Social media giant is failing to capitalise on US president’s use and is reluctant to make deep cuts needed to turn a profit
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| Twitter has no obvious path to profit or growth even though many see it as one of the utilities of the internet. Photograph: Kacper Pempel/Reuters |
Not even the best efforts of Donald Trump can pull Twitter out of its dive, it would seem. The company’s fourth-quarter results showed a loss of $167m (compared with $90m a year before) on flat revenues of $638m, with no clear path to profit, even though the US President’s frequent outbursts helped increase the number of users by a modest 2 million to 319 million.
Twitter should be capitalising on the fact that the most powerful man in the world is using it as his channel to present the alternative facts of his presidency. Imagine if Trump’s key announcements were made on YouTube: each clip would be festooned with ads.
But Twitter doesn’t seem to have a knack for making money from what it does, even though millions wait breathlessly to see what will pop up on it next. Its earnings before interest, tax, depreciation and amortisation figures show a profit – $215m, up from $191m a year before – but that excludes stock compensation, restructuring and various other expenses.
Twitter should be capitalising on the fact that the most powerful man in the world is using it as his channel to present the alternative facts of his presidency. Imagine if Trump’s key announcements were made on YouTube: each clip would be festooned with ads.
But Twitter doesn’t seem to have a knack for making money from what it does, even though millions wait breathlessly to see what will pop up on it next. Its earnings before interest, tax, depreciation and amortisation figures show a profit – $215m, up from $191m a year before – but that excludes stock compensation, restructuring and various other expenses.
The reality is that Twitter has too many employees for what it does (and their stock options drag down profits by $158m a quarter). And what it does to make money – ie show ads to people – isn’t done well enough. However, its returning chief executive and co-founder Jack Dorsey seems reluctant to make the deep cuts needed to focus on profit.
Compare it with Facebook, founded just two years earlier, in 2004. Mark Zuckerberg’s company had fourth-quarter revenues of $8.81bn, 13 times greater than Twitter, and profits of $3.56bn. Twitter, on the other hand, has never made a profit.
Dorsey managed to throw in some buzzwords on the analysts call – machine learning, artificial intelligence – but the company is a wounded bird and arguably has been ever since it decided its model should be about showing people adverts. That’s a fight that it was always going to lose to Google and Facebook, which started earlier and do it better. News publishers aren’t the only ones losing to those two giants.
What’s next for Twitter? Dorsey doesn’t have a clear answer. “Engagement,” he told analysts. “Quality,” he said. But there’s no obvious path to profit or growth for the business, even though many regard it as one of the utilities of the internet. Nobody can or will buy it while Dorsey is in charge.
But with nearly $1bn in the bank, and positive cashflow, Twitter can probably last a little while. Just don’t expect it to make a profit.
Compare it with Facebook, founded just two years earlier, in 2004. Mark Zuckerberg’s company had fourth-quarter revenues of $8.81bn, 13 times greater than Twitter, and profits of $3.56bn. Twitter, on the other hand, has never made a profit.
Dorsey managed to throw in some buzzwords on the analysts call – machine learning, artificial intelligence – but the company is a wounded bird and arguably has been ever since it decided its model should be about showing people adverts. That’s a fight that it was always going to lose to Google and Facebook, which started earlier and do it better. News publishers aren’t the only ones losing to those two giants.
What’s next for Twitter? Dorsey doesn’t have a clear answer. “Engagement,” he told analysts. “Quality,” he said. But there’s no obvious path to profit or growth for the business, even though many regard it as one of the utilities of the internet. Nobody can or will buy it while Dorsey is in charge.
But with nearly $1bn in the bank, and positive cashflow, Twitter can probably last a little while. Just don’t expect it to make a profit.
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