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Saturday, May 14, 2016

Twitter Racks Up Losses Even When Others Profit From It


What has 310 million users but has never turned a profit?  Here’s a hint – you only need seven characters to answer.

Yes, Twitter, one of the world’s leading social media platforms, can’t figure out how to make any money.  It is improving – by losing less in the first quarter of 2016 -- $80 million -- compared to the same time a year ago - $162 million.

It’s strange that Twitter isn’t making a lot of money.  Revenue rose by 35%, to nearly 595 million dollars this quarter.  It has a recognizable brand, doesn’t need any stores or warehouses, has lots of users, and gets tons of media coverage.  Is it mismanaged?  Is it paying its employers too much?  Does it need to trim its payroll?  Or does it need to get better at sales and advertising?

Somehow everyone else is making money with Twitter.  Media companies, book publishers, musicians, and others use Twitter to hawk products like books, magazines, and streamed content.  Politicians gain voters, celebrities fans, and sports teams increase ticket sales via Twitter.  Others get paid for promoting or endorsing products on Twitter.  But somehow Twitter can’t monetize all of its users and content?  Just charge users a buck a year and you turn a profit. Just charge 10% higher fees and you’ll come close to breaking even.

Twitter’s stock has plunged 42% in the six months since Jack Dorsey became CEO.

Twitter claims it’s losing out to “higher-performing video products.”  Really, how is this possible?  Traditional media outlets, like print and T.V. claim they’re losing ad revenue to digital.  Twitter is digital.  Isn’t anyone spending money on ads?  If they are, don’t they need to pay Google, FB, You Tube, Twitter and the like in order to grow?

Maybe Twitter is just full of shit. They say they lose money the way Hollywood accounting will claim a deficit on a huge blockbuster.  It could all be fuzzy math.

A friend of mine in finance says that Twitter is cash-flow positive but earnings negative.  Twitter gives out huge stock compensations, which is counted as an expense, and produces accounting losses.  Stock compensation is an expense.

Twitter, it seems, could make a mint by trading in its access to so many people, whether it’s with sponsored tweets, selling information to marketers, or partnering with media outlets on the paid dissemination of the news.

Facebook has managed to make a profit and become the sixth most valuable company in the nation, with a valuation of 350 billion dollars.  Whereas Twitter’s users only rose by 1.6%, FB saw a 15% jump this year – and FB is more than 5x the size of Twitter.  FB brought in $5.3 billion this past quarter, with a profit of $1.5 billion.  If FB charged each of its 1.66 billion users just a buck every quarter, it would surpass its advertising profits.

I’m surprised there aren’t physical products from Twitter and Facebook.  They should have a store, selling witty T-shirts, mugs, bags, and the like. 

"I Tweet, Therefore I Am” or “Do You Like My Facebook?” should be splashed across the chests of college students. Or have personalized shirts made up with one’s Twitter handle.  I can see wearing a shirt with @ThePRExpert instead of my initials sewn into it.  Or how about selling books about or based on cool content from Twitter or FB?  Or maybe the brands partner with companies to endorse their products – Facebook’s official car or Twitter’s official drink or sneakers.

It’s not easy running a huge global company with new competition coming from all corners.  But once you’ve done the hard part – establish a name for yourself, raise funds, go public, and become a leader in your domain, you need to cash in on it.  Authors and publishers would kill to be in the position Twitter and FB are in.  Maybe book publishing should align with them somehow.

Otherwise, Twitter can just put up a digital panhandling sign that says: “A penny for your thoughts” -- and charge it!

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Brian Feinblum’s views, opinions, and ideas expressed in this blog are his alone and not that of his employer. You can follow him on Twitter @theprexpert and email him at brianfeinblum@gmail.com. He feels more important when discussed in the third-person. This is copyrighted by BookMarketingBuzzBlog © 2016

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