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Why on earth is wall street so hung up on user growth? Don't they still have a ton of monetization opportunities? I see no where near the amount of ads as faceb

Why on earth is wall street so hung up on user growth? Don't they still have a ton of monetization opportunities? I see no where near the amount of ads as facebook and I hear their ad targeting is pretty bad right now and despite all this, their revenue isn't bad at all.

sergiotapia 11y ago
Because if you ain't first, you're last! WOOO GIT SOME!!!!!!
sosuke 11y ago
These are the investors that want quick cash now. They want to put all their eggs in one basket and cash out before everyone else does.
- oldmanjay 11y ago
  Or equally plausibly, they are investors worried about the long-term strength of the company since they are in the same market as several other very strong companies who look to the long term. That's less convenient for the narrative of hatred for Wall Street, of course, but it does seem within the bounds of reason.
bonaldi 11y ago
The price reflects the future prospects of Twitter, and a poorly-monetised Twitter with a shrinking user base is worth less than a poorly-monetised Twitter with a booming user base. Put another way, they used to be hosting a huge party and just had to work out how to turn that into cash. Now people are starting to leave the party, making cash less of a concern at that point.
- ZanyProgrammer 11y ago
  Seems like they (and a lot of SV) need to figure out ways to monetize other than ads.
  - Grishnakh 11y ago
    I can tell you the easy answer to that problem: micropayments. Look how much people will spend on Android apps when they're a dollar or three. Make things really cheap, and people will buy them: they'll do a lot of impulse purchases when things are cheap enough. If news articles only showed you part of the article, and then demanded $0.02 to read the rest, I could see a lot of people paying that. Considering how little they get paid for ad impressions (fractions of a cent), direct payments like that would be more profitable, and readers wouldn't care that much about spending pocket change on it. But there's no way to make a functioning micropayment system currently. It's not feasible to have credit-card payments for sub-$1 transactions because of the high per-transaction fees, and Visa/MC have a cartel going where you have to use them for any kind of credit/debit payments. SV needs to figure out how to make easy, low-fee micropayments a reality, and then we'll see some change.
    - LoSboccacc 11y ago
      Any intermediary will face the issue of having user deposit an advance payment so micropayments can happen. Unless one has balls enough to factor in debt in micropayments. You sign up users and make them agree to pay those .02 at a later time and when you're down five dollars the usets need to pay to continue. It's risky but with enough margin to cover the insolvents it could work
      - abraae 11y ago
        great plan! Allegedly a Facebook user is worth $128 (http://www.forbes.com/sites/georgeanders/2014/02/07/youre-worth-128-on-facebook-sorry-about-that-linkedin-drop/#68e47ffa3aa0 http://www.forbes.com/sites/georgeanders/2014/02/07/youre-wo...). Paying $5 to acquire a micropayment customer sounds cheap.
        mistermann 11y ago
        > Wall Street right now is valuing the average Facebook user at $128 , a touch ahead of Twitter’s $118 — and far above LinkedIn’s skimpy $84. Wow, I would say Twitter and Linkedin are vastly overvalued compared to Facebook.
- x0x0 11y ago
  The more users you have the more you can demand advertisers work with you to implement custom ad units or ad types. Since twitter seems to be focusing on promoted tweets and other twitter-only advertising methods, you really need a lot of scale to justify advertisers building custom creative for you.
- diab0lic 11y ago
  I think this pretty much nails the wall street perspective. Interestingly enough I left the party because their attempts to monetize were really invasive; Emails, many notifications on my phone, etc... I think some subset of their users (to which I belonged) appreciated the simplicity of the product. Their attempts to increase engagement decreased it with what appears to be a significant portion of their user base.
  - jeremy_k 11y ago
    Interesting. I receive no emails and rarely any push notifications from Twitter. I use it every day while riding the bus, although I'm mainly a consumer and hardly tweet anymore. Did you and I fall into different categories or something and somehow that led to you receiving invasive marketing where as all I ever see are a few promoted tweets? Pretty curious about this because you mention that your experience is happening to a large portion of the user base.
    - jsprogrammer 11y ago
