Twitter reports $645m loss for 2013 | Hacker News Reader

Twitter reports $645m loss for 2013

bbc.co.uk

109 pointsshasa87 comments

Before we jump the gun on this "loss", read this first:[1]

  Net loss - GAAP net loss was $511 million for the fourth quarter of 2013 compared to a net loss of $9 million in the same period last year. The company's Q4 GAAP net loss included $521 million of stock-based compensation expense, of which $406 million was for restricted stock units previously granted to employees, for which no expense had been recognized, until the effective date of our initial public offering in accordance with GAAP.

  Adjusted EBITDA - Adjusted EBITDA was $45 million for the fourth quarter of 2013 compared to $18 million in the same period last year.

  Non-GAAP net income / loss - Non-GAAP net income was $10 million for the fourth quarter of 2013 compared to a Non-GAAP net loss of $0.3 million in the same period last year.

Oddly enough the "The company's Q4 GAAP net loss included $521 million of stock-based compensation expense, of which $406 million was for restricted stock units previously granted to employees, for which no expense had been recognized, until the effective date of our initial public offering in accordance with GAAP." seems be tucked away in "Research and Development" part of the P&L.

It's worth noting they have $2.2b in cash:

> Cash, cash equivalents and marketable securities - As of December 31, 2013, cash, cash equivalents and marketable securities were approximately $2.2 billion, compared to $321 million as of September 30, 2013.

TL;DR - This $645m "loss" isn't what you think it is.

[1]https://investor.twitterinc.com/releasedetail.cfm?ReleaseID=...

Stock based compensation still costs investors money. They are effectively using investors' money to pay their employees, and that should and always will be priced into the stock.

With its 18% decline in after hours trading today, Twitter's market cap is still $36.63 billion. Even if you analyze it based on the shell-game of adjusted EBITDA, and assume that it will stay at $45 million/quarter, you come out with a P/E ratio of 165.

Twitter is not Facebook. Their growth trajectory isn't remotely close. Personally, I am staying away. I don't want to party like it's 1999.

> Stock based compensation still costs investors money.

Hi, could you expand upon this, perhaps with an example? Thanks.

When the company floats they release a given amount of stock to the market.

If they then also release stock to pay their employees then the total stock in the market goes up.

If the total number of stock (i.e. shares) goes up but the company profits go and the money in the bank (and other assets) also goes down then the value of each of those individual stock items will also be going down.

Hence the drop in the share price.

I don't follow your math.

Actually I was wrong...to the low side. When I calculated it I used a lower market cap than I should have. Adjusted EBITDA was $45 million for the quarter. $45*4 quarters=$180M. $36.63B/$180M=203.5. So they are trading at 203.5 times adjusted EBITDA

Too bad Twitter can't issue RSUs to pay for server costs as well, they could take their expenses down to zero.

Depending on who the hosting provider was, they could :)

The stock fell 18% because "monthly active users" grew "less than 4 per cent...between the third and fourth quarters," with US user growth at just "3 per cent quarter-on-quarter". "Facebook," by comparison, "increased its user numbers at the same 4 per cent rate from a much larger base in the same period" [1]. The GAAP loss highlighted is due to one-off accounting charges related to stock compensation.

Note that revenues came in 4% above expectations and 110% higher than last year's.

[1] http://www.ft.com/cms/s/0/a1ecfc6e-8eab-11e3-b6f1-00144feab7...

They actually mentioned the stock-based compensation and it's impact on GAAP profitability in their S-1.

Following the completion of this offering, the stock-based compensation expense related to Pre-2013 RSUs and other outstanding equity awards will have a significant negative impact on our ability to achieve profitability on a GAAP basis in 2013 and 2014.

http://www.sec.gov/Archives/edgar/data/1418091/0001193125134...

I like how the article introduces Twitter as "Microblogging site Twitter..." as if you haven't heard of Twitter but are familiar with this thing called microblogging.

I think it's more about making Twitter sound less relevant, as if it is "one of many".

Isn't it though?

Yes, in the same sense that Google is just "one of many" available search engines.

Photo-sharing site Facebook...

