6 ms·

Loss of almost $80 million on $316 million in revenue, and they're offering $1b... seems like they're asking for a lot when they have very little.

by tcoppi 13y ago

dm8 13y ago
Looks like they are betting on potential. To be honest, Twitter is so mainstream that it is entirely new medium of news/discovery/conversation just like Radio/TV/Internet. I'm sure they will be extremely profitable company in the future.
- umsm 13y ago
  Exactly. It feels like they are not concentrating on their profitability yet. When they do, I believe they will have a lot more income.
  - yapcguy 13y ago
    Oh my god. They're bleeding money. If they don't IPO now, how much longer could they last for?
- Touche 13y ago
  I doubt it. Twitter is fundamentally flawed in a way that I'm not sure is fixable. The fact is that the vast majority of people on Twitter get no feedback at all when they post something. This is a combination of 2 things: 1) Tweets disappear quickly from a user's timeline 2) Most people have few active followers 1 and 2 work against each other to form a negative feedback loop. The result is the vast majority of users use it passively to read celebrity tweets, nothing more. Twitter must know this as their growth is already peaking and they're not making much money. Expect to see more drastic measures to try and turn what they already have into something profitable. They've peaked.
  - jedc 13y ago
    Twitter can have value to people that post nothing. (This is the case for a number of my friends on Twitter.) And what you're describing has existed since Twitter was created as Twttr.
    - Touche 13y ago
      Right, it has value, but that value is not going to go up, is my point. Twitter users don't become more engaged over time because only a small percentage of users can use it the way it is intended.
      - foobarqux 13y ago
        Seems to me most of the value in Twitter is as a broadcast medium for established media entities.
  - guelo 13y ago
    500 million tweets a day means that users are getting some kind of positive reinforcement for posting, and that it's more than celebrities.
    - yapcguy 13y ago
      How many are retweets rather than original tweets? How many are spam? How many are shady i.e. pay folk in the Philippines or Pakistan to send out tweets all day, to boost the numbers?
    - bolder88 13y ago
      500m tweets a day is nothing. That's only 5,700 tweets a second. An average IRC network for example does more than that.
      - cscheid 13y ago
        The number your comparison is missing, and one that happens to be crucial to both business and technical differences, is that you should be looking at tweet impressions, not tweets.
        hboon 13y ago
        Also interesting is if impressions should be counting followers of the tweet author or only if the follower reads it. Many users are following so many accounts that they can only read only a small subset of their timeline. I wonder if Twitter's apps and services also have to evolve substantially like Facebook's did to include more elaborate filtering and ranking options.
- stormbrew 13y ago
  Their revenue growth is pretty solid, so there is clearly potential there. Doubled revenue between first half 2012 and first half 2013, 10x yearly since 2010.
  - yapcguy 13y ago
    Past performance is not an indication of future... you know the rest. They're also on track to almost double their from 2012 to 2013. Why don't people ever look at the costs? There's a reason why they are on track to lose over $100 million this year.
- austenallred 13y ago
  I agree with you regarding Twitter's monetization opportunity; they're barely scratching the surface of what's possible, hiring like crazy (most of the expense), etc. What seems odd to me is that they're filing for IPO right now. Do they honestly expect public markets to buy their "but it's becoming ubiquitous" story? 2000 wasn't that long ago.
  - dm8 13y ago
    Doing IPO means raising money from public markets. So with IPO money, they believe they can buy lot of companies, hire people and make it really profitable business. FB/Google/LinkedIn didn't have to go public but they had to due to SEC regulations and/or their existing investors.
    - MichaelGG 13y ago
      Haven't they already raised over a billion dollars have have over 1000 employees?
hayksaakian 13y ago
For only recently opening their ad platform, that's not too surprising.
- tcoppi 13y ago
  Maybe, but then what is the reason they think this is a good time for an IPO? It seems kind of desperate to my admittedly untrained eye, but it could also be brilliant.
  - hayksaakian 13y ago
    From my naive point of view, it seems like now is when they can make their most optimistic projections that could still be taken seriously.
peloton 13y ago
That's usually a placeholder number. They're going to raise what they can and it will probably end up much higher than $1b in stock.
7Figures2Commas 13y ago
Salesforce is worth $30 billion and has no earnings. Amazon is worth $143 billion and has no earnings. Facebook, with a ~$120 market cap, is valued at more than 200 times earnings. Tesla's market cap is roughly a third of Ford's. As long as the Fed is easing, fundamentals don't matter. The mispricing in equities is particularly pronounced in prominent technology companies, but there is clear excess throughout the market. The name of the game is momentum. This game will end, and badly, but questioning the market and fighting the Fed has not been the path to profit so keep in mind that, right now, Twitter's bottom line is practically irrelevant.
- 3am 13y ago
  Come on, don't lump those together. * 75% of CRM's float is sold short, market clearly agrees with you * AMZN has big FCF numbers, 2012 being an anomaly because of the big fixed capex expenditures. They grow the business without regard to engineering their GAAP earnings, which is admirable, and means the EV/FCF is probably a big, though somewhat reasonable 25-50. * FB analysis requires a DCF because they're growing earnings so fast. They're only 40 x estimated 2014 earnings * TSLA is not the same business model as F or GM, though they all nominally sell cars. Look at the leverage around licensing revenue that ARMH or QCOM showed. I haven't read Twitter's S-1 and can't comment on it (50 x revenue makes it feel closer to CRM than any of the others), but I generally agree with your opinion that equities are near a peak because it is literally impossible for fixed income to be less attractive as an alternative and the Fed is clearly letting us know it's closer to the end of QE than the beginning. (disclaimer: nobody should make investment decisions based on my advice, I'm not a professional and you could lose all your money if you do, etc) EDIT: after perusing the S-1 the revenue growth rate is incredible, so it may end up more like FB (which has only surpassed it's ipo price in the last month or so...) EDIT 2: Yahoo!'s short data was laughably wrong, CRM's percent of float sold short is 10%
  - yapcguy 13y ago
    > after perusing the S-1 the revenue growth rate is incredible Well, one could also say that the growth rate of their cost base is incredible too.
sologoub 13y ago
Looking at their adjusted EBIDTA, it looks like they managed roughly the same amount in 2012 as in 1st half of 2013. That definitely shows that they are aggressively driving to profitability. Top line revenue is not looking quite as impressive, but 2012 is shown at $317 million, where as H1 of 2013 is shown at $254 million. If you assume same revenue levels for H2 (no idea if that's a valid assumption), you are looking at $508 million for 2013 or a 60% growth in revenues. Add to this the sentiment comments made by others about how mainstream twitter is, and you definitely have decent justifications for high-ish stock price.
dev_jim 13y ago
Another lazy post voted to the top on HN that beats the same ole lack of profit drum in a rapidly growing company. Where's the comparison to Apple to really drive home the point?

