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IMO, Twitter is the poster child for the tech bubble. They have users, which is their only claim to viability, but notably, they have never made a profit. Curre
by imagist 10y ago
IMO, Twitter is the poster child for the tech bubble. They have users, which is their only claim to viability, but notably, they have never made a profit. Currently valued at around $10 billion with 350 million active users, that's about $29 per user. You'd be hard-pressed to find an investor so foolish that they would invest $29 in each of their users and hope to make it back if it were stated in those terms, but people have rushed to invest in a company which only has users, and whose attempts to monetize users through advertising have correlated strongly with loss of users. There can be little argument that Twitter's price has become entirely detached from its value.
That doesn't of course, mean you couldn't make money by investing in Twitter. You can make money by investing in overvalued companies as long as you don't hold onto your share until it busts. One profitable route would be if Twitter does get bought by a larger company. The market as a whole will lose on Twitter, but local maxima can be more profitable than the whole.
But at a personal level, don't be naive about this. A lot of people are investing, not just money, but time and energy, in Twitter or startups like Twitter. If you find yourself thinking that Twitter is a company with any real value, you should take a step back and evaluate whether you're being wise, or whether you've fallen prey to the unbridled optimism of the tech bubble. Twitter's position as poster child for the tech bubble makes it a good litmus test for people's understanding of the industry, and I suspect it will correlate very strongly with who loses everything when the tech bubble collapses.
- thr0waway1239 10y agoYour comment actually sort of explains the question I asked. Would you still maintain this view if either a) advertisers reduce their spend on FB because of poor results and the usual problem with saturation of any advertising channel and start looking at other options, or b) more events play out in the future where Twitter's place as the "other social network that people actually care about" becomes more important/relevant - e.g. one more mass hysteria event surrounding some censorship from FB, or c) anything happens to block FB from being able to show ads inside WhatsApp?
- imagist 10y agoIn the long run, I don't think that Twitter's problem is one of competition from FB or any other competitor. They have enough users that they could turn a profit even if they could monetize those users, regardless of competition. But they haven't turned a profit, which after 10 years is a strong indicator that they can't turn a profit. If Twitter is able to time an addition of ads with a major event that damages FB's user base, the influx of users from FB might cancel out the loss of users from the addition of ads, and Twitter might be able to turn a profit. But that effect is a) temporary, and b) fairly unlikely. Even if they managed to eat into their competitors' user bases, they have failed to monetize their existing hundreds of millions of users, so there's no reason to believe they'd be able to monetize future hypothetical users.
- thr0waway1239 10y ago> They have enough users that they could turn a profit even if they could monetize those users, regardless of competition. That's an excellent point. I started this discussion wondering "Is the company in such bad shape that it needs to find a buyer?" and I think you might have just convinced me that it needs at least some kind of joint venture , if not be bought outright. Hope Twitter doesn't go the way of MySpace.
- onewaystreet 10y ago> But they haven't turned a profit, which after 10 years is a strong indicator that they can't turn a profit. In those 10 years Twitter has changed leaderships multiple times. Twitter has never had stable and competent management.
- imagist 10y agoThat's symptomatic of the problem, not causal. Despite leadership changes, Twitter has build a solid infrastructure, raised money, etc.--all the things that would make them a profit if their business model were at all profitable. Leadership keeps changing because nobody knows how to make it profitable, and we've tried enough approaches now that I think we can conclude it won't be profitable.
- gxs 10y agoPeople always write them off, but I do wonder if it's more of an emotional write off or the fact that as non twitter users, they refuse to see value because they personally don't see value. I'm not a twitter user or advocate but: 106.31M 316.93M 664.89M 1.4B 2.22B That's their revenue over the past 5 years. Their R&D cost last year was over 800M. I'm not saying they are Google, I'm not saying they are LinkedIn, but there is definitely big money at play here at a scale investors love (hundreds of millions of users, over 300M at last check) so it might be premature to completely dismiss them.
- Pxtl 10y agoYes, I think a large part of the hate that Twitter gets is from people who see Twitter as a silly product, like Snapchat or something. Yes, Twitter has challenges in monetizing, and yes, Twitter is weird, and yes, Twitter hasn't made a profit yet. But fundamentally, Twitter is still the preferred platform for following media, celebrities, politicians, internet-famous-people, and quick ad-hoc public communication with those people. And just like how Facebook's success is that all your friends are there, Twitter's success is that every public figure you're interested in is there, even the geeky small nuts-and-bolts types like writers and programmers and artists. It has become the public plaza of the Internet. If I want to post pictures of my kids, I'll do it on Facebook. If I want to pick a fight with my city councillor about a decision he made or get in touch with a script-writer of my favourite movie, I'll do it on Twitter.
- erklik 10y agoHell. Most of tech-support is through Twitter. My tweet carries a large amount of power compared to a phone-call to tech-support.
