> “It calls into question why they didn’t see this coming,” said Victor Anthony, an analyst at Axiom Capital Management, who has a buy rating on Twitter’s stock. “I don’t think anyone ever questioned their ability to generate revenues.”
Hmm, I thought everybody did? I guess wall street really does have a clear view of this whole tech scene.
>Twitter cut full-year revenue guidance to $2.17 billion to $2.27 billion, from the previous range of $2.3 billion to $2.35 billion.
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.
Twitter is incapable of ever meeting the Price-Sales multiple of 20X+ until the stock drops closer to reality. The average stock is less than 2X. Apple is around 3X and has never in it's history been greater than 7X. What can Twitter do to multiply their sales by 5X? It's great they make some money but the stock price is unrealistic.
Apple is a bad comparison because the near-death-experience in the 90s combined with its contrarian attitude has put it in on a very short leash with Wall Street. I mean, aside from its years in the desert Apple has performed as well and as consistently as any tech company over long stretches. And yet it's P/E is consistently a third of Google's or Sony's.
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.
Twitter is just now figuring out what business they are really in: content distribution. They thought they were a social network, but social networking is just how they source their talent and content.
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.
I love how "I don't think anyone ever questioned" can mean two different things: either everyone assumed they could make money, or nobody ever even bothered to ask the question if could they make money, let alone knows the answer.
My understanding is that the "crash" was actually better-informed than Twitter had intended. They do have a bad earnings report, which was released sooner than they intended. Perhaps before various insiders' sell orders had a chance to complete? b^)
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.
Did anyone expect any different from Twitter? Their main platform needs significant improvement.
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.
Interesting about 75% of the ads I see on Twitter are for products that I might actually be interested in. This is way higher than e.g Facebook (which seems to think I want to play a free to pay game or sign up for bad dating sites or get my degree again) which suggest to me that Twitter is doing something right and it can't be data collection because Facebook knows so much about me (including that I graduated from the very place they wanted me to get the degree, with that exact degree).
What may be happening is that the ads on Twitter are better targeted to technical users.
I can understand why investment type people like y-axes that don't start at zero - they're usually interested in tiny changes a long way from zero. But for the general public to watch? If you didn't already have an up to date feeling for the price of Twitter shares, then this whole report is meaningless without finding the -$9 and doing the calculation yourself. She even points out that it's now $40 but not what it was before. Are most viewers really that tuned into the market that they know the prices of things before they're in the news?
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.
My personal reason for using Twitter less is the degradation of the website. Using J to scroll down has always been buggy with image posts and often resets to the first post, but newest 'feature' includes not being able to view threads inline. When clicking a tweet it will go to the details page (opening in a new tab doesn't work) and when going back you have to scroll down possibly hundreds of tweets. When opening images inline (that still works in most cases) the page scrolls up a random amount, anywhere between 5 and 50 tweets it seems. Copying image URLs using right click also doesn't work anymore when viewing an image (only from the tweet list can you copy it, then manually editing the URL to include ':large' works). And of course the ads, even though I don't see them, the J key doesn't skip them so I know they're there.
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.
I started using https://tweetdeck.twitter.com/ especially for the above reasons. Somehow the JS is way more reliable on the tweetdeck site. It's a pity that even the widest column setting is way too narrow, it still feels more like a "management interface" than a Twitter home feed.
Another way to look at it is that Twitter's first trade on the NYSE in November 2013 was at $45.10, and today, almost a year and a half later, it closed at around $42. That is not a whole lot of return for what is supposed to be a growth stock. It's also not a particularly great story to tell prospective employees if you're trying to attract them with stock-based compensation.
>Twitter cut full-year revenue guidance to $2.17 billion to $2.27 billion, from the previous range of $2.3 billion to $2.35 billion.
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.
>I find it astonishing that what is basically a short message broadcast service can generate billions of dollars of revenue.
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.
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.
Twitter, like Facebook, has beacons on just about every website out there, thanks to website owners who are all too happy to make it easy for visitors to click "like" or "tweet" in the hopes of attracting attention. You don't even have to post a single Tweet for Twitter to know about what you're into.
In other words, they missed earnings by 4.5% (comparing the means of the two ranges) when the original uncertainty range on their estimate was also 4.5%. Doesn't seem very exciting to me.
Indeed. This is news if you're actively day trading Twitter shares. Otherwise it's business as usual. Now it's at 2014 prices. It's had bigger swings in both directions in the recent past.
Coming soon: more ads. From the article: "Under a new agreement, marketers using Google’s DoubleClick advertising service can buy Twitter’s Promoted Tweets."
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.
Compensation. I know an engineer with 3 year experience who was offered 150K salary + 600K of stock grant over 4 years. Management get paid a lot more, obviously.
Is this a recent offer or an old offer with current valuation of their stock? The latter seems reasonably if the stock offer had a five-figure valuation but a recent offer of 600k in stock seems ludicrous. Are public tech companies really offering that much in compensation these days?
