Twitter Reports Weak Earnings and the Stock Is Crashing
bloomberg.com
bloomberg.com
Hmm, I thought everybody did? I guess wall street really does have a clear view of this whole tech scene.
What's that quote about getting someone to understand something that their job depends on them not understanding?
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
I still don't question Twitter's ability to generate revenue, because they will generate over $2 Billion this year. I question their ability to meet Analyst expectations, sure, but they already have revenue. Billions of dollars of it.
They beat their earnings estimate by 57% and missed their revenue estimate by 4.7%. This is by no means the definitive death knell so many people on HN are making it out to be. Wall Street is a crazy place and expectations were sky high and yes the stock dropped a lot, but Twitter will survive and is doing just fine.
It seems like HN is convinced the company is eternally doomed and will never make money. That notion has been pretty much proven false. Twitter makes money; they're just behind where people thought they would be.
And it literally won the war. They take the lions share of profits in the personal computer market and they have a huge moat. You could argue they will be in trouble when personal computing devices stop changing so quickly and are fully commodified, but I can't imagine that's within the next two decades. Honestly I find it weird their P/E isn't higher.
Their homepage redesign, which just launched, is the first step toward what could be huge growth. Evaluation of the company will shift from active users to passive audience. Twitter ads can reach them both just fine, and there are way more passive watchers than tweeters.
"Today’s $TWTR earnings release was sourced from Twitter’s Investor Relations website https://investor.twitterinc.com . No leak. No hack."
Looks like someone found a draft post. Yeesh.
The major markets (NYSE, NASDAQ) require that major news be released 15 minutes before the markets open or after the markets close, to give participants time to "digest" it without racing to trade. Earnings are almost always released just after the markets close or early in the morning for this reason. E.g., here's a schedule of upcoming releases: http://www.earningswhispers.com/calendar.asp .
A major news release by the company during trading hours is supposed to trigger a 15-minute pause in trading (which we saw in Twitter's case).
It's an open question as to whether that makes sense in an era of nearly 24/7 liquidity in official and unofficial after-hours trading networks, but Twitter was likely trying to follow official protocol. It's also not clear when there's so much other near-instant trading, but the idea is that the company can at least (in theory) give a level playing field for its own news by releasing when everyone has time to read before trading.
Biggest disadvantages for Twitter:
1) People are flocking to other social messaging apps, especially the mobile variants (Snapchat, Instagram, etc). I suspect because its coolness factor is waring off, because of rampant trolling, and poor discovery.
2) Most of Twitter advertising is useless, in large part due to poor data collection. I have yet to see any performance campaigns really kill it on the platform. Brands only advertise because they are easily misled by agencies.
Can anyone offer realistic suggestions to help improve the company's outlook? Here are some random thoughts:
1) Trying to take a piece of the mobile ecosystem seems like a smart move, as they show genuine expertise. I liked their acquisition of MoPub and every developer seems to use Crashlytics. People seem to use Periscope and Vine often, as well. This could lead to a lucrative formula: Making apps easier to build with their tools, nudge developers to monetize through MoPub, and then take the plethora of learnings from the latest mobile craze and build an awesome new app.
2) They need to better monetize news, not just social interaction. How much content is written today because "Person said X offensive statement on twitter"? Twitter gets $0, despite the fact most news comes from them. Maybe try to attempt to be the Bloomberg Terminal for all news going forward? How about trying to beat Nielsen (16bn market cap) in actually monitoring sentiment? This obviously would take some ingenuity, but could be very rewarding. They seem to be trying this strategy, with some of their recent acquisitions.
3) Find out what other countries want. There is still a huge untapped marked in the 3rd world. Twitter could expand there by offering new services.
4) Somehow disincentivize blowhards from going on Twitter too often.
My comlany stopped doing Twitter advertising. It is basically marketers marketing to eachother. The whole thing is gamed. Not to mention it is opaque, expensive, and clunky to use. Sharp contrast with say google adwords.
What may be happening is that the ads on Twitter are better targeted to technical users.
Turns out this is only something like 20% drop making it the same as February this year! Nothing spectacular at all. It endured a similar crash in October last year and took a few months to recover.
https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e...
A 20% move is huge for any stock (most don't move that much in a year!), and it's certainly far outside the norm for TWTR[1].
[1] http://stockcharts.com/h-sc/ui?s=TWTR&p=D&b=5&g=0&id=p298069...
Overall, the user experience becomes worse and worse. They said Twitter makes a good replacement for RSS feeds, but honestly I wish my Twitter feed was an RSS feed to be loaded in any reader I like.