- Pxtl 10y agoYup. Twitter carries the implicit threat of "satisfy me or I'll make a public stink". It's the closest we non-journos can do to putting a mic in their face and demanding answers on camera.
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- dominotw 10y ago> If you find yourself thinking that Twitter is a company with any real value What about non-monetary value like playing a key role in 'Arab Spring'[1] https://en.wikipedia.org/wiki/Social_media_and_the_Arab_Spring https://en.wikipedia.org/wiki/Social_media_and_the_Arab_Spri...
- sfifs 10y agoSure, then they should be a non profit and be funded as such.
- gaius 10y agoIf they showed a single ad to anyone during that, then they lose the moral high ground.
- imagist 10y agoGiven Twitter's complicity in freedom-of-speech curtailing activities in the US, France, Israel, and Turkey, Twitter's non-monetary value only goes as far as that non-monetary value provides them monetary value. I don't think this is worth considering from either an investment or ethical perspective. Twitter, like most corporations, is an amoral entity.
- pc86 10y agoWhy would anyone pay $10B for non-monetary value?
- lossolo 10y ago
- ravenstine 10y ago> They have users, which is their only claim to viability, but notably, they have never made a profit. I am SO glad that someone else realizes this. Many journalists, and lots of regular people subsequently, mistake revenue for profit.
- ravenstine 10y agoNot sure why I am being downvoted. Is Webster's Dictionary too offensive to some?
- jlebrech 10y agoat $29 per user, wouldn't it be better to spend $1 Billion creating a replacement for twitter and then giving each new user a dollar or something?
- vthallam 10y agoSo that they can take the dollar and go back to twitter to tweet "how the new company is making a fool of itself?" :)
- nostrademons 10y agoBing tried this - they offered users cash for searching on Bing and buying things. What resulted is that everybody searched on Google to find the thing they were interested in, then searched for that specific item on Bing, collected the cash, and quickly went back to Google. You don't change habits with a dollar or even $29, and consumer habits are immensely valuable.
- briholt 10y agoAgreed on poor finances. But Twitter has one thing that no one else has - they are in the center of the zeitgeist. Every political candidate is on Twitter. Every news network discusses Twitter happenings everyday. NFL broadcasts list players' Twitter handles. Half the commercials on TV advertise hashtags. South Park just did a whole episode about Twitter. The cost to embed your brand in the minds of Americans like that would be far greater than $10B. The question is can some larger company capitalize on that mindshare.
- pc86 10y agoThere are plenty of people who use Facebook and don't use Twitter. Facebook is certainly more ubiquitous, it's just not quite as easy to tell you where someone's FB page is the way you can just have "@BarackObama" in the ticker.
- allemagne 10y agoA (somewhat less significant) number of people use Twitter and not Facebook. Facebook seems to have a reputation of being more ubiquitous, yet creepier than Twitter.
- emodendroket 10y agoIt's a lot more than "somewhat" less significant.
- deleted 10y ago[deleted]
- orblivion 10y agoOddball idea: If all these news outlets, and other organizations, benefit from it, maybe they could finance it. The same way the Linux Foundation is sponsored by large tech companies.
- abc_lisper 10y agoNo shit! They should charge companies and news agencies, and anyone representing companies per tweet(1k per tweet or similar). They provide a valuable service - why should they give it to corporations for free?
- scosman 10y agoBe careful conflating "never made a profit" with not having a business. They made $710M in revenue last quarter, up 48% yoy. Their expenses might be high, but they can address that. Companies like Amazon didn't make a profit for years, and are rightfully quite valuable in the eyes of the market. A $29 valuation per MAU is low if anything. Facebook is almost 10x that (and deserves to be). Early stage startups often get 50x that or higher.
- imagist 10y ago> Be careful conflating "never made a profit" with not having a business. At 10 years in, this isn't a conflation--these are just equivalent. > Early stage startups often get 50x that or higher. ...and this makes sense for some early-stage startups. But Twitter isn't an early-stage startup.
- segmondy 10y agoWhy the hell is their expense that high? 350 million users, sure it's a lot. Plus they have to store the messages for a long time and it's not like a text message but more like a group chat. Still, most of their expense can't be going towards their tech stack but headcount. Anyone that takes over the company is going to be doing massive layoffs. They should do it their self and become profitable or else someone is going to do it and run of their good folks in the process. They are about to become the new Yahoo if they don't turn themselves around quickly.
- heydenberk 10y ago> Anyone that takes over the company is going to be doing massive layoffs. Rapidly-growing tech behemoths like Google can afford to acquihire hundred of engineers and, eventually, assign them to other work.
- BinaryIdiot 10y agoMaybe. But at the same time, with over 3,000 employees and a small set of products, that's not only a lot to take on but much of which is likely redundant. With so many surely they hold a fair amount of under performers as well.
- jgalt212 10y ago> whose attempts to monetize users through advertising have correlated strongly with loss of users. I don't know if that's true, or how strong the correlation is, but if it's there and you as a founder can detect it before others, that's a good sign you should sell the company rather than stay independent.
