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Comment by tinco | Hacker News Reader

It's just the delusion of wall street. They expect hockey stick growth figures from a single product company that clearly already dominates their niche. Even though most people feel Twitter is declining, it's actually still growing.

The graphic shows the twitter bird in a freefall, but what's actually happening is the public markets traders worst nightmare, the bird is just flying straight on.

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I wouldn't call it a delusion. Investors were valuing Twitter at close to $40 Billion because they were expecting Facebook-like growth. Now that they don't see that growth they currently value it at around $20 Billion. Based on simple things like P/E that's still a good number.

I still think there's a good chance of a turnaround for Twitter. It's widely used by the media and celebrities. If they come up with a better way to consume this then I think they have a good chance of getting back to their recent highs in their stock.

I agree. It's the opposite of delusion, quite grounded in reality.

And I agree with your second point. Their current level of network effect / lock-in should give them plenty of runway to find new ways to grow and/or monetize.

I am not so sure. They actually have negative earning, GAAP-wise, caused by a huge amount of stock based compensation and acquisition costs. Even with all these spending, Twitter is not showing any growth. Twitter will lose more engineering and product talents as the stock price goes down. They can't also use stock to acquire growth either. It's a dead spiral. Twitter has been leveraging Wall street goodwill and hype but I think it's the start of the end.

I wasn't aware of the extent of stock compensation costs, but I do realize that they haven't turned a profit.

You don't deny the power of the platform, network, and brand themselves, right? I forget the buzzword for this type of non-fungible, unique asset. I guess we just wait and see what sort of valuation it fetches in an acquisition.

No I am not denying the value of the brand and the network, but I don't know how to valuate these assets. I don't see how they are worth 20B, but maybe some others do. In terms of the engineering platform, I am quite confident a similar platform can be built with much less than 1B. Twitter platform is not that special in terms of engineering challenges.

One plausible risk scenario is, under pressure, they try make significant changes without incremental testing.

I don't see a good alternative channel to Twitter right now. Facebook certainly isn't it. Instagram definitely sliced out some of Twitter's market, but can't do the same in other use cases. Neither can Snapchat.

From the standpoint outgoing traffic Facebook dominates Twitter. That is a concern. Fake traffic or real, this is a signal of engagement.

Another problem is ad platform dominance. Advertisers will spend on well built platforms with large audiences. Google and Facebook clearly excel in this area now. It isn't so much Google & Facebook that threaten Twitter but all the other social apps and sites which are banking on the exact same model to justify their valuations. If Twitter is earning 1/3rd or 1/4th of the amount per user Facebook is in the long term this could be a problem.

There is a price where Twitter becomes a very strong acquisition target. It certainly is heading in that direction.

Recent product changes have led me to use Twitter less. Twitter's official app UX is a mottled mess. I stalk the feed from 3rd part clients for news and product updates, but contribute less of me. Ello now gets my views and posts. I even have a final goodbye tweet on standby just waiting for the next Facebookification decision out of Twitter. I'm pretty sure other power users have been changing their usage patterns too just from personal observation.

They actually beat analyst expectations for revenue, but the sales pitch for a long time has been, "Revenue doesn't matter, because massive user growth!" That doesn't pan out so well when user growth is OK at best.

The real problem is core to the product (it's really hard to become an active user), and one that's both really difficult and really time-consuming to solve.

Twitter's user growth has been nearly flat. This is a fact. Whether this matters and whether Twitter can turn things around are different issues. Twitter's problem is that it went public as a growth company comparable to Facebook when it might just be a niche social network.

I think part of the issue is that Twitter is a great tool for people in media/news as well as PR/celebrities etc, and because of the role these groups play in society they have been doing what amounts to a lot of free advertisement for Twitter. All along this may have been "artificially" increasing Twitter's user numbers relative to the kinds of users they want.

Twitter's valuation problem is that they sold Wall Street on a user growth story instead of revenue growth story. Had they done the latter, they stock price would be much less volatile and Dick Costolo would still have his job.

Most academics disagree that there is such a thing as "Wall Street delusion". TWTR was and is accurately priced at all times. In the past, it was more valuable as investors had larger reason to believe in the future growth prospects of the company. Now it is less valuable because we have seen that the company has failed to live up to those expectations.

I'd be willing to accept it's just the press with their doomsday headlines that make it seem as if there was a delusion. But why does it drop 5% in a day then? Why are analysts always so surprised when actual reports come out?

It always takes me by surprise. For example when Amazon finally split their revenue to show how much their cloud offerings were making the stock jumped by 18%. How is that even possible? They have a cap of 250B one confirmation of something any geek with a calculator could've estimated makes the company jump 50 billion dollars.

You can tell me TWTR was accurately 2 years ago, and it's accurately priced today, but I can't believe it was accurately priced friday.

(I'm long in AMZN and totally surprised by the windfall)

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