      Twitter was pushing text from people I didn't follow to my phone's lock screen. Only visit occasionally now.
      - jonlucc 11y ago
        Their Android widget used to show the latest tweet of a person a follow. Recently (few months, maybe?) it was only the most recent ad. I'll be damned if I dedicate a chunk of my home screen to whatever crappy ad Twitter wants to fling at me.
    - diab0lic 11y ago
      I used to receive multiple push notifications a day at a minimum, which was irritating to me because prior to this a push notification meant that someone was interacting with me, and that didn't hold true anymore. Twitter had broken that implicit contract with me. As for what I had said in the parent comment, what I was trying to imply was that something has happened recently that has disengaged a significant (different than large portion, specifically meaning not insignificant) portion of its user base as evidenced by the deceleration in user growth. Apologies for any confusion. :)
- devishard 11y ago
  That's entirely perception with no basis in reality. A million users who make you $10 each are worth the same as 10 users who make you $1 million each. It's worth it for Twitter and its investors to track users so they can see how to monetize them, but if revenue goes up its okay. If making money ever isn't the main goal of a business, that truly are screwed. That said, I've long believed that Twitter would be one of the first to fail when the tech bubble pops. They don't have a product people are willing to pay for.
joakleaf 11y ago
Perhaps because they think lack of growth is a precursor to implosion. Investors also always think about the immediate obvious future. Twitter may have many monetization opportunities, but without implementing or demonstrating any, you have know way of knowing where they are going or if they'll succeed as an investor.
- Riod 11y ago
  Quite possible too. They compete with FB for ad revenue. Social networks tend to be winner take all/most. If Twitter continues to be small, then it has to have a small valuation
samfisher83 11y ago
The way you do valuations is using DCF analysis. They do some projection until a final year at which point they treat is as perpetuity with some growth rate. Here is the basic formula PV = FCF/(r-g). Where r is discount rate and g is growth rate. As you can see g is huge in the way companies are valued. For example for d=10% and FCF value of $10 million a growth rate of 1% would value the company at 111 million whearas a growth rate of 9% would value it at $1 billion. Almost 10x as much. That is why growth is so important to finance people.
- dharmon 11y ago
  This formula (the Gordon growth model), doesn't really apply here, cause the g is for perpetual growth. For example, if you plugged in FB's current growth rate, it would blow up to something ridiculously large. The rule of thumb is that it should never be larger than GDP (since that company would quickly come to dominate the national economy). Tracking inflation is safe if the company can at least raise prices to match inflation. If you don't want to set up a full DCF, the Benjamin Graham formula gives a quick intrinsic value estimate: V = E * (8.5 + 2g) * 1.1, E is earnings (FCF, or a modified form like owner's earnings would work also), but here, g is the growth rate for the next 7-10 years. This still wouldn't work for TWTR, since negative earnings always give you a negative value, so you would have to project out the next few years until twitter has positive earnings (or positive FCF), then you could use the Graham formula and discount it back to present value. But at that point you might as well just do a full DCF.
  - mistermann 11y ago
    You wouldn't happen to know of a book or website where one could learn some of these theories and formulas in a very condensed/quick way?
    - kgwgk 11y ago
      The Little Boook of Valuation, by Aswath Damodaran, is nice. You can find lot of things at his website, including a draft version of the book. http://pages.stern.nyu.edu/~adamodar/ http://pages.stern.nyu.edu/~adamodar/ http://pages.stern.nyu.edu/~adamodar/pdfiles/papers/littlebookvaln.pdf http://pages.stern.nyu.edu/~adamodar/pdfiles/papers/littlebo...
revelation 11y ago
Investing in stable, boring companies (or markets) is a suckers game reserved for pension funds. Or to put it differently, why invest in a company that isn't growing? How do you make money if you pay $X and don't expect the company to go beyond $X?
- saryant 11y ago
  Dividends.
- hodder 11y ago
  This is some of the worst investing advice I've ever heard. High valuation glamour investing in the way you describe has been widely discredited by academics as leading to poor returns. You can in fact slice the market into valuation deciles, and your returns on 5-10 yr rolling averages will increase as you step down to cheaper deciles. Further, high valuation stocks are subject to much greater crashes while annual best deciles upside is spread across valuation deciles. Meaning High value stocks tend to be a poor bet.
