“How?” may be the single biggest question asked of Twitter following the latest news of the company’s financial drama.
How can Twitter be one of the most popular social media sites in the world and yet make zero profit? How can Twitter have lost a whopping $2 billion since launching in 2006? How is Twitter going to make money when all signs seem to point to impending doom?
No, your eyes didn’t deceive you just now. Twitter, that Twitter, is out $2 billion in a twist of events that nobody (not even former Myspace users) saw coming.
— New York Daily News (@NYDailyNews) March 2, 2016
“Since our inception, we have incurred significant operating losses, and, as of December 31, 2015, we had an accumulated deficit of $2.09 billion.
“Although our revenue has grown rapidly, increasing from $28.3 million in 2010 to $2.22 billion in 2015, we expect that our revenue growth rate will slow in the future as a result of a variety of factors, including the decline in the growth rate of our user base.”
The above is a nice summary of all the answers to the questions being asked as to how and why Twitter finds itself in a multi-billion-dollar hole. In case you were too stunned to catch what was being said, allow me to break it down for you.
- Just making Twitter operate like Twitter cost the company loads of money.
- The site’s revenue went up from $28.3 million to $2.22 billion over a five-year period. However, because of costs and slow growth, earnings were virtually erased.
It’s that last point that could ultimately serve as Twitter’s undoing. Such problems have forced previous internet gathering spaces to become defunct as savvy social media users chose to congregate on newer and hipper sites.
The one thing Twitter does have going for it is that it’s a hub of information. If you want to know the latest events happening anywhere in the world or what a significant portion of a population is talking about, you check Twitter’s trending topics. Although Twitter has promoted ads, they seem to have neglected the benefits of having a paid service.
For instance, YouTube put together a partnership program with its most popular members that has generated quite a lot of money. If Twitter were to put together a similar type of “real-time” engagement program for its most influential users, that could help stimulate profits.
It’s going to have to do something; the news has been lackluster to outright terrible since the company’s IPO went public in 2013.
The New York Daily News writes that Twitter actually had $400 million prior to its IPO launch. In 2015 alone, the social media brand lost $500 million. As trends go, Twitter may be on track to continue to bleed money in the years to come. Even as Twitter scrambles for ways to dazzle its user base and bring new users aboard, there is one area of admitted risk that just might stun observers.
To quote the New York Daily News, “The shareholder document actually admits under it’s “risks” section that new users might be confused by the product. Despite our efforts to reduce barriers to consumption, people who are not out users may not understand the value of our products and services and new users may initially find our product confusing,’ reads the document.”
The idea that billions of people “just don’t get Twitter” or its value 10 years after it was introduced to the world is just mind-boggling. It’s an admission that could prove more problematic than newer, more competitive platforms. Twitter is running out of time to make its case, so perhaps they need to make the platform less confusing sooner rather than later.
Billions of dollars are on the line.
[Photo by Andrew Burton/Getty Images]