. For example, on this site the interface shows me quickly who is replying to whom. A billion dollars in and Twitter still can't do this. They tried to be the world's largest chat room and basically came up AOL.
    - cpeterso 11y ago
      And the UI changes they have made are demonstrably worse, such as their seemingly random threading, constantly losing page scroll position, and repeating earlier tweets.
- trjordan 11y ago
  1) Operating is not the same as building, especially if you have to figure things out. 2) Twitter reported half a billion in revenue last quarter.

rdtsc 11y ago

> What is out of the ordinary is the public markets' reaction? But is it? Maybe the public is realizing that tweets were just a cool fad for a while. For twitter to be profitable, I am guessing, there has to be people that want to use it, and (very important) people believing that people want to use it (so they'd pay Twitter for advertising). Compare with Google. Google provides something momre back (gmail, search, calendar, docs, photo storage, directions + many other things I forgot about). Twitter provides 140 status messages. There is nothing wrong it, that is very cool. But I think there is a realization that it just isn't as cool as it was in 4 years ago. And it just became 3% less cool.

joshkpeterson 11y ago
I don't know, I'd be willing to bet twitter usage is up compared to 4 years ago. Also, stock price != coolness, and further coolness != making more money. Isn't that what this story is about?
- bandrami 11y ago
  But then again stock price != making more money. Particularly for non-dividend-paying firms.
  - sinxoveretothex 11y ago
    Would you care to expand on this one? It seems to me that stock price is correlated with more money: if I have X stock options worth Y dollars each, I effectively have X*Y dollars worth of stock. If stock price increase by 1 dollars, I have X dollars more than I did before. No?
    - nikanj 11y ago
      I think they mean the stock price of the company is not well correlated with the amount of money the company is making
    - blumkvist 11y ago

incepted 11y ago

> the stock is down 3% in after-hours trading. Any fluctuation within 5% is perfectly normal and totally meaningless.

austenallred 11y ago
Especially when the stock was up the day before

bobbyi_settv 11y ago

> Typically when a company announces layoffs its stock goes up. They haven't announced layoffs. The article is very clear about this.