hkmurakami 11y ago
Companies are compared to peer group companies by the banks. For example, small cap semiconductor companies are compared to each other on the basis of P/E, revenue growth, margins, etc. What are Twitter's peer companies? Well Facebook is certainly one such company that is publicly traded and its metrics widely available. So Facebook's numbers, and in particular the numbers that Wall Street analysts decide are relevant, become the benchmark stats that Twitter is judged on, even if Twitter actually should not be put into the same basket as Facebook.
untog 11y ago
Quite simple: investors invested in a company that was going to grow exponentially. Now that it is not growing, they want out. Which, IMO, is fine. I wish we lived in an environment where Twitter could say "we're making money, we're successful enough, invest if you like what you see", but Silicon Valley is frequently hockey stick growth or death.
- bonaldi 11y ago
  I think a social network is slightly different from the other companies where that argument applies. The Internet was a fun place with 300m people on it, but growth made it better. Same with Facebook. People bring problems, but in general networks are better with more of them around.
  - ethbro 11y ago
    Some crotchety old timers might argue that point. https://en.m.wikipedia.org/wiki/Eternal_September https://en.m.wikipedia.org/wiki/Eternal_September
    - _cudgel 11y ago
      As a crotchety old timer, I agree completely.
      - bonaldi 11y ago
        You'd take Usenet over everything else we got from the growth of the network, from Amazon to MP3s?
        ethbro 11y ago
        There's a lot of different distinctions to be made (or argued against) regarding the "who" of the network, rather than the "what". I think HN comments would be a prime example that simpler-functionality-with-higher-quality-participants is a valued combination.
jusben1369 11y ago
There are a lot of reasons why. Just one example is advertisers. The largest advertisers need to work with properties at a certain scale. TV has that. Google has that. Facebook now has that because it grew to be huge. Pinterest doesn't. Twitter doesn't and more importantly now looks like it never will. So if your service's primary revenue stream is advertising but you're unappealing to the largest advertisers it's a big problem.
- bpicolo 11y ago
  Seems like a poor example. Twitter is way higher scale than a single TV network. 320M MAU.
  - smm2000 11y ago
    Twitter requires custom creatives - this is a huge cost. Every TV network can run standard 30s slot. Average American spends 4h on TV every single day. Twitter has nothing on that.
  - jusben1369 11y ago
    Yes. You can't deploy the same ad on FB and Twitter and Pinterest the way you can do a TV spot and deploy it on any channel large or small.
  - Riod 11y ago
    Actually the worst part of twitter is that things disappear so quickly (till recently). 320MM MAU doesn't mean everyone sees that. A TV ad can 1) be sent to any station, 2) has a good chance of being seen by a large % of people tuned into that station at that particular time.
Xyik 11y ago
An ads business is based on impressions. Growing users is one way of increasing impressions in which you can sell to advertisers.
rb808 11y ago
Wall Street isn't so hung up on user growth. The article is on techcrunch. OK it is an issue but there are lots of others. http://www.bloomberg.com/news/articles/2016-02-10/twitter-user-growth-stalls-first-quarter-sales-to-fall-short http://www.bloomberg.com/news/articles/2016-02-10/twitter-us...
briantmaurer 11y ago
If there are two companies A and B, and you are convinced that A will yield a better ROI than B, you will sell B and buy A – even if there is room for B to yield a positive ROI. Growth in users/usage/engagement in a social network almost always yields a better ROI than no/low/negative growth in users/usage/engagement. Twitter does not necessarily have a monetization problem, people just want to invest their money where there is more potential.
- Riod 11y ago
  No. Really depends on the price of B. If you could buy all of twitter for $1 now, you wouldn't?
  - altonzheng 11y ago
    Well, yes, because then your ROI would be huge for the money you're putting in.
    - Riod 11y ago
      Neat, me too.
  - briantmaurer 11y ago
