back to article Has the world reached PEAK TWIT? Supplies of new Twitter users are drying up

Twitter finished off fiscal 2014 with a ripper fourth quarter in many senses, during which it doubled sales from the previous year - but the microblurt-based ads site gained fewer users than some investors hoped for. On Thursday, Twitter reported revenues of $479m for the three months ending on December 31, a 97.4 per cent …

  1. Anonymous Coward
    Anonymous Coward

    Have a cigar

    So while the big investors are lighting cubans with large-denomination bills, the company accountants are (publically at least) looking seriously worried about a lack of bottom-line 'profits.'

    Sounds a lot like the movie industry!

    1. NoneSuch

      Re: Have a cigar

      Half the users (or more) on Twitter are secondary or fake so they've been without new users for some time now.

      Their problem is they can't monetize smiley faces.

    2. Charlie Clark Silver badge

      Re: Have a cigar

      The story sounds an awful lot like lowering the lights and putting on soft music prior to selling yourself: Twitter is looking for a buyer that might want to plug-in its admittedly attentive if vacuous user base into something bigger.

      I'll guess we know more once Facebook starts competing with What's App: How will Stephen Fry, Lady Gaga, etc. be able to resist a bigger audience?

  2. Mark 85 Silver badge

    Why would the accountants look worried? They're the ones funneling the large bills for cigar lighters. Creative accounting and probably very much like the movie industry... or maybe a bad sequel.

  3. Not also known as SC

    Stupid question

    Could someone explain what Twitter is losing money with? Surely their servers cannot cost $2bn (revenue + loss for the year) to run and support? I know the article mentions accounting tricks but $2bn is a lot of money* to account for.

    *Compared to my salary.

    1. Justthefacts

      Re: Stupid question

      Twitter is actually an unsuccessful poorly managed, small ads business.

      Their income is customers taking out advertising slots. That business is boring, staid 19th century and highly labour intensive for the income generated. Day-to-day operating It's a dead trees industry, and the business model failed 20 years ago as there is little profit in it. There is essentially no scaling to the business - it takes 10 people to negotiate & take 1000 ads, 100 people to take 10000 ads and so on.

      Apart from cost of paper (very small), how are they different from the Classified magazines you used to get in newsagents? Which all went broke, despite that their buyers actually paid money for the physical magazine that more than covered the cost of the paper?

      The IT angle just distracts the management and investors from correctly focusing on their core business, which is having sales & marketing making pitches to potential advertisers, and trying to keep call-centre staff to stay longer than 3 months at minimum wage. The IT angle is just p*ing money down the drain, it doesn't add a penny to income.

      Of course you can make a living this way (see El Reg). But that's all you are doing, keeping yourself fed - justifies a PE ratio of maybe 7 on the shares. Anything else - just don't let the hype make you lose focus on core business, which is RUNNING SALES AND MARKETING and paying them as little as you can get away with.

      Twitter actually SHOULD be making a packet by doing an Enron - paying their bonuses in "Twitter share options". That would actually be a viable business model


      1. Ant Evans

        Re: Stupid question

        I thought 21st century advertising happened through media buying. In the unlikely event Twitter is trying to do this retail, then they deserve what's coming to them. Media buying might itself be labour intensive, but that's not necessarily Twitter's direct problem.

        My very brief experience of Twitter is that it's labour intensive to use. Why would I spend all day sorting through a garbage tip, when I can just buy food in a shop?

      2. Michael Wojcik Silver badge

        Re: Stupid question

        That business is boring, staid 19th century and highly labour intensive for the income generated.

        Agreed, but still - $1.5 billion in revenue and they can't come close to making a profit? $2 billion in costs? Even EBITDA is only $100 million, or a margin of around 7%? For a company that's nearly nine years old? What are they spending all that money on?

        I suppose I could read their statements and whatnot and figure some of that out, but I suspect it would be too depressing. I'm not holding any Twitter stock, as far as I know (I don't pay attention to everything in the funds), so I don't have any stake in it; but I'm weary of these advertising-and-magical-thinking social-networking firms.

  4. Securitymoose

    Something is wrong

    I would love to be in charge of that lot. Somebody is milking it, and needs to be removed. Same with Wikipedia - how can they not make a profit when the overheads are minimal?

    1. Rol Silver badge

      Re: Something is wrong

      I've been searching for a lead on how the server industry treat their hard drives from an accountancy perspective, but haven't found anything informative, thus far.

      Hard drives must surely be one of the biggest costs for a company like Twitter, but how do they write off their value?

      Prudence would suggest they are written off in their first year, despite having a life of about four years or so. Their value on the open market after one year of gruelling use on a server wouldn't amount to much and so the entire cost would hit the profits for the first year.

      As Twitter is expanding and hoping to greatly expand I imagine year two sees many more hard drives being bought and similarly posted against that years accounts.

      If what I am guessing is right, perhaps next year will show some good profits.

      Happy for some insight on this topic, if there are any in the industry who know what their accountants are up to, or indeed accountants who frequent these pages.

      1. Anonymous Coward
        Anonymous Coward

        Re: Something is wrong

        "Hard drives must surely be one of the biggest costs for a company like Twitter, but how do they write off their value?"

        Think how you'd do it. You'd capitalise the up front costs of a new DC, or a large expansion of racks including the HDDs, but then the replacement ones you'd treat as a revenue expense because individually they'd be below the de minimus for capitalisation in most companies, because they're only one component of the value creating asset (even at blade server level the HDD is a small value, replaceable part. And because once you're up and running for more than a few months, the HDD replacements will settle down to a steadyish renewal cost (assuming no bad batches of HDD).

        But, having said that, HDD's will be a tiny part of the costs of web services. The biggest bill is the capital data centre build (including land, civils, electricals, racks, servers, UPS, accomodation, security etc etc), and the biggest operating cost is the energy bill (servers, facilities, air con to dump the server heat), and possibly (depending on the business model) the data and comms connection charges.

  5. The last doughnut

    Like many things in our wonderful modern world, the financials are out of touch with real world economics. I'm sure Tim Worstall would agree?

  6. David Pollard

    Obligatory xkcd

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