Twitter is not dying. It’s on the cusp of getting much bigger

http://www.slate.com/articles/technology/technology/2014/05/twitter_is_not_dying_it_s_on_the_cusp_of_getting_much_bigger.single.html

by smacktoward • 12 years ago

52 47 12 years ago

slate.com

eddanger• 12 years ago

So now is a good time to invest... got it.

diego• 12 years ago

There's an unusual amount of bullish articles about Twitter's stock these days, and one must wonder if it's related to the post-IPO lockup expiration coming up next week.

http://www.forbes.com/sites/timworstall/2014/05/01/the-end-o...

fizx• 12 years ago

The quarterly earnings call just happened, TWTR got roasted, and we all love contrarian articles.

bhouston• 12 years ago

These things do not just happen, there is usually a good PR firm behind these types of coincidences, probably pitching it as "everyone loves contrarian articles and don't I have a good one for you."

hendzen• 12 years ago

Pump before you dump, right?

mathattack• 12 years ago

I think in a month we'll have a better view of Twitter's worth, less impacted by PR and market technicals like lockup.

caseyf7• 12 years ago

Ok, so Twitter should be valued as a media platform instead of as a social network. Wall Street is still going to let out a collective ugh oh when they realize they gave an RSS platform a $22 Billion valuation.

adventured2• 12 years ago

Recently a $40 billion valuation. It was trading at a mere 60 times sales or so.

aaronbrethorst2• 12 years ago

I'm inclined to agree. I originally planned to not invest in Twitter until the lockup expiration next week, but tossed in a bit of money in November of last year. My investment increased by about 50% until a couple weeks ago when it ended up in negative territory. On the off chance that Twitter's last quarterly earnings ended up being awesome, I bought another chunk of stock on the afternoon before they reported. It immediately went down 10%, and so I bought some more.

I'm now excitedly looking forward to getting to triple(?) down on my investment with the lockup expiration on the 6th. Call Twitter a social network, or whatever you feel like. I think it's essentially part of the fabric of the Internet today, and far less replaceable than something like Facebook, despite the significantly smaller user base. I'm bullish—and very long—on TWTR.

gfodor2• 12 years ago

I think I disagree. Twitter's economic moat seems very narrow. From a user's perspective it's just a pub/sub messaging system. Facebook has a much deeper set of features. It feels very much like Twitter can be replaced by a decentralized, open alternative if executed well. If Twitter's ads start to get annoying enough, or the network itself becomes full of trash, people will be ready for an alternative at some point. (And in general, these types of networked messaging services fall in and out of favor every 5-7 years or so it seems.) I don't think the same holds true for Facebook (which has been tried before and failed.)

But I look at something like the bitcoin blockchain and wonder if that concept is just a few conceptual degrees from something that could replace the twitter stream. In 5-10 years will we be using twitter or will all devices just have a way to broadcast out into the ether, with a 'distributed ledger' of messages maintained by agents on the network?

I'm almost certain there is someone tooling away on this right now, the question is will they be able to make it accessible and easy to migrate onto from twitter.

wellboy2• 12 years ago

Very unlikely to happen. Traction is such a huge factor why people use social networks that outweighs all the features such as ad-free or better usability by the amount of 10 probably.

Twitter needs to f up big time to lose its current popularity.

harmegido• 12 years ago

You probably know this already, but I would be extremely wary of playing "active investor" with anything greater than 5-10% of my total portfolio.

I look at it this way: even if you believe it is possible to beat an index consistently through active management (which I don't), you're unlikely to do it without spending 80+ hours/wk focusing on it like the pros do.

hhw• 12 years ago

I disagree. Most of the pros are pros at finance, but not in the industries they actually invest in. By having expertise in a particular industry, you may be able to recognize disconnects between most pros and reality. Case in point, if you recognized that traditional hard drives weren't really going to be displaced by SSD's back in 2011, and saw the major players start to consolidate through M&A thus reducing competition, and bought Seagate and Western Digital stocks then at mid single digit P/E's, you'd have done pretty well with a 3-4x return in as many years. All the pros seem to love these stocks now, but certainly didn't back then. Now that may have been an extreme case, but a clear example of how financial analysts speculate based on very shallow understanding of the companies they make bold predictions about. Any time they get it wrong, which is not uncommon, there is an investment opportunity. Perusing financial news of the industries you have expertise in for a few minutes a day is sufficient for spotting such opportunities. Or to look at it a another way, consider the 80 hours a week you already put into your own industry as investment research.