Lol. Also +1 re mechanical twerk

I'm not of those people who thinks all tech valuations are insane, but I think it is hard to justify twitter being worth 150x their quarterly revenue (~$36b valuation/~$240m revenue). I understand twitter's valuation reflects the fact that it's a growing company, but even a company like facebook is only valued at 60x their quarterly revenue ($158b/$2.5b quarterly revenue).

But at least the consensus on wall street and the financial press seem to agree that TWTR is clearly overvalued.

Growth investors don't invest off of current revenue or earnings. It's how they expect these numbers to grow in the next few quarters/years.

So if you're going to be bearish on TWTR (which is fine) you probably want to go after their guidance or growth metrics. Their revenue growth is still growing, so you'd have to make the case that it will flatline sometime soon.

It seems like speculation is a game everyone wants to play. Until a bubble pops.

>but I think it is hard to justify twitter being worth 150x their quarterly revenue (~$36b valuation/~$240m

What do you think is easy to justify for Twitter?

(I'm actually pretty confident in Twitter, I guess. They took ten years-ish to IPO and not a day goes by where I don't see a hashtag on several products be it a local political group or a super bowl commercial)

It used to be AOL keywords. Times change quick.

>It used to be AOL keywords. Times change quick.

Interesting idea. I was around for AOL keywords, they weren't the same nor were they used the same way by as many different types of people. AOL has a billion dollar market cap still, despite the times changing quickly. Does it mean Twitter will be around 100 years from now? Of course that's unlikely. (Isn't GE the only one left from the original US stock exchanges?) But I think Twitter has a solid shot for the next several years. #TwitterCouldLose80PercentOfItsUsersAndStillBeLargerThanAOLAtItsPeak

I was going to make this point, but more than just "things can change" - AOL keywords didn't start getting massively used in adverts/etc. (in the UK at least) until pretty much when AOL were losing relevance, for search and most other things. Really, marketing trends shouldn't be used as a signal for much more than "marketing people like doing this"

Hashtags aren't just twitter. Every service has hashtag plumbing now.

If it had no business model and no revenues at all, I would assume that the valuation might be higher, since it's far easier to sell on expectations, rather than real cashflow, which would somehow limit the speculator's unbound speculations.

I saw a provocative question on Twitter this afternoon:

"What exactly does Twitter need 2300 employees for?"

Sales. Being a sales company requires a lot of salespeople. That's frankly a small number considering the number of companies that advertise.

The result of this appears to be the occasional Coca-Cola promoted tweet that I scroll past. Maybe it takes that many people to convince large companies that this experience is worth whatever they're being charged?

Maybe a sales company needs a lot of salespeople... but what are these people selling? Advertising? I've been using Twitter more and more over the last year, and I am hard-pressed to remember any ads that I saw.

Who is advertising on Twitter? And is it really effective? And do they need 2,300 people to sell these advertisements?

But they are also an Internet company where the ad signups are done online, so it's not immediately obvious why they would have all those salespeople. (Not saying that they don't need a large number of salespeople, but that it isn't an immediately obvious need)

Sales isn't about doing the paperwork of getting you signed up for a service. Sales is about convincing you to buy the service. Twitter doesn't have an automated system to convince companies to spend millions buying ads, they have salespeople, like every other sales company.

Yes most signups are done online via a self-serve system; however, there is a lot of money to be made if you can produce custom deals, content, and ad placement with bigger partners.

Guess how many salespeople Google has.

Any chance you know? Would be interested to know their numbers vs twitter.

"Several thousand" according to WSJ.

They are not selling accounts. They are selling advertising opportunities to businesses.

Can't we automate sales?

Hooo boy, we wish we could. Sales, much to my own inner-hacker's chagrin, is something done best by building relationships in person. You can put some of it off to a nice self-serve web experience a la Adsense, but if you ever want to make the big bucks (enterprise fuck-you bucks) you have to have sales people talking to real people who can write big checks and aren't Googling for self-serve solutions to their equally big problems.

Computers can't write sales copy or do a great in-person pitch yet.

You can, but the margins are much, much lower.

Hoarding engineers.

Copy-cat to the old google strategy. Hire way, way too many engineers than your core business requires and maybe they'll figure something out.

Worked out good for goog, but I feel bad for engineering talent that goes to twitter.