    From an investor perspective, prices in the stock market are basically meaningless.[1] As an investor you can purchases multiples or fractions of a stock which allows you to choose your price. Percent change in price is all that matters for your ROI. e.x. A $1 increase on a $1 stock purchase yields a 100% increase, a $1 increase on a $100 stock price only yields a 1% increase. In this example, you should have purchased $100 worth of the $1 stock. e.x. On the other hand, if have some $x less than $100, but you think the $100 stock is going to increase at a faster rate than the $1 stock, you should purchase x/100th of a share of the $100 stock. [1] A stock's price is meaningful for two reasons. The sum of value of all shares defines the market capitalization for a company. Also, price can be used to exclude buyers in a socioeconomic way. This is rare, most companies will split the stock every so often to keep the price affordable. An example of an exclusionary stock is Berkshire A, which is currently priced around $180,000. Nonetheless, at the end of the day, as an investor, the only thing that matters is your expectation for the percent change in price.
spangry 11y ago
Sorry if it's bad form to re-post, but it seems relevant. Here's the counter-argument: My very controversial view is that Twitter will never achieve profitability (of the level that justifies their market cap). Like Facebook, Twitter is in a two-sided market. Unlike Facebook, it's unclear what the other side of that market is, or how it could be sufficiently monetised: User --> Facebook <-- Advertiser (Stalking) --> (Profit) <-- (Eyeballs) (Socialising) --> (Profit) <-- (Targeting) User --> Twitter <-- ? (Free expression) --> (Profit?) <-- ? (Public broadcast)--> (Profit?) <-- ? There are probably a bunch of other market participants on the right side (e.g. developers) for both companies. But I think these are the primary profit engines (and main benefits listed under the participants). Here's the interesting part. Let's assume the right side participant for Twitter is also 'advertisers'. In both cases, advertising creates a 'negative cross-side network effect': it subtracts from the user's benefit. But Facebook has a number of advantages over Twitter: - Because of the structured data they hold, it's far easier for them to target advertising at finely grained demographics. This is beneficial because it reduces or eliminates the 'user value subtraction' from advertising, and increases the value of placing an ad for advertisers (so Facebook can charge more for it). Twitter have far less scope to do this, as they can only make general inferences about their user based on sentiment and relationship-network analysis. Also, because the data is public, advertisers can analyse and target (via company/brand accounts) for free. - Facebook enjoy increasing returns to scale. On the user side, if more people use facebook there are more people to stalk or socialise with. On the advertiser side, more users means more eyeballs, more targeting data and more advertising niches. For Twitter, users gain far less from increased scale (as user-base size is not related to 'free expression', and only weakly related to 'public broadcasting', given non-twitter users can read twitter walls). Even worse, because Twitter data is public, they can't charge advertisers for the (less structured) data they generate. - Although an ill-defined concept, Facebook has increasing returns to scope. That is, as they acquire new types of data on their users, they can offer even better targeting and find more granular marketing niches. For example: imagine if Facebook acquired LinkedIn. It's fairly easy for them to link Facebook and LinkedIn users, as most use their real names on both. So now, in addition to knowing someone is a single 28 year old white guy who enjoys scotch, they now also know he earns a high income. This means that where they used to target him with generic scotch ads, they can now target high-end and expensive scotch ads at him. Twitter's users, on the other hand, mostly interact behind unlinkable pseudonyms. As heretical as these sound, I think there are only three ways for Twitter to generate significant profits (and they all carry significant drawbacks): - start charging for API calls above some threshold (i.e. charge for market research) - start charging commercial entities based on number of followers (or volume of tweets) - use adsense (better user data linkability) tl;dr - Twitter creates significant value. But it's difficult for them to capture at least some of that value as profit (unlike Facebook).
randyfandal 11y ago
Because there are other things that DO grow. So if twitter doesn't grow, then you go invest your money somewhere else that does grow. Which means you sell twitter.
perseusprime11 11y ago
Facebook trained the wall street to think in terms of MAUs.
HappyTypist 11y ago
Because monetisation is logarithmic, while growth is supposed to be exponential for a while. You can go from $1 / user to $1.40 / user or $1.60 / user, but you can't go to $3 / user or $10 / user without some fundamental shifts that'll lose you users. You CAN go from 100 million users to 300 million to 1 billion.