Source: http://stockcharts.com/h-sc/ui?s=TWTR&p=W&b=5&g=0&id=p870792...
http://stockcharts.com/h-sc/ui?s=TWTR&p=D&b=5&g=0&id=p456401...
I find it astonishing that what is basically a short message broadcast service can generate billions of dollars of revenue. So I think that they have to be doing something very right. Perhaps everyone is anticipating the inevitable next hot thing a little bit too hard.
It's not just a short message broadcast service.....it's a short message broadcast service with 300,000,000 users.
Basically a short message service? That's naive. Twitter is a marketing platform with 300m people signed up to receive marketing materials, people who also readily provide the platform with the details of what they like/would likely click on/spend money on, where they are in the world, what age they are, what gender they are and more. Of course it's extremely valuable.
"a government surveillance operation run by gullible volunteers, a Stasi for the Angry Birds generation”
http://www.theonion.com/video/cias-facebook-program-dramatic...
The idea that social networks are useful for surveillance and the joke that the users are just useful idiots, massively predates the onion sketch as well though.
These details can only be extracted with very complex natural language processing techniques.
> where they are in the world
The vast majority of Twitter users have no structured geographic location.
> what age they are, what gender they are
Twitter doesn't even have fields to enter age and data. It's all inferred, which makes it difficult to extract accurately (if at all).
valuation typically comes from:
profit X magic multiplier
where your magic multiplier is functionally a premium based on twitter's future profit potential
they're a publicly traded company, and last I remember they report their earnings publicly to shareholders
according to http://www.cnbc.com/id/102573751 their earnings were
$436 million
----------------
I've noticed more and more ads on twitter: in their android widget, on their apps, on their site.
I'm constantly getting emails asking me to use a twitter ads coupon or read about new ads features.
Twitter is in danger of pulling a Myspace. At Myspace, revenue went down, ad density was raised to compensate, usage went down, ad density was increased to compensate, then usage crashed. For a publicly held ad-based growth company, a down quarter is a disaster. The valuation as a growth company ends and the company starts to be valued based on its operations and earnings. Twitter currently has negative earnings.
Investors are now asking why Twitter costs so much money to run. Their revenue is $1.3 billion a year, yet they're losing money. They don't pay for content, their basic product isn't that complicated, and bulk compute and network costs are declining. Something is wrong there.
Super Annoying.
https://cabalamat.wordpress.com/2009/01/27/a-broadband-tax-f...
Advertising is a net negative on far too many fronts.
"Paul Romer on Information Goods" https://www.reddit.com/r/dredmorbius/comments/311aco/paul_ro...
"Why Information Goods and Markets are a Poor Match" https://www.reddit.com/r/dredmorbius/comments/2vm2da/why_inf...
I don't even bother running an ad-block, because disabling plugins is so effective at suppressing annoyances.
When I recently installed Chrome on a newer computer, the new method is Ctrl+Click to get a context menu, and then selecting "Run this plugin". Not sure why they made it more complicated, and I wish I knew how to get the older behavior my older computer has somehow retained while Chrome has been auto-updating.
At least, that is my assumption, and if not, they should consider that as a positive outcome for me.
It's actually a slight improvement, because previously you'd have to reload a page to do that.
https://plus.google.com/104092656004159577193/posts/QZ1vdpwB...
These will catch most of them:
0.0.0.0 www.autofixinfo.com # Autoplay video
0.0.0.0 c.brightcove.com # Autoplay video
0.0.0.0 player.theplatform.com # Autoplay video
0.0.0.0 link.theplatform.com # Autoplay video
0.0.0.0 ci-2862d2c8d6-68f418d2.http.atlas.cdn.yimg.com # Autoplay video
I find communicating to VPO's that I'll block them for this shit, and advertising this fact and methods, might have some positive effect.
There are a small number of video providers for all the usual 80/20 rules. A half dozen or so nails virtually everything frequently used.
And very little video is even worth viewing.
Leak or not, missing earnings is a career limiting move for management. And it was a HUGE market reaction for an earnings miss, kinda implies that the market isn't convinced by the fundamentals of the stock.
Ouch!
They're making money, they grew to 18% more active users (that sounds like a lot), what seems to be the problem?
If I expect that I'll have 50,000 dollars in the bank a year from now (starting from 0), and 6 months in I only have 15,000 dollars, then naturally I would adjust my expectations downwards.
Did they expect the stock to be valued higher and because it has not lived up to that, they're selling it and buying a different stock that will do that?
twitter is currently valued at say $35 billion then long term to justify that valuation per what the stock market demands long term they need to consistently generate around 2 billion a year in profit. If they do really well and have say a 25% margin they'd need $8 billion a year in revenue to operate at that level. Current revenue projections are closer to 2 billion and are being scaled back by executives and they're not consistently profitable at all.