Loss of almost $80 million on $316 million in revenue, and they're offering $1b... seems like they're asking for a lot when they have very little.

by tcoppi 13y ago

Loss of almost $80 million on $316 million in revenue, and they're offering $1b... seems like they're asking for a lot when they have very little.

dm8 13y ago

Looks like they are betting on potential. To be honest, Twitter is so mainstream that it is entirely new medium of news/discovery/conversation just like Radio/TV/Internet. I'm sure they will be extremely profitable company in the future.

umsm 13y ago
Exactly. It feels like they are not concentrating on their profitability yet. When they do, I believe they will have a lot more income.
- yapcguy 13y ago
  Oh my god. They're bleeding money. If they don't IPO now, how much longer could they last for?
Touche 13y ago
I doubt it. Twitter is fundamentally flawed in a way that I'm not sure is fixable. The fact is that the vast majority of people on Twitter get no feedback at all when they post something. This is a combination of 2 things: 1) Tweets disappear quickly from a user's timeline 2) Most people have few active followers 1 and 2 work against each other to form a negative feedback loop. The result is the vast majority of users use it passively to read celebrity tweets, nothing more. Twitter must know this as their growth is already peaking and they're not making much money. Expect to see more drastic measures to try and turn what they already have into something profitable. They've peaked.
- jedc 13y ago
  Twitter can have value to people that post nothing. (This is the case for a number of my friends on Twitter.) And what you're describing has existed since Twitter was created as Twttr.
  - Touche 13y ago
    Right, it has value, but that value is not going to go up, is my point. Twitter users don't become more engaged over time because only a small percentage of users can use it the way it is intended.
    - foobarqux 13y ago
      Seems to me most of the value in Twitter is as a broadcast medium for established media entities.
- guelo 13y ago
  500 million tweets a day means that users are getting some kind of positive reinforcement for posting, and that it's more than celebrities.
  - yapcguy 13y ago
    How many are retweets rather than original tweets? How many are spam? How many are shady i.e. pay folk in the Philippines or Pakistan to send out tweets all day, to boost the numbers?
  - bolder88 13y ago
    500m tweets a day is nothing. That's only 5,700 tweets a second. An average IRC network for example does more than that.
    - cscheid 13y ago
      The number your comparison is missing, and one that happens to be crucial to both business and technical differences, is that you should be looking at tweet impressions, not tweets.
      - hboon 13y ago
        Also interesting is if impressions should be counting followers of the tweet author or only if the follower reads it. Many users are following so many accounts that they can only read only a small subset of their timeline. I wonder if Twitter's apps and services also have to evolve substantially like Facebook's did to include more elaborate filtering and ranking options.
stormbrew 13y ago
Their revenue growth is pretty solid, so there is clearly potential there. Doubled revenue between first half 2012 and first half 2013, 10x yearly since 2010.
- yapcguy 13y ago
  Past performance is not an indication of future... you know the rest. They're also on track to almost double their from 2012 to 2013. Why don't people ever look at the costs? There's a reason why they are on track to lose over $100 million this year.
austenallred 13y ago
I agree with you regarding Twitter's monetization opportunity; they're barely scratching the surface of what's possible, hiring like crazy (most of the expense), etc. What seems odd to me is that they're filing for IPO right now. Do they honestly expect public markets to buy their "but it's becoming ubiquitous" story? 2000 wasn't that long ago.
- dm8 13y ago
  Doing IPO means raising money from public markets. So with IPO money, they believe they can buy lot of companies, hire people and make it really profitable business. FB/Google/LinkedIn didn't have to go public but they had to due to SEC regulations and/or their existing investors.
  - MichaelGG 13y ago
    Haven't they already raised over a billion dollars have have over 1000 employees?

