3 ms·

I'll give them credit, Facebook figured out how to monetize themselves. Versus say, Twitter, which i don't use and still don't understand how it even exists.

adventured 9y ago
Interestingly, Twitter's problem is not monetization, it's cost vs scale. They managed to do $2.5 billion in sales with about 300 million monthly actives for 2016 (the 300m is wonky, I don't know what the avg was for the year etc, but they were near that anyway). If you scaled them to Facebook's size, they'd be at an equivalent $16.5 billion annually. Account for the benefits of scale that Facebook derives, and it's reasonable to say they're monetizing OK given their 300x million users. The problem? Their costs are well out of line. When Facebook had $2 billion in sales (2010), they generated $600 million in net income. Instead, at that scale, Twitter is bleeding half a billion dollars on the net income line; they've basically got a billion dollar profit imbalance vs what Facebook was doing at the same scale. Also worth noting, Facebook hit around 500 million users in July 2010 (the year they did $2b in sales). Twitter is monetizing better than Facebook was at the same user scale. The negative comparison of course, is that Facebook had far more users, and still generated $600m in net income (radically better cost management).
- encoderer 9y ago
  Great point. It's easy to judge twitter here, and by many different data points FB has been an exceptionally well run company, but engineers are a lot more expensive now than they were in 2010. I imagine Twitter has to pay interns today what Facebook was paying experienced engineers in 2010 (100% serious).
  - adventured 9y ago
    I definitely agree with the salary inflation. Here's another interesting contrast between them given that. Twitter has roughly twice as many employees, versus what Facebook had at a comparable monthly active user count. It's costing them something in the neighborhood of $200 million per year to keep those employees. Twitter's organization size was built up on the assumption of a much larger userbase that never materialized. Then their leadership chose not to adjust to the new reality (until perhaps recently, as they seem to be finally focusing on costs).
    - mcintyre1994 9y ago
      Wait, Twitter are paying $200m on employees, bringing in $2.5bn and spending $3bn (draining half a billion)? I assumed their biggest expense would be employees, what are they spending $2.8bn/year on? At that scale spending 4x what Facebook spent on employees at the same level (assuming 2x as many with 2x salary inflation) barely registers.
- dbbk 9y ago
  Twitter's spending is just bonkers out of control. And from my understanding, they haven't even tried to curb it. Twitter could be a happily profitable company if they just shed some of the fat.

adventured 9y ago

Interestingly, Twitter's problem is not monetization, it's cost vs scale. They managed to do $2.5 billion in sales with about 300 million monthly actives for 2016 (the 300m is wonky, I don't know what the avg was for the year etc, but they were near that anyway). If you scaled them to Facebook's size, they'd be at an equivalent $16.5 billion annually. Account for the benefits of scale that Facebook derives, and it's reasonable to say they're monetizing OK given their 300x million users. The problem? Their costs are well out of line. When Facebook had $2 billion in sales (2010), they generated $600 million in net income. Instead, at that scale, Twitter is bleeding half a billion dollars on the net income line; they've basically got a billion dollar profit imbalance vs what Facebook was doing at the same scale. Also worth noting, Facebook hit around 500 million users in July 2010 (the year they did $2b in sales). Twitter is monetizing better than Facebook was at the same user scale. The negative comparison of course, is that Facebook had far more users, and still generated $600m in net income (radically better cost management).

encoderer 9y ago
Great point. It's easy to judge twitter here, and by many different data points FB has been an exceptionally well run company, but engineers are a lot more expensive now than they were in 2010. I imagine Twitter has to pay interns today what Facebook was paying experienced engineers in 2010 (100% serious).
- adventured 9y ago
  I definitely agree with the salary inflation. Here's another interesting contrast between them given that. Twitter has roughly twice as many employees, versus what Facebook had at a comparable monthly active user count. It's costing them something in the neighborhood of $200 million per year to keep those employees. Twitter's organization size was built up on the assumption of a much larger userbase that never materialized. Then their leadership chose not to adjust to the new reality (until perhaps recently, as they seem to be finally focusing on costs).
  - mcintyre1994 9y ago
    Wait, Twitter are paying $200m on employees, bringing in $2.5bn and spending $3bn (draining half a billion)? I assumed their biggest expense would be employees, what are they spending $2.8bn/year on? At that scale spending 4x what Facebook spent on employees at the same level (assuming 2x as many with 2x salary inflation) barely registers.
dbbk 9y ago
Twitter's spending is just bonkers out of control. And from my understanding, they haven't even tried to curb it. Twitter could be a happily profitable company if they just shed some of the fat.