Wake up! Yeah you'll get your proverbial "gold star" you've been chasing since kindergarten , but you are being warehoused and hoarded according to some mba's "strategic plan"

Come work for a small company and make something happen!

18% drop in after hours trading... ouch

https://www.google.co.uk/finance?q=NYSE%3ATWTR&ei=68TyUrjPF4...

Anyone who knows more about Twitter, how exactly can they make such a big loss? What exactly are they doing?

> Net loss - GAAP net loss was $511 million for the fourth quarter of 2013 compared to a net loss of $9 million in the same period last year. The company's Q4 GAAP net loss included $521 million of stock-based compensation expense, of which $406 million was for restricted stock units previously granted to employees, for which no expense had been recognized, until the effective date of our initial public offering in accordance with GAAP.

— https://investor.twitterinc.com/releasedetail.cfm?ReleaseID=...

So everyone should have known?

I don't think anyone cared about the loss, so much as the revenue and user growth/engagement figures.

Volatility is typically much higher in after hours sessions because there isn't nearly as much liquidity in the market. Tomorrow's opening price will probably be more informative. Also good to keep in mind that even if it is 20% down from today's close that would still leave it up about 17% from it's first trading day in November and up 100% from the IPO price ($26).

Tons of employees + tons of machines + tons of bandwidth - very little advertising revenue = big loss

Have you purchased anything or viewed many ads on Twitter?

Wikipedia says they have 2,000 employees last year, without meaning to sound rude what exactly do they need all those employees for?

It's an interesting question. By comparison, at the end of 2010 Facebook had about 2,000 +/- employees and $2b in sales for that fiscal year. Twitter is roughly three times overstaffed compared to Facebook.

Do you happen to know how the active user base compares between 2010 Facebook and 2013 Twitter?

Facebook had ~820M MAU at the end of Q4'2010. Twitter has ~230M MAU at the end of Q4'2013.

Sauce: http://lighthouseinsights.in/wp-content/uploads/2013/07/face...

A good portion are likely selling ads and supporting advertisers.

they're not doing a very good job. i can't remember the last time i clicked on a twitter ad.

They're doing a pretty good job if they're managing to sell ads no one clicks on. I also don't click on Twitter ads, but I'd guess some folks are.

I've never even SEEN a Twitter ad. Maybe it's becuase I exclusively interact with the platform through Tweetbot and Buffer?

Everything I see on Twitter is a kind of ad.

On some level, everyone on Twitter is promoting themselves, and grooming their followers to a particular image or persona.

I've said this before, but if Twitter added a tier of paid accounts that offered analytics, scheduling and other features, I'd upgrade. Maybe there would be enough revenue to keep the servers running.

Full disclosure: I used to work at Twitter, and this conversation came up all the time. I even proposed it myself as a naive new hire, and after a few good-humored suggestions from coworkers to run the math, ended up with roughly the following scenario:

Say 1% of Twitter's active users would be willing to pay for such a service. (That's extremely generous, I think, but it makes the math easier.)

At 240 million MAUs, that gives ~2.4 million paying users. Say the price was comparable to Flickr at $50/year. (Again, very generous, and probably out of reach of most users outside US/Japan/EU, but we'll try it for the sake of argument.)

After up-selling each and every one of those users, the company could have annual revenue of about $120 million...or roughly _half_ what they cleared in Q4.

Even with 2-3x organic growth in the next couple of years, it would be a dead-end in terms of revenue, and better-financed competitors would be able to push them around, poach their best staff, etc.

So how do they make most of their money?

You may be interested to know that Twitter does offer such things: https://support.twitter.com/groups/58-advertising#topic_247

They're a big company with lots of employees and infrastructure and not a whole lot of revenue stream. The question isn't so much how can they make a big loss, it's how could anybody have expected different.

Per the article, everyone expected a big loss. The stock price dropped because their user growth is slowing.

Duh? Who really thought Twitter would suddenly become profitable after the IPO? The VCs cashed out and walked away laughing at the imploding building.

THERE (STILL) IS NO PROFIT MODEL.

No profit model? Completely wrong.

