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Not Even Trump Can Help Twitter!
Yesterday after the close, Twitter (TWTR) announced yet another disappointing quarterly earnings report. On the surface, Twitter has the wind at its back. We just had the craziest Presidential election in history, and the most active global news flow I’ve ever seen. Black Lives Matter. Migrant crisis. Syria. The Brexit. Italy’s No Vote. Right wing nationalist movements rising worldwide. There’s never been more stuff to talk about! Heck, President Trump Tweets so often that you’d think he owns the stock. Plus, Twitter gets a staggering amount of exposure from the media. Athletes and celebrities’ feeds are constantly promoted on the mainstream media. Yet Twitter’s ad revenues DECLINED year-over-year in Q4. Facebook (FB) grew ad revenues by 53%! And Facebook has a revenue base that’s 10 times as big! So what’s the deal here? Aside from the fact that Twitter is not user-friendly and offers little in the way of instant gratification — Facebook has the greatest advertising platform the world’s ever seen. It has in-depth personal information on almost 2 billion people. Think about it. Odds are, Facebook knows: 1) Your full name, age, location, marital/family status, and employment history 2) All of your hobbies and personal interests 3) Your political affiliation 4) What websites you visit 5) What companies you buy from 6) Who you talk to 7) Where you go Twitter surely has some of this data, but it also has some major disadvantages: 1) A smaller user base, and smaller data set 2) More anonymity Speak to anyone in the Internet marketing world, and you’ll know that businesses are tossing huge sums of money at Facebook and Instagram ads. Twitter? Not many folks seem to care.
Continue Reading -->Twitter Is No Fun, Can’t Offer Proper Guidance
I’ve been a long-time bear on Twitter (TWTR) and the company’s lousy quarter just reinforced the fact that it has 2 major problems: 1) User Experience As I’ve said before, unless you have a lot of followers, Twitter isn’t much fun. You don’t get much engagement relative to platforms like Facebook (FB) and Instagram. Meanwhile, go out and find any teenager and ask them what platforms they’re focused on. They’ll say Snapchat and Instagram, which offer more engagement, are easier to use, and are just plain more fun than Twitter. Not everyone can come up with clever one-liners, but everyone can take a selfie or shoot a quick video. This has to change. Twitter has to become FUN to use. 2) Guidance I’m baffled by Twitter’s inability to set its guidance bar low enough to generate real beats. For Q2 (reported yesterday), Twitter guided for $600 million in revenues. At the time (4/26), that was 12% below street estimates. And Twitter only beat it by $2 million in revenue! In Q1, Twitter actually failed to hit its own guidance, even though its guidance was 5% below street expectations when issued. Any smart company offers guidance low enough to beat. So if Twitter can barely beat its guidance, it says 1 of 2 things: either they continually overestimate their own revenue momentum, or they need to take investor relations 101. Given that their CFO is a former high-profile Wall Street analyst, I think it’s the former. Now if Twitter can’t beat its guidance for Q3 — which implies just 7% revenue growth — we’re looking at a single-digit stock unless it gets taken over. Perspective We have to remember that at one point, Facebook (FB) — the undisputed king of social and perhaps the greatest digital ad platform the world has ever seen — was at one point down and out. So a turnaround can’t be completely counted out, assuming Twitter can drastically improve its user experience. (I don’t have faith myself) That’s the first step to getting the numbers to turn, though throughout history, I can’t remember a single successful turnaround of a social media platform. Friendster… nope. MySpace… nope. AOL… nope. Google+… nope. For now, this chart below tells you everything you need to know about Twitter: It plots the 2017 consensus revenue forecast (red line) against Twitter’s stock price since the IPO. This is a good illustration of the trend of growth expectations for the company. In early 2015, analysts expected over $5 billion in 2017 revenues. Now they’re forecasting under $3 billion. That red line needs to start going up. Soon.
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