With that said, it's good to mix in some fundamentals with your contrarianism to reduce risk, and investing in companies that are actually making money. Twitter is not one of these companies. That's not to say that I'm bearish on Twitter, I just think it's far too risky to invest in or against given that its price is more affected by rampant speculation than economic realities.

mattmanser• 12 years ago

I think it's essentially part of the fabric of the Internet today, and far less replaceable than something like Facebook

There are many examples of communication mediums getting abandoned suddenly and rapidly on the internet, just off the top of my head there's BBSes, ICQ & MSN Messenger. Even email to an extent, I get much less personal email than I used to and it seems to be much less common for young people to have their own email address.

What people use to talk on the internet seems to be an incredibly faddish thing.

theOnliest• 12 years ago

That's true, but the point the article makes is that Twitter is not primarily a tool for talking to people you already know, but instead for publishers/content creators to broadcast their material. These sorts of things change much less frequently: I never got an ICQ message from the New York Times, but I sure get a lot of tweets from them.

jamespo• 12 years ago

a long term investment is a short term investment that failed

monkeyprojects2• 12 years ago

I'm inclined to disagree, simply because the social media reach being talked about has everything to do with people using Twitter and nothing to do with how Twitter will make money...

If you think Google is immediate purchase advertising, facebook is friend recommendation and branding advertising what is the purpose of advertising on twitter at the moment....

willvarfar• 12 years ago

I thought Facebook was in-app accidental click advertising? ;)

Ntrails• 12 years ago

Invested in stock, lost money, invested more money, lost more money, increases holdings once again.

barking• 12 years ago

People love a bargain :)

aaronbrethorst2• 12 years ago

I did the same thing with FB a while back, someone made a similar comment, and my FB holdings are now up 150% in aggregate ;)

brc• 12 years ago

I have read about 3 articles in the last few days which say the complete opposite. Including a 'Eulogy for Twitter'.

I don't know who is right. I know I find Twitter has become a mess lately, with fewer people putting original thought into it, and more people using it as a 'I can yell louder than you' platform.

I think considered thought, breaking news and wry humor is the only suitable content for twitter. But that's just me.

seren• 12 years ago

It seems the crux of the article's argument is that Twitter is primarily a great tool for influential people to reach a wide audience. It is a sound argument. However, what will happen if these key people jump to the next big thing ? It seems like a pretty fragile strategy for the long term.

rhizome2• 12 years ago

I believe a lot of the major players these days to be pretty fragile. All it takes is a good privacy policy and a "sign in with Twitter" button to move a person's environment over. Sure, you lose your messaging history, but I doubt that's a dealbreaker for a lot of people. All it takes is a crappy enough experience to motivate people to pick another corner to hang out and gab.

ronaldx• 12 years ago

In my experience, "sign in with Twitter" acts as a significant barrier because people don't actually know their Twitter password.

bsder3• 12 years ago

Well, if the float is only 70 million out of 600 million available, the lock expiration is likely to dramatically increase the float. Since it doesn't look like Twitter has pent up buyers demand, that's likely to wallop the stock.

Or, if you are feeling uncharitable, what better way to make all your employees hold onto their stock than to crash its price right before they can cash out their options (presumably a lot of that 600 million shares had to be allocated to service options).

colinbartlett• 12 years ago

Wait, you can't really "make" someone hold onto their stock, can you? Like have a condition for continued employment be don't sell?

I'm guessing it will just be market forces: a bunch of twenty- and thirty-somethings with credit card debt or an eye on Tesla deciding weather to cash in those pieces of paper.

al2o3cr• 12 years ago

I'm pretty sure having the stock priced lower than the strike price for the options would pretty effectively "make" people hold onto their stock.

Related: I'll sell you this dollar for $2.50. ;)

bsder3• 12 years ago

You assume those people have stock. That is very unlikely to be true. Most of those people have stock options. Very different.

An option means that I can buy a share of stock at some guaranteed price (strike price). So, I would actually have to cough up the money to buy the share. Only after that, do I now own a share of stock that I can transact as such.

If the strike price is above what the stock currently sells for, I probably do not want to exercise the option. If the strike price is close to the option price, I probably would rather hang on to the option until the price rises some more. The option doesn't cost anything until I exercise it (or lose it, most options have a time limit) so I mitigate risk by waiting.

So, unless the stock price is above the option strike price+some margin, people won't transact.