sergiotapia 11y ago

Because if you ain't first, you're last! WOOO GIT SOME!!!!!!

sosuke 11y ago

These are the investors that want quick cash now. They want to put all their eggs in one basket and cash out before everyone else does.

oldmanjay 11y ago
Or equally plausibly, they are investors worried about the long-term strength of the company since they are in the same market as several other very strong companies who look to the long term. That's less convenient for the narrative of hatred for Wall Street, of course, but it does seem within the bounds of reason.

bonaldi 11y ago

The price reflects the future prospects of Twitter, and a poorly-monetised Twitter with a shrinking user base is worth less than a poorly-monetised Twitter with a booming user base. Put another way, they used to be hosting a huge party and just had to work out how to turn that into cash. Now people are starting to leave the party, making cash less of a concern at that point.

ZanyProgrammer 11y ago
Seems like they (and a lot of SV) need to figure out ways to monetize other than ads.
- Grishnakh 11y ago
  I can tell you the easy answer to that problem: micropayments. Look how much people will spend on Android apps when they're a dollar or three. Make things really cheap, and people will buy them: they'll do a lot of impulse purchases when things are cheap enough. If news articles only showed you part of the article, and then demanded $0.02 to read the rest, I could see a lot of people paying that. Considering how little they get paid for ad impressions (fractions of a cent), direct payments like that would be more profitable, and readers wouldn't care that much about spending pocket change on it. But there's no way to make a functioning micropayment system currently. It's not feasible to have credit-card payments for sub-$1 transactions because of the high per-transaction fees, and Visa/MC have a cartel going where you have to use them for any kind of credit/debit payments. SV needs to figure out how to make easy, low-fee micropayments a reality, and then we'll see some change.
  - LoSboccacc 11y ago
    Any intermediary will face the issue of having user deposit an advance payment so micropayments can happen. Unless one has balls enough to factor in debt in micropayments. You sign up users and make them agree to pay those .02 at a later time and when you're down five dollars the usets need to pay to continue. It's risky but with enough margin to cover the insolvents it could work
    - abraae 11y ago
      great plan! Allegedly a Facebook user is worth $128 (http://www.forbes.com/sites/georgeanders/2014/02/07/youre-worth-128-on-facebook-sorry-about-that-linkedin-drop/#68e47ffa3aa0 http://www.forbes.com/sites/georgeanders/2014/02/07/youre-wo...). Paying $5 to acquire a micropayment customer sounds cheap.
      - mistermann 11y ago
        > Wall Street right now is valuing the average Facebook user at $128 , a touch ahead of Twitter’s $118 — and far above LinkedIn’s skimpy $84. Wow, I would say Twitter and Linkedin are vastly overvalued compared to Facebook.
x0x0 11y ago
The more users you have the more you can demand advertisers work with you to implement custom ad units or ad types. Since twitter seems to be focusing on promoted tweets and other twitter-only advertising methods, you really need a lot of scale to justify advertisers building custom creative for you.
diab0lic 11y ago
I think this pretty much nails the wall street perspective. Interestingly enough I left the party because their attempts to monetize were really invasive; Emails, many notifications on my phone, etc... I think some subset of their users (to which I belonged) appreciated the simplicity of the product. Their attempts to increase engagement decreased it with what appears to be a significant portion of their user base.
- jeremy_k 11y ago
  Interesting. I receive no emails and rarely any push notifications from Twitter. I use it every day while riding the bus, although I'm mainly a consumer and hardly tweet anymore. Did you and I fall into different categories or something and somehow that led to you receiving invasive marketing where as all I ever see are a few promoted tweets? Pretty curious about this because you mention that your experience is happening to a large portion of the user base.
  - jsprogrammer 11y ago
    Twitter was pushing text from people I didn't follow to my phone's lock screen. Only visit occasionally now.
    - jonlucc 11y ago
      Their Android widget used to show the latest tweet of a person a follow. Recently (few months, maybe?) it was only the most recent ad. I'll be damned if I dedicate a chunk of my home screen to whatever crappy ad Twitter wants to fling at me.
  - diab0lic 11y ago
    I used to receive multiple push notifications a day at a minimum, which was irritating to me because prior to this a push notification meant that someone was interacting with me, and that didn't hold true anymore. Twitter had broken that implicit contract with me. As for what I had said in the parent comment, what I was trying to imply was that something has happened recently that has disengaged a significant (different than large portion, specifically meaning not insignificant) portion of its user base as evidenced by the deceleration in user growth. Apologies for any confusion. :)
devishard 11y ago
That's entirely perception with no basis in reality. A million users who make you $10 each are worth the same as 10 users who make you $1 million each. It's worth it for Twitter and its investors to track users so they can see how to monetize them, but if revenue goes up its okay. If making money ever isn't the main goal of a business, that truly are screwed. That said, I've long believed that Twitter would be one of the first to fail when the tech bubble pops. They don't have a product people are willing to pay for.

