It’s no secret that Twitter hasn’t been doing well, financially, over the years. They have a great platform, and they tend to fly under the radar when it comes to scandals and such, but everyone knows that they aren’t doing well in terms of profit. Which is weird, considering all the things I just mentioned. I’m not suggesting that there is something wrong with Twitter. In fact, I would honestly have expected the opposite. Facebook, on the other hand, seems like a train wreck, so I could see their stocks falling, but that’s also not the case. All that said, Twitter stock closed at $43.49 this week, which is up 155% from last year. That’s some pretty incredible gains. But why?
In fact, this doesn’t really make a lot of sense. Twitter’s user count last quarter was only up 3% from where it was a year before – coming in at 336 million. First quarter revenue was up 21% year over year, but only up 12% from two years ago. To put this in perspective, Facebook’s revenue increased 122% in the same two-year stretch. Again, this statement boggles the mind, but stay with me. That said, there are two reasons that Twitter’s stock is doing well:
The first reason is that Twitter is profitable. Twitter is finally making money. Albeit, not a ton of money, but they are making some money nonetheless. They turned their first-ever profit in the fourth quarter of last year and was also profitable in the first quarter of 2018. Not only were they profitable, they brought in $61 million during that quarter. How did they do it? They cut costs and managed their money in a more appropriate way. Which is why Twitter is doing a better job than they have before. I think that this is key. I’m not saying that it’s the reason they’re doing well, but cost-cutting isn’t easy. As more and more companies try to locate efficiencies, it can be hard to let go of antiquated traditions or procedures. So I certainly commend Twitter for being able to do this.
The second reason is that they are growing. Twitter has a broad user base, which isn’t really growing. But the population of people who are using it every day is growing. Twitter daily active user growth is at 10% for the fifth straight quarter. That means, people are coming back more frequently. I have to admit, I’m not one of these users. I’m in the “broad” user base. I’ve been going through a phase where I don’t use Twitter and I think it has a lot to do with the news. How many times a day can I see a post about Donald Trump or Mark Zuckerberg without wanting to pull out my hair? That said, I really do like the platform, but I know I’m not contributing.
Let’s face it, Twitter is a great platform. I think it’s great because they don’t change it all that much. Maybe that’s why some people don’t like it, and therefore aren’t using it? I think it has potential and some things could be improved, but it’s the one place that you go for live events and breaking news. To compare, again, Facebook has struggled to get into sharing news. And it’s not just Donald Trump who uses it, but I honestly wonder if that’s a deterrent for some people? Trump aside, Twitter has become the platform of choice for engagement. Overall, I think that Twitter will continue to grow and come out on top.