Why is Twitter failing horribly at turning a profit?
Are these operating expenses going to be the norm for Twitter or will they eventually go to similar margins as Facebook?
6 Answers
Take a look at their cash flow statement: Twitter, Inc. Common Stock Stock - Yahoo! Finance
Their operations just don't generate a lot of cash. Most of their cash is generated by issuing stock and debt.
For the year ended December 2014, they generated about $81 million in cash from operating activities. They had a net outflow of $1 billion in cash from investing activities.
They had $1.6 billion of cash come in from financing activities.
That suggests that they are using financing--issuing stock and debt--as a source of cash for their operations. That isn't really sustainable.
Their operations just don't generate a lot of cash. Most of their cash is generated by issuing stock and debt.
For the year ended December 2014, they generated about $81 million in cash from operating activities. They had a net outflow of $1 billion in cash from investing activities.
They had $1.6 billion of cash come in from financing activities.
That suggests that they are using financing--issuing stock and debt--as a source of cash for their operations. That isn't really sustainable.
It's not for lack of trying. It seems like I get emails daily asking me to either directly buy ads or sign up for a webinar to learn more. I even have sales reps DM'ing me directly on Twitter asking me to setup a time to learn more.
I tried Twitter ads and they didn't work for me. Could I have done things differently? Sure, but I tried it enough to know it didn't move the needle for my market. However, I have heard from others that it is quite effective.
The question may be, "Will ad revenue from it's users ever be enough to make Twitter profitable?" Consider that Twitter may also make money from relationships selling access to it's large database, but who knows.
Facebook doesn't just make money from ads. It also has revenue from app sales and in-app purchases from those apps. Now they are adding payments via Messenger and may soon get into e-Commerce.
Twitter could eventually add a payments service or become some other sort of 'connector' service that enables other things to happen, but whatever they do, they might want to do it quick before their money runs out.
I tried Twitter ads and they didn't work for me. Could I have done things differently? Sure, but I tried it enough to know it didn't move the needle for my market. However, I have heard from others that it is quite effective.
The question may be, "Will ad revenue from it's users ever be enough to make Twitter profitable?" Consider that Twitter may also make money from relationships selling access to it's large database, but who knows.
Facebook doesn't just make money from ads. It also has revenue from app sales and in-app purchases from those apps. Now they are adding payments via Messenger and may soon get into e-Commerce.
Twitter could eventually add a payments service or become some other sort of 'connector' service that enables other things to happen, but whatever they do, they might want to do it quick before their money runs out.
After meeting numerous teams at Twitter I realized the sole reason of why Twitter will never turn heafty profit. The company is so hyper focused on hiring people from Google that misses the entire point of hiring people with the necessary skillset.
In one instance a junior PM at Google (band 6) was hired as the Group PM to lead its eCommerce team. The person was clueless how to segment the eCommerce market, but knew that had to hire another ex-Googler that also had no experience of generating a dime in revenues. The result is that Twitter eCommerce platform is dead -- thou could have been a great revenue pipeline.
In one instance a junior PM at Google (band 6) was hired as the Group PM to lead its eCommerce team. The person was clueless how to segment the eCommerce market, but knew that had to hire another ex-Googler that also had no experience of generating a dime in revenues. The result is that Twitter eCommerce platform is dead -- thou could have been a great revenue pipeline.
Check this: Martijn Sjoorda's answer to How could Twitter be valued at $11B but not be profitable?
Not a lot has changed for the better in the last two years, sadly.
Not a lot has changed for the better in the last two years, sadly.
Simple: how could Twitter turn a profit?
I don't know, and apparently neither does anyone at that company.
I honestly can't think of a way that wont require a major redesign of the company and product which could drive users away, or the monetization of the service itself which will definitely drive many users away.