There's a big gap between where they need to be to support the current stock price and where they are (and seem to be heading in the near and mid term). That's why the stock is under a lot of negative pressure.
isn't it possible that some number can be purposefully influenced so that the stock will go up upon announcement?
I'm not quite sure what you're asking here: "Normal" investors can and do set these numbers. Every time you buy or sell a share of stock at a given price, you're adding your (tiny) signal of what you think the price should be (and nudging it a little in that direction as well). The price of the stock reflects the aggregate of the millions of these little guesses.
Until then I had also written Twitter off, but if they can monetize Fabric and leverage some of what they've learned about big data and how (not) to scale technical infrastructure, they may be able to position themselves as a technology solutions company that also has a limited character notification system.
Selling B2B has proven itself to be so much more sustainable. Businesses do not like to switch platforms as everything is integrated into their stack and workflows. For consumers everything is just a click away. Not so much for lots of businesses.
I've no interest in the visual based media that's slowly replacing it, but I've always been more of a text person than a picture person anyways. Also I like being able to quickly scan dozens of messages instead of the large amount of real estate a picture would take up in relative terms.
And speaking of the compact size, I find the 140 char limit to be feature, not bug. At least for the people I follow they generally use that as a way to hone their thoughts and not just blather about.
I have my complaints, nothing is perfect but while I enjoy using FB losing Twitter would put a giant hole in my day to day life.
The only real difference I've noticed in the last, lets say 15 years, is that people have grown up with things now and so they seem "easier" and more "accessible." To some extent that's true, but it's mostly the people that have changed not the products or services themselves.
I don't really believe that any "internet company" is sustainable. The value they add exists at a point in time and decays. Get in and get out. The basic functions are too easy to copy and there's no guarantee you keep your community unless you do so by force.
At some point you either become a media company that caters to specific demographics (the lookalike audience you acquired), or you disappear.
If tomorrow their was no more Facebook I don't feel like it would be a big deal for more than a week or so. After a few hours everyone would have a new solution for photos, messaging, etc.. After a month no one would care anymore.
As an investor I think the thing is to get in early, help built that valuable moment in time in peoples' lives, and then just get out.
Of course there are a million variables. I mean, AIM is still around, right? But it's no longer the "default" IM system, while a few years ago, it seemed to be (to me, anyway).
Year after year, same old "ugly" site, same old boring use case.
I wish I'd thought of it.
Another thing I left out, which I feel is novel, is the wiki. IMO the wiki is one of the few "new" things. When you really think about the wiki it's pretty different form a message board or co-editing a website. It's something else.
And I'm not sure Facebook or Google (with its current revenue makeup) is anything other than a media company, nor have they ever not been.
I can easily see Facebook going the way of AOL. In a few years a new generation will grow up with something new that seems easier and more intuitive to them, and Facebook becomes a legacy platform. Maybe they buy a few small media companies that keep the newsfeed interesting.
I just can't see Facebook, Twitter or anything else being "the thing" on a sustainable basis. There's no precedent for that, and it really doesn't make sense to me intuitively.
Snapchat and Yik Yak are messaging applications, so they attract kids and friends who want to communicate with one another privately. Problem is, messaging apps don't seem to be revenue generators anymore.
Because Tweets are all public and searchable, I would argue that Twitter is a publishing platform. They attract content producers who want public attention: press, celebrities, politicians, brands, etc.--and the audiences who want to hear from these folks. So they should be able to drive a lot of revenue from ads.
It's time to be a real business or pay the price of being an overvalued pile of stinking financial junk.
Even if Twitter fired half its people and cut costs like crazy they'd still struggle to justify their current valuation. The street is angry at the reveune numbers since on this current trajectory there's not really a clear path for how the company can generate enough profit to justify its valuation... unless their revenue skyrockets, which is looking less and less likely evey quarter.
BTW: Lot of downvotes instead of replies.
It's mass market vs niche market.
Why use a 24 hour news network when you can just get on-the-ground views from Twitter? That's probably what they have against it.
There's more to be said about why you use Twitter instead of one of the other places you could read things, but the basic "value proposition" is actually simple.
I've used it to good effect to watch real-time events like protests and riots.
I think a market correction is long overdue, I believe that after this year, capitals will be tougher to come across, companies that didn't really innovate but instead captured markets by burning cash won't be able to sustain this level come rainy season when capital market dries up for these firms.