joakleaf 11y ago

Perhaps because they think lack of growth is a precursor to implosion. Investors also always think about the immediate obvious future. Twitter may have many monetization opportunities, but without implementing or demonstrating any, you have know way of knowing where they are going or if they'll succeed as an investor.

Riod 11y ago
Quite possible too. They compete with FB for ad revenue. Social networks tend to be winner take all/most. If Twitter continues to be small, then it has to have a small valuation

samfisher83 11y ago

The way you do valuations is using DCF analysis. They do some projection until a final year at which point they treat is as perpetuity with some growth rate. Here is the basic formula PV = FCF/(r-g). Where r is discount rate and g is growth rate. As you can see g is huge in the way companies are valued. For example for d=10% and FCF value of $10 million a growth rate of 1% would value the company at 111 million whearas a growth rate of 9% would value it at $1 billion. Almost 10x as much. That is why growth is so important to finance people.

dharmon 11y ago
This formula (the Gordon growth model), doesn't really apply here, cause the g is for perpetual growth. For example, if you plugged in FB's current growth rate, it would blow up to something ridiculously large. The rule of thumb is that it should never be larger than GDP (since that company would quickly come to dominate the national economy). Tracking inflation is safe if the company can at least raise prices to match inflation. If you don't want to set up a full DCF, the Benjamin Graham formula gives a quick intrinsic value estimate: V = E * (8.5 + 2g) * 1.1, E is earnings (FCF, or a modified form like owner's earnings would work also), but here, g is the growth rate for the next 7-10 years. This still wouldn't work for TWTR, since negative earnings always give you a negative value, so you would have to project out the next few years until twitter has positive earnings (or positive FCF), then you could use the Graham formula and discount it back to present value. But at that point you might as well just do a full DCF.
- mistermann 11y ago
  You wouldn't happen to know of a book or website where one could learn some of these theories and formulas in a very condensed/quick way?
  - kgwgk 11y ago
    The Little Boook of Valuation, by Aswath Damodaran, is nice. You can find lot of things at his website, including a draft version of the book. http://pages.stern.nyu.edu/~adamodar/ http://pages.stern.nyu.edu/~adamodar/ http://pages.stern.nyu.edu/~adamodar/pdfiles/papers/littlebookvaln.pdf http://pages.stern.nyu.edu/~adamodar/pdfiles/papers/littlebo...

revelation 11y ago

Investing in stable, boring companies (or markets) is a suckers game reserved for pension funds. Or to put it differently, why invest in a company that isn't growing? How do you make money if you pay $X and don't expect the company to go beyond $X?

saryant 11y ago
Dividends.
hodder 11y ago
This is some of the worst investing advice I've ever heard. High valuation glamour investing in the way you describe has been widely discredited by academics as leading to poor returns. You can in fact slice the market into valuation deciles, and your returns on 5-10 yr rolling averages will increase as you step down to cheaper deciles. Further, high valuation stocks are subject to much greater crashes while annual best deciles upside is spread across valuation deciles. Meaning High value stocks tend to be a poor bet.