According to the IPO docs they make about $2/1000 views in America (which is good) and were projected to make $1 billion in revenue this year (also good). This article reports that their first quarter revenue is about $250 million, more than double the previous year, which makes their prediction definitely feasible. The remaining question is whether they can turn this revenue into profit, and my answer is yes, because (1) the growth of their operating costs is dramatically outpaced by the growth of their revenue, and (2) most of their losses are due to acquisitions (and they are smart acquisitions). So overall this is a pretty strong portfolio and I'd say it's a completely reasonable bet they're going to be significantly profitable soon.

Now. Serious question: did you read this article? If yes you should be embarrassed at your misapprehension here, because in spite of the title, this data in this article actually paints a pretty damn rosy picture of Twitter's future. If no, then why are you commenting here? Here I am sounding cranky, but if you're going to do the ALL INTERNET SHOUTING CAPS thing then you'd better take care not to say something silly. Just my personal opinion, but next time I'd start by both reading the article and understanding the article, and I'd follow that up with taking care to make it sound like I don't think that everyone who disagrees with me is, blanket statement, stupid. Because some of us have done our homework and still disagree with you.

If you read the article, you should know the primary concern is not the profits or revenues but rather the decline in product engagement/growth. What is your response to that? Your comment doesn't even make a single mention of the #1 reason to be very concerned about twitter.

Thanks for the spirited reply, Zaid, but I never said I disagree with any of these points. I'm responding specifically to the ridiculous notion that profit could not possibly be in the future of a post-IPO Twitter, not this stuff about whether Twitter is actually in trouble. If you want to take issue with my position you should probably respond to something I actually said. It is less productive to pretend I am debating a different set of issues and then complain when I don't address these other issues.

(I also don't appreciate your assertion that I didn't read an article from which I cited specific factual statements. Obviously I did. This is all particularly annoying, since you seem to believe something that I think is mostly true, and not on something which I concretely disagree; it makes it seem like you're hunting for a disagreement and not conducting this conversation in good faith.)

Timeline views were down nearly 7%, suggesting users were refreshing their feeds less often.

(1) Twitter makes most of its revenues from timeline views

(2) Timeline views are declining

(3) When a recently IPO'd company's biggest money making product is on the decline in terms of usage, that is hardly a rosy picture.

Sure, it is certainly debatable that "rosy" was the right choice of words here (it probably was a bit bombastic). But unless your plan is to claim that it is impossible to be optimistic about this situation (which is more or less the position I have taken issue with), then I'm not interested in having this discussion.

I'm open to the possibility is wrong; I'm not open to the idea that this debate about the semantics of "rosy" is the most interesting thing to be said here.

Sorry if this is a bit blunt.

They actually do have a profit model.

The sad thing is they're giving it away to other companies (ie Gnip, Datasift). Here's a suggestion: Twitter. Take away every single middleman out there. Sell your data for an arm AND a leg.

As we learned from Amazon's performance, VC and Wall Street don't care about profit, they only care about sales. As long as the sales and customer based is strong, that's ok. There rest can be adjusted.

its only been, what, 7 years? give them time

Has a social network at twitter's scale ever been able to undo a growth plateau? In this business you live and die by organic growth.

I have so many problems with the twitter product I don't even know where to begin. I am working on writing my own UI to twitter to look more like facebook. At its essence, I long for a twitter that:

* makes it easier to follow and indulge in conversations(facebook does this)

* filters out noise, such as retweets or same links showing up 5 times from 5 different people

* remove the 140 char limit; we've moved away from 140 chars with sms for a reason and it is time for twitter to do the same

Remove the 140 char limit and you remove the one thing that makes twitter twitter, brevity. You want it to look like Facebook??? Facebook's UI is a hot mess resulting from trying to pack every feature under the sun into one platform--no thanks. Moreover it sounds like you don't really know how to use Twitter and I think that is the real problem the company faces. Most of the people out there on twitter don't really understand how to leverage the platform to benefit them which is a larger educational-level issue they need to attack head on. The genius thing about twitter is that they've created a sort of psuedo protocol in a sense that works best when rapidly disseminating information. While you certainly can, it is not the tool to use for any sort of lengthy conversation, save that for Facebook, email, or whatever you prefer.