My uncharitable speculation was: What better way to keep everybody from flooding the market with Twitter shares than to drive the price down enough to keep people from wanting to cash out their current options.

To be fair, the depression in Twitter is probably just everybody getting a shock that "Gee, Internet companies can actually saturate a market and run out of growth."

Amazon got zapped recently (imagine, adding sales tax to their prices dropped their sales). Google and Apple are showing some signs of deceleration (ad revenue is slipping because smartphones have saturated all markets with real money--so now everybody is actually chasing a competitor's customer rather than bringing in new users).

therealarmen• 12 years ago

From what I can tell, Instagram is eating Twitter's lunch:

http://www.google.com/trends/explore#q=instagram%2C%20twitte...

marincounty• 12 years ago

read 9780132302340 before investing.

mapleoin• 12 years ago

What are you, a robot?

http://www.isbnsearch.org/isbn/9780132302340

mrweasel2• 12 years ago

It's always weird to read article like this. The focus is always on "number of users" and stock prices, but rarely are we told is a company is making money.

From the article: "direct timeline views by logged-in users are the form of engagement that Twitter can most readily turn into money."

To me that seems to be the problem, Twitter can't readily turn logged-in users in to money.

Just like with Facebook is pretty hard to tell how Twitter is suppose to make a decent profit.

adventured2• 12 years ago

Not sure where Facebook fits in there. They're earning a massive profit, and a roughly 25% net income margin. Have you seen their latest quarterlies?

Revenue was $2.50 billion, up 72% vs Q1 2013. GAAP income from operations was $1.08 billion, up 188% compared to $373 million in the first quarter of 2013. GAAP operating margin was 43% for the first quarter of 2014, compared to 26% in the first quarter of 2013. GAAP net income was $642 million, up 193% compared to $219 million for the first quarter of 2013.

I'm skeptical Twitter can replicate Facebook's results due to the difference in the engagement, but it was never hard to imagine Facebook monetizing a billion highly active users via ads (just on volume alone).

mrweasel2• 12 years ago

I hadn't actually seen Facebooks numbers, but that impressive. You're right, they don't fit in then :-)

bsder3• 12 years ago

Much like Google, Facebook has been squeezing the advertisers rather than generating more/better impressions.

Revenue from advertising numbers for the endpoints (company with product to end consumer) are down across the industry, and everybody is trying to hide it. Once it becomes general knowledge, the advertising spend is going to drop and take the numbers from both Google and Facebook with it.

From my personal experience: I always run AdBlock/NoScript. I am APPALLED by web surfing when I don't have those. If I'm stuck on an iPad or my Galaxy, I want to hurl the pad across the room after 15 minutes. I have uninstalled apps just because the advertising was so intrusive (to be fair--those app developers don't want me either--I'm not the fish that will make their revenue).

So, now, I absolutely will not use web browsers on phones/pads unless I'm desperate (at which point ads will actively piss me off instead of get me to buy). Good job, advertisers. You've now ensured that you absolutely cannot reach me.

aspidistra• 12 years ago

Don’t be surprised to see Twitter become more YouTube-like, turning its home page into a real-time news platform accessible to anyone, whether they’re logged in or not.

I'm sure the home page (i.e. twitter.com) was like this at one point. There was a search box, a list of top tweets, some featured accounts, and a (scrolling?) list of top and trending hashtags for the region you were viewing the page from.

edit - Wayback Machine capture of what I mean, from Nov 2010:

https://web.archive.org/web/20101102183624/http://twitter.co...

Freestyler_3• 12 years ago

A media platform without any potential audience is as usefull as a big paper add in a newspaper that never got published, but a few collectors got their hands on it.

antidaily• 12 years ago

Finances and stock prices aside, I can't imagine what would replace it. At least for me.

jpswade• 12 years ago

When someone explicitly says something is not dying, it makes me think it probably is...

danielweber• 12 years ago

Separate the platform from the business.

The platform will continue on. The business is in great doubt.

jeffmanu• 12 years ago

The one reason I think Twitter will be valuable for a while is that there whole concept of getting your news in less than 200 characters will always be more appealing than many of the other options available. The future will center around focus.

snorkel• 12 years ago

Seems like the article is wrestling with the semantics of "active user" and wants to focus on counting passive users instead. Either way, the audience size is the audience size, and growth generally means growth in audience size.

Twitter is not dying. It’s on the cusp of getting much bigger

Related Stories