hkmurakami 11y ago

Companies are compared to peer group companies by the banks. For example, small cap semiconductor companies are compared to each other on the basis of P/E, revenue growth, margins, etc. What are Twitter's peer companies? Well Facebook is certainly one such company that is publicly traded and its metrics widely available. So Facebook's numbers, and in particular the numbers that Wall Street analysts decide are relevant, become the benchmark stats that Twitter is judged on, even if Twitter actually should not be put into the same basket as Facebook.

untog 11y ago

Quite simple: investors invested in a company that was going to grow exponentially. Now that it is not growing, they want out. Which, IMO, is fine. I wish we lived in an environment where Twitter could say "we're making money, we're successful enough, invest if you like what you see", but Silicon Valley is frequently hockey stick growth or death.

bonaldi 11y ago
I think a social network is slightly different from the other companies where that argument applies. The Internet was a fun place with 300m people on it, but growth made it better. Same with Facebook. People bring problems, but in general networks are better with more of them around.
- ethbro 11y ago
  Some crotchety old timers might argue that point. https://en.m.wikipedia.org/wiki/Eternal_September https://en.m.wikipedia.org/wiki/Eternal_September
  - _cudgel 11y ago
    As a crotchety old timer, I agree completely.
    - bonaldi 11y ago
      You'd take Usenet over everything else we got from the growth of the network, from Amazon to MP3s?
      - ethbro 11y ago
        There's a lot of different distinctions to be made (or argued against) regarding the "who" of the network, rather than the "what". I think HN comments would be a prime example that simpler-functionality-with-higher-quality-participants is a valued combination.

jusben1369 11y ago

There are a lot of reasons why. Just one example is advertisers. The largest advertisers need to work with properties at a certain scale. TV has that. Google has that. Facebook now has that because it grew to be huge. Pinterest doesn't. Twitter doesn't and more importantly now looks like it never will. So if your service's primary revenue stream is advertising but you're unappealing to the largest advertisers it's a big problem.

bpicolo 11y ago
Seems like a poor example. Twitter is way higher scale than a single TV network. 320M MAU.
- smm2000 11y ago
  Twitter requires custom creatives - this is a huge cost. Every TV network can run standard 30s slot. Average American spends 4h on TV every single day. Twitter has nothing on that.
- jusben1369 11y ago
  Yes. You can't deploy the same ad on FB and Twitter and Pinterest the way you can do a TV spot and deploy it on any channel large or small.
- Riod 11y ago
  Actually the worst part of twitter is that things disappear so quickly (till recently). 320MM MAU doesn't mean everyone sees that. A TV ad can 1) be sent to any station, 2) has a good chance of being seen by a large % of people tuned into that station at that particular time.

Xyik 11y ago

An ads business is based on impressions. Growing users is one way of increasing impressions in which you can sell to advertisers.

rb808 11y ago

Wall Street isn't so hung up on user growth. The article is on techcrunch. OK it is an issue but there are lots of others. http://www.bloomberg.com/news/articles/2016-02-10/twitter-user-growth-stalls-first-quarter-sales-to-fall-short http://www.bloomberg.com/news/articles/2016-02-10/twitter-us...

briantmaurer 11y ago

If there are two companies A and B, and you are convinced that A will yield a better ROI than B, you will sell B and buy A – even if there is room for B to yield a positive ROI. Growth in users/usage/engagement in a social network almost always yields a better ROI than no/low/negative growth in users/usage/engagement. Twitter does not necessarily have a monetization problem, people just want to invest their money where there is more potential.