Facebook UI might seem like a hot mess to you, but I can promise you it is getting more engagement and growth for facebook than twitter's. At a time that twitter is struggling with those two things, they should do more to be like the guy who is nailing growth and engagement.

Again you're reinforcing my point on education by comparing Facebook to Twitter. You can't compare the two just because they are both "social networks". They are two completely separate tools with separate purposes and more importantly separate users. Facebook has larger numbers because their user pool is larger and probably always will be. Grandmas look at pictures of grandchildren, high school friends keep in touch, that one guy you're friends with posts obnoxious religious or political rants. There is no barrier to entry, it's the worlds large public bulletin board and that's okay. These people aren't concerned about consuming aggregate information rapidly. When Facebook people come to twitter looking for Facebook they get disappointed. You don't hear Facebook users bitching about Pinterest needing to change because people expect a different experience from Pinterest. If more users coming to twitter from other networks better understood the platform they would be way less likely to be left scratching their head. Like I said, this is a problem that twitter needs to solve, but in the mean time if you enjoy Facebook and find twitter unusable then it's probably not the tool for you.

If you want Twitter to be more like Facebook, why not just use Facebook?

I agree that I'd like for it to be easier to dive into a conversation. It's a lot better than it was years ago, but I still struggle with the UI for that sometimes.

As for the 140 char limit, I think that should never change. Removing that would remove the entire essence of Twitter and turn it into endless drivel.

I do already use facebook pretty much all day. But twitter has a different audience and has more conversations relevant to work. Except the UI sucks and makes me work my ass off to engage in those conversations. If facebook or linkedin ends up eating twitter's lunch at some point, I won't complain.

> Removing that would remove the entire essence of Twitter and turn it into endless drivel.

Funny, because that's exactly what it is right now. When was the last time there was something worth reading on Twitter?

> remove the 140 char limit; we've moved away from 140 chars with sms for a reason and it is time for twitter to do the same

I disagree. I think that is the only reason Twitter still exists. 140 allow you to look trough the stream very fast. Try to follow a hashtag with the same amount of posts on Facebook or Google+ would be impossible

The thing that I don't quite get with Twitter is that I genuinely do not know anyone in real life who actually uses it.

Some people I know have accounts so they can use it as an aggregator, and the occasional person tweets a question at a pseudocelebrity who isn't otherwise accessible, but I do not know anyone who uses it for its intended purpose.

For comparison, all my (24, m, Australia) friends use Facebook, most have Snapchat, half have Instagram, some have Pinterest, few use G+ or tumblr). No one uses Twitter.

With that in mind, the kind of valuations Twitter has seem insane to me. It seems like the only people who like it are celebrities and media companies who desparately want me to 'join the conversation'. Both of those groups are more than happy to move onto the next big thing, as we saw with Myspace.

It could be me who is just an outlier (this is, after all, completely anecdotal), but I have a feeling that the outlier might actually be Silicon Valley.

Male in Australia also, and I know a fair few Twitter users. A lot in PR (wife's trade) use it and a lot of athletes (brother's trade) plus fans also.

Do you watch sports?

Yeah, I'm a season member of two sports - cricket and AFL.

> Twitter brings in money largely by selling advertising space and data on tweeting habits.

It's the first time I hear about Twitter selling "tweeting habits" of their users. I don't know what that means, does anyone?

I don't know much about the specifics of what Twitter are selling, but there's two possibilities:

1. They're just selling raw feeds of data that people can pay for and analyse as they wish. This is something they definitely are doing, it's called the "Twitter Firehose", and isn't cheap to get access to.

2. They're selling their own, presumably anonymous, analysis of users for external advertising purposes. For example if I've tweeted about wanting to buy a car, maybe some car company's agency wants to buy data that will allow them to (re)target me outside of Twitter - I put (re) in brackets as it's the same concept as retargeting, but technically just targeting as I wouldn't (necessarily) have already visited that car seller's website. I've no idea if Twitter do anything like this, and I'm not entirely sure how it would work from a technical point of view, I've done marketing based around very targeted data, but only ever through companies that specialise on figuring out who to show adverts to, so I've never had to worry about how they were doing it.

An ad deal with Twitter comes with an analytics dashboard and an ability to run surveys on users targeted across various dimensions.

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