- imagist 10y agoAgreed.
- 8ytecoder 10y agoPersonally, I have found the ads on Twitter to be the most relevant. (Google search is too. However, I prefer organic results while searching and I scroll through to the results almost always.)
- Pxtl 10y agoYup. On twitter I see ads for tech and movies - that fits my tastes. On fb I see ads for sleaze.
- deleted 10y ago[deleted]
- icedchai 10y agoHow many of these 350 million users are trolls and sock puppets? I know I have at least a half dozen Twitter accounts myself.
- ryandrake 10y agoHell, are they even active users? I know I probably signed up for twitter long ago when it started, maybe tweeted once or twice, and never used it again, finding it useless. Do their "user counts" count me?
- tn13 10y ago> 350 million active users, that's about $29 per user Name one other platform which has Obama, Trump, Hillary, Beiber, JK Rowling, Pope, United Airlines, Marc Anderseen, Borrat, Bozo the Clown all engaging in two way communication with their fans and haters ? I think an investor should worry less about $29 per user metric and worry more about the incompetence of the top management which has failed to generate revenue out of this.
- tragic 10y ago> Obama, Trump, Hillary, Beiber, JK Rowling, Pope, United Airlines, Marc Anderseen, Borrat, Bozo the Clown With the likely exception of Andreesen, all you're getting are particularly fragmented and discombobulated press releases from 'their people' (in house or consultant PRs). I could live without them.
- tn13 10y agoI live without Twitter perfectly. But most people care.
- astrodust 10y ago$29 per human user or per account? There's a big difference here. $29 per human is a steal, however if 9/10 accounts are bots, spammers, or dead, that's $290 per human which is a total ripoff.
- imagist 10y agoThe number I cited was their claimed active users. I'm not sure why you consider $29 per human user a steal. There are two sides to a transaction--what you pay and what you get for it. What exactly do you think investors are getting for their money here?
- astrodust 10y agoJust compared to other industry metrics.
- jhall1468 10y agoSo you pulled it out of thin air?
- astrodust 10y agoNo. Look at the citations others have made within this thread. A rule of thumb is generally anywhere from $50 to $200 per head for social network type applications. See also: Facebook, MySpace, Instagram, etc.
- imagist 10y agoThat's exactly why we're in a bubble. "Because other people are paying even more" is a really bad reason to pay too much for something. But that's the entire basis of Twitter's price--it's people investing in Twitter because other people are investing in Twitter (and other such companies) with no concern for whether that investment will ever return a profit.
- javiramos 10y agoSure, but they are also growing incredibly fast at ~50% yoy with over $2 billion in revenue. I think that they have a fantastic revenue generating capability which justifies the valuation.
- javiramos 10y agoSure, but they are also growing incredibly fast at ~50% yoy with over $2 billion in revenue. I think that they have a fantastic revenue generating capability which justifies the valuation.
- danohu 10y agoTheir annual revenue is about $6 per user [1]. The problem isn't absolute failure to monetize, it's massive costs. If you thought you could run twitter without their ~4000 employees, you might have a chance of pulling some cash out of there. The problem is, it's hard to simultaneously clamp down on costs and push for growth. In SV, anything other than growth is an admission of failure. If you aren't flinging money into R&D, everyone will assume it's the start of a downward spiral. [That, and you can't buy twitter without outbidding all the True Believers] [1] http://www.viewproxy.com/twitter/2016/2/annualreport2015.pdf http://www.viewproxy.com/twitter/2016/2/annualreport2015.pdf
- ryandrake 10y agoHave an up-vote. That's the big problem isn't it? It's no longer acceptable to simply get control of costs, make the ink black instead of red, and milk your product for a nice steady profit--then, once that happens, figure out if it's appropriate to grow from there.
- voronoff 10y agoThey have invested in their tech team which is both infrastructure and expense. How much of the ~$10 billion it's worth is up for debate, but zeroing it's value is absurd.
- isho 10y ago$29 per user doesn't seem that out of line from other companies I've worked for. Of course it totally depends on the business but it comes down to the expected revenue each of those users will generate.
- andyfleming 10y ago> poster child for the tech bubble I don't think that they are that overvalued. To me, better examples are companies that get very high valuations in a short time that aren't justified. Twitter has had significant sustained usage and has monetized somewhat effectively.
- Godel_unicode 10y ago> ...and has monetized somewhat effectively. Disagree. They got a massive valuation quickly, never made a profit, and have lost much of that value because of it. "Twitter has lost $2 billion since in 2011." http://money.cnn.com/2016/03/21/technology/twitter-10th-anniversary/ http://money.cnn.com/2016/03/21/technology/twitter-10th-anni...
- omk 10y agoOne man's garbage is another man's gold. I believe that the suitors will be able to make more value of the data from Twitter, than Twitter could by itself.