Riod 11y ago
No. Really depends on the price of B. If you could buy all of twitter for $1 now, you wouldn't?
- altonzheng 11y ago
  Well, yes, because then your ROI would be huge for the money you're putting in.
  - Riod 11y ago
    Neat, me too.
- briantmaurer 11y ago
  From an investor perspective, prices in the stock market are basically meaningless.[1] As an investor you can purchases multiples or fractions of a stock which allows you to choose your price. Percent change in price is all that matters for your ROI. e.x. A $1 increase on a $1 stock purchase yields a 100% increase, a $1 increase on a $100 stock price only yields a 1% increase. In this example, you should have purchased $100 worth of the $1 stock. e.x. On the other hand, if have some $x less than $100, but you think the $100 stock is going to increase at a faster rate than the $1 stock, you should purchase x/100th of a share of the $100 stock. [1] A stock's price is meaningful for two reasons. The sum of value of all shares defines the market capitalization for a company. Also, price can be used to exclude buyers in a socioeconomic way. This is rare, most companies will split the stock every so often to keep the price affordable. An example of an exclusionary stock is Berkshire A, which is currently priced around $180,000. Nonetheless, at the end of the day, as an investor, the only thing that matters is your expectation for the percent change in price.

spangry 11y ago

Sorry if it's bad form to re-post, but it seems relevant. Here's the counter-argument: My very controversial view is that Twitter will never achieve profitability (of the level that justifies their market cap). Like Facebook, Twitter is in a two-sided market. Unlike Facebook, it's unclear what the other side of that market is, or how it could be sufficiently monetised: User --> Facebook <-- Advertiser (Stalking) --> (Profit) <-- (Eyeballs) (Socialising) --> (Profit) <-- (Targeting) User --> Twitter <-- ? (Free expression) --> (Profit?) <-- ? (Public broadcast)--> (Profit?) <-- ? There are probably a bunch of other market participants on the right side (e.g. developers) for both companies. But I think these are the primary profit engines (and main benefits listed under the participants). Here's the interesting part. Let's assume the right side participant for Twitter is also 'advertisers'. In both cases, advertising creates a 'negative cross-side network effect': it subtracts from the user's benefit. But Facebook has a number of advantages over Twitter: - Because of the structured data they hold, it's far easier for them to target advertising at finely grained demographics. This is beneficial because it reduces or eliminates the 'user value subtraction' from advertising, and increases the value of placing an ad for advertisers (so Facebook can charge more for it). Twitter have far less scope to do this, as they can only make general inferences about their user based on sentiment and relationship-network analysis. Also, because the data is public, advertisers can analyse and target (via company/brand accounts) for free. - Facebook enjoy increasing returns to scale. On the user side, if more people use facebook there are more people to stalk or socialise with. On the advertiser side, more users means more eyeballs, more targeting data and more advertising niches. For Twitter, users gain far less from increased scale (as user-base size is not related to 'free expression', and only weakly related to 'public broadcasting', given non-twitter users can read twitter walls). Even worse, because Twitter data is public, they can't charge advertisers for the (less structured) data they generate. - Although an ill-defined concept, Facebook has increasing returns to scope. That is, as they acquire new types of data on their users, they can offer even better targeting and find more granular marketing niches. For example: imagine if Facebook acquired LinkedIn. It's fairly easy for them to link Facebook and LinkedIn users, as most use their real names on both. So now, in addition to knowing someone is a single 28 year old white guy who enjoys scotch, they now also know he earns a high income. This means that where they used to target him with generic scotch ads, they can now target high-end and expensive scotch ads at him. Twitter's users, on the other hand, mostly interact behind unlinkable pseudonyms. As heretical as these sound, I think there are only three ways for Twitter to generate significant profits (and they all carry significant drawbacks): - start charging for API calls above some threshold (i.e. charge for market research) - start charging commercial entities based on number of followers (or volume of tweets) - use adsense (better user data linkability) tl;dr - Twitter creates significant value. But it's difficult for them to capture at least some of that value as profit (unlike Facebook).

randyfandal 11y ago

Because there are other things that DO grow. So if twitter doesn't grow, then you go invest your money somewhere else that does grow. Which means you sell twitter.

perseusprime11 11y ago

Facebook trained the wall street to think in terms of MAUs.

HappyTypist 11y ago

Because monetisation is logarithmic, while growth is supposed to be exponential for a while. You can go from $1 / user to $1.40 / user or $1.60 / user, but you can't go to $3 / user or $10 / user without some fundamental shifts that'll lose you users. You CAN go from 100 million users to 300 million to 1 billion.