Random question: How do I stop videos from auto starting on Bloomberg? I'm running Safari with no Flash, and have Ad-block on. Video doesn't start, but audio does.
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
If you must watch the vids, downloading via yt-download (from another host or vm not using that hosts file) frequently works.
Why not use NoScript and/or RequestPolicy instead? That way, all such sites are blocked by default, and you can temporarily or permanently enable individual ones with a couple of clicks.
Related, it would be great for HN to be able to tag stories as having auto-playing audio, a paywall, modal ads, and other undesirable elements of a posted story's site.
It's another web trend I don't understand. All news websites seem to do it, it's super obnoxious, and I don't know anybody who doesn't just rush to click stop as soon as they click the page.
Chrome has made this worse recently, though. I disabled Flash more than a year ago on an older computer, and all that's required is clicking to enable.
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.
I really appreciate what Chrome did. People got clever and would move their player (or triggers) in front of your regular clicks to get their annoyance to play. They can't do that with right-click and a left-click in a context menu.
At least, that is my assumption, and if not, they should consider that as a positive outcome for me.
Go to a page with an unloaded flash element. On the far right side of the address bar there will be a puzzle piece with a red 'X' over it, click that and you can enable plugins on that page for that session only.
It's actually a slight improvement, because previously you'd have to reload a page to do that.
This probably shouldn't be surprising news but it has some shock value. Twitter is very close to what some would consider a model civic communications platform. I remember hearing one tech pundit refer to it as "citizen's band radio for the 21st century." The idea that such an effective tool needs to generate revenue a la Facebook seems odd, even though I understand that it operates like any other business entity.
I don't see why not. You can take the result of some effort and say, OK, this is a model for the kind of result we'd like, but are not currently getting from our more open, idealistic systems. There would probably be many benefits to such, err...open ways of thinking.
It's interesting how different people's opinions can be. 140 character limits, extreme prioritization of newest content and large scale bot participation are not what I'd look for in a "model civic communications platform", but conversely I can see its virtues from an advertiser perspective: the non-ad content is for the most part qualitatively indistinguishable from the ads and much of the user base actively wants to follow brands.
revenue yes; profits... and perhaps even gratuitously obscene profits... probably not. but people wouldn't have invested in a "cb radio" system years ago. Wikipedia feels the need to beg every so often - not sure people would want to see that in their twitter streams, but I'm not sure who's really happy about ads either.
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.
The reaction makes a lot of sense.
Their revenue is miniscule compared to a $34 billion market cap.
That market cap can only be justified by massive future revenue growth. The results are indicative that the future revenue growth might not be as massive as people thought it was.
Twitter is currently valued at >10x revenue, is unprofitable and future revenue projections are being dialed back. The hype has worn off. It's going to get real ugly real fast unless they can post some decent results real fast.
The way stock prices work is that the price of a company's stock (or more relevantly, the price*num_shares) incorporates their current earnings as well as their potential future profits (which is driven by the company's forecasted growth). Updates on how the company is actually performing (e.g. earnings releases) are a chance to get concrete information that allows everyone to update their expectations of future growth. If the market at large was expected some number $N, and the actual released figure less than $N, then self-evidently the expected growth would be adjusted down.
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.
Ok but from my understanding - you get to buy and sell stocks. So when twitter says that instead of earning say 300 million, they a bit less like 280, why is this a big problem?
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?
It's both what they just did and what they are trending towards in the future.
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.
> who sets these expectation numbers, how do they get it and why can't normal investors arrive at the same numbers?
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.
I think the writing is on the wall for Twitter. The younger generations are increasingly flocking to snapchat, yik yak, and similar apps. I never hear of anyone using it anymore(college student here). I would have stopped facebook a while back as well if I didn't use OAuth for damn near everything
Twitter, Facebook, Google+, Snapchat, Instagram, Whatsapp, etc… they are all just iterations of the same basic things: messaging, file (photo) sharing, identify, news. The writing is on the wall from inception. The value is in the community, but community is amorphous and not really ownable or defendable.
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.
I think your comment is quite insightful. Just think about how many times instant messaging has shifted from one most-popular platform to another. IRC, ICQ, AIM, MSN, Skype...SMS?...Facebook?...WhatsApp? It's just a constant shift from one service to the next. Obviously this cycling will continue forever. Therefore it would seem unwise to invest in any one platform too heavily, if at all--as a user or an investor.
It makes sense to invest, I think. Notice, I'm not saying that these things aren't valuable—they are. It's just that their value is time limited. They add the bulk of their value between date X and Y, and it just decays after that. And after their value has been delivered, if they disappeared entirely the world really wouldn't be any different.
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.
Kind of an anecdote, but still interesting, thanks. The question is, then, for how long will Skype be as popular as it currently is? And, will these teens keep using it as they age? If so, will Skype's demographic tend to follow them?
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).