hayksaakian 13y ago

For only recently opening their ad platform, that's not too surprising.

tcoppi 13y ago
Maybe, but then what is the reason they think this is a good time for an IPO? It seems kind of desperate to my admittedly untrained eye, but it could also be brilliant.
- hayksaakian 13y ago
  From my naive point of view, it seems like now is when they can make their most optimistic projections that could still be taken seriously.

peloton 13y ago

That's usually a placeholder number. They're going to raise what they can and it will probably end up much higher than $1b in stock.

7Figures2Commas 13y ago

Salesforce is worth $30 billion and has no earnings. Amazon is worth $143 billion and has no earnings. Facebook, with a ~$120 market cap, is valued at more than 200 times earnings. Tesla's market cap is roughly a third of Ford's. As long as the Fed is easing, fundamentals don't matter. The mispricing in equities is particularly pronounced in prominent technology companies, but there is clear excess throughout the market. The name of the game is momentum. This game will end, and badly, but questioning the market and fighting the Fed has not been the path to profit so keep in mind that, right now, Twitter's bottom line is practically irrelevant.

3am 13y ago
Come on, don't lump those together. * 75% of CRM's float is sold short, market clearly agrees with you * AMZN has big FCF numbers, 2012 being an anomaly because of the big fixed capex expenditures. They grow the business without regard to engineering their GAAP earnings, which is admirable, and means the EV/FCF is probably a big, though somewhat reasonable 25-50. * FB analysis requires a DCF because they're growing earnings so fast. They're only 40 x estimated 2014 earnings * TSLA is not the same business model as F or GM, though they all nominally sell cars. Look at the leverage around licensing revenue that ARMH or QCOM showed. I haven't read Twitter's S-1 and can't comment on it (50 x revenue makes it feel closer to CRM than any of the others), but I generally agree with your opinion that equities are near a peak because it is literally impossible for fixed income to be less attractive as an alternative and the Fed is clearly letting us know it's closer to the end of QE than the beginning. (disclaimer: nobody should make investment decisions based on my advice, I'm not a professional and you could lose all your money if you do, etc) EDIT: after perusing the S-1 the revenue growth rate is incredible, so it may end up more like FB (which has only surpassed it's ipo price in the last month or so...) EDIT 2: Yahoo!'s short data was laughably wrong, CRM's percent of float sold short is 10%
- yapcguy 13y ago
  > after perusing the S-1 the revenue growth rate is incredible Well, one could also say that the growth rate of their cost base is incredible too.

sologoub 13y ago

Looking at their adjusted EBIDTA, it looks like they managed roughly the same amount in 2012 as in 1st half of 2013. That definitely shows that they are aggressively driving to profitability. Top line revenue is not looking quite as impressive, but 2012 is shown at $317 million, where as H1 of 2013 is shown at $254 million. If you assume same revenue levels for H2 (no idea if that's a valid assumption), you are looking at $508 million for 2013 or a 60% growth in revenues. Add to this the sentiment comments made by others about how mainstream twitter is, and you definitely have decent justifications for high-ish stock price.

dev_jim 13y ago

Another lazy post voted to the top on HN that beats the same ole lack of profit drum in a rapidly growing company. Where's the comparison to Apple to really drive home the point?