The Strategist

Twitter flies up

03/09/2018 - 06:07

Twitter is perhaps the most popular microblogging service in the world. This social network allows exchanging short (no more than 280 characters) messages.

At the end of 2017, Twitter had 330 million active users. One of the Twitter stars is US President Donald Trump. In an effort to communicate their thoughts directly to the world because of pressure from the media and the dissemination of false news, the current head of the White House has become on the main newsmakers of the social network.

The company was founded in 2006, and in 2013 it conducted an IPO at a price of $ 26. Shares of Twitter rose to $ 70 in the first months of trading, but due to unimportant financial results in recent years, their quotes have steadily declined. This turned into a trend when it became clear that the company was not able to increase the number of users. Against this backdrop, the price per share fell below $ 14.

However, over the past 12 months, Twitter has reported a two-digit increase in users. This leaves some room for a hope for the return of interest in this format of the social network. The main catalyst for the influx of users was the arrival of Donald Trump, who decided to use Twitter to fight the pressure of pro-democracy media.
Also, Twitter is popular among crypto anarchists, who like to twit about crypto currencies and blockchain. The relative anonymity of the platform allows users around the world to exchange unregulated information.

The inflow of users to the microblogging platform has increased, since the topic of crypto currency has become widespread, including with the help of the media.

In addition, the company's management is consistently working to expand Twitter’s capabilities and functionality for users. Over the past few years, the social network has signed contracts with various sports associations, primarily with the NBA, MLB, NHL and NFL. Besides, MMA broadcasts fights via Twitter.