Is this a trait of "internet companies" or of advertising-backed media companies in the post internet world? They all seem to sell product and its not like the New York Times has anything inherently more "defensible" than Twitter does (Brand & Scale).
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 don't think there's anything wrong with media companies. They are sustainable over a longer period of time, they just aren't particularly interesting.
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.
I forgot a few things. CL is definitely one of them.
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.
Granted I'm an old fogie no longer in the target demo for hip stuff (turning 40 imminently) but I don't know what I'd do w/o Twitter. I communicate with friends, use it as a defacto news aggregator, an aggregator for chatter on various topics that interest me, a way to discover new things, keep up semi-professional acquaintances (largely w/ people I've never met in person) and even met a handful of friends w/ it.
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.
I'm an iOS engineer, and the company I work for recently started using Twitter's analytic tool Fabric for mobile crash debugging.
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 don't know anyone that has ever cliked an ad in the internet, anywhere. And yet multibillion bussines are sustained on top of that industry. Anecdotes can only take you so far.
I think Twitter and Snapchat/Yik Yak are in different industries.
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.
This is one dimension of the problem. I think from the technical point of view having a more efficient stack that cost you less and the change in the system is cheap (aka software engineering time) can make your product more profitable even though your competitors offer more features. This sort of angle is missed quite often in the startup scene, while older mature companies care about it a lot more. A good example would be Amazon.
Revenue hasn't been a problem, Twitter will do over $2 billion this year. Wall Street has been fixated on user growth though. Probably thanks to Facebook touting its ever increasing user base.
It is still growing, but the momentum has been slowing for over a year. I googled, "twitter user growth" and every result points to disappointing user growth
"Crashing" is a bit inaccurate. It dropped and has now stabilized at a lower price. Crashing would imply that it's continuing downwards, which it isn't.
As a developer, how accurate do you think Twitter's user numbers really are? There are a ton of fake accounts out there. Some are semi-legit (for development), but there are millions of followers available for purchase and Twitter has only removed a fraction compared to Facebook from my anecdotal evidence. What do you think?
Twitter is just a sign of what's to come for a lot of new tech companies. The street wants profit. Once you go public the whole cool startup party ends (unless you can be a cool startup AND hit your profit numbers).
It's time to be a real business or pay the price of being an overvalued pile of stinking financial junk.
Yes, but the street cares about revenue because they care about profit. If you have high costs you can always just say you had a bad quarter but profit will come when costs come down.
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.
I never understood Twitter management. Just accepting small and medium sized companies to consume their firehose and charge for that will be enough to significantly increase their earnings. This was the Google AdWords breakthrough.
A small business can probably get by with using the streaming track API or the sample hose which is available to everyone. Not sure what an SMB would even do with the firehose.
I remember that CNN was all Twitter all the time a few years ago. I haven't watched until today for Baltimore info. No mention of Twitter in the last six hours of watching.
Personally, I find Twitter highly overrated. At least 90% of this service seems to consist of inane nonsense, assorted trolls, blowhards and every *ism imaginable. While other services like Reddit (or HN) offer the community a way to curate content and block out the worst nonsense, Twitter buries you with it. The only way to use it is to only follow select people and stick to your news feed. But there the 140 character limit all to often makes it impossible to deliver anything more meaningful than a headline and a link.
I watched the coverage all day yesterday. The police were talking about their Twitter as the official way to stay updated, and the news anchors frequently were talking about who tweeted what. Maybe CNN just has something against Twitter now, who knows.
I'm talking more about CNN putting tweets up on the screen and discussing the contents of the tweet. Like when a tweet about MH370 being sucked into a black hole was discussed by a panel.
Yes, and I'm saying maybe someone in their company decided that Twitter is bad, or maybe some Twitter VP ate the sandwich that person wanted to eat, or they decided Twitter is a competitive threat, or whatever. As I said, who knows.
While I understand Twitter from a technical perspective, I have never understood why a large number of people use it. The value proposition for an average person is effectively zero. It's great for businesses and celebrities, but one-sided value propositions tend to not work out long term. We are now starting to see that inevitable result play out. You can only defy gravity for so long.
The serious interactive users of twitter typically use it like a threaded IRC channel, with added benefit of being able to search based upon user and hashtags.
I've used it to good effect to watch real-time events like protests and riots.
While we will never return to the pre-social-media days, perhaps the infatuation had faded. The current generation entering their teens has never really known a time without it. There's no real novelty to it. The distinction between mindless time wasting and real usefulness may be more clear.
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.
this is my theory that the current economic model we have of dot com stocks is very much flawed, grossly overvaluing future potential revenues vs. current revenues. This argument never makes sense to me, unless you are investing in infrastructures like oil rigs or telecom grids that have a very sure and quantifiable return on investment, this is a mystery with a lot of dot com companies, especially for those that fail to demonstrate ability to earn.
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.
Hmm, I thought everybody did? I guess wall street really does have a clear view of this whole tech scene.