And twitter wonders why they can't find a revenue model that works.
They'll likely hit $3.5 billion in annual revenue within two years. One year after that, they'll be the size of Yahoo (which is 12 years older than Twitter). They're already on a revenue ramp dramatically better than the one Netflix has had.
If that isn't a model that works, I can't wait to see the one that does.
Twitter's primary financial problem is an unnecessarily bloated cost structure.
They need 47% growth in the next four quarters, and then 36% growth in the four quarters after that, to hit $3.5 billion in sales. Given first quarter growth was 74%, then second quarter growth was 61%, it's not a far stretch to hit 47% over the next four.
Shareholders have sent the stock down on the basis of user growth, not sales growth.
Twitter has three problems.
1) They're not Facebook, it is not about users, and they should stop trying to be something other than a broadcast platform. It's about consumption.
2) They were extremely overvalued right out of the gate. There was a lot of delusional thinking around their potential. There's one Facebook, there isn't going to be another any time soon. Twitter will never be another Google type company.
3) They're carrying vastly more cost in their business than they need to. They have 36% the head count of Facebook, with 12% of the sales. They've stacked the business on the premise they were going to be a massive company like Facebook - they're not, it's time to adjust costs accordingly.
There's also the possibility that they're nearing a plateau. That everyone who wants to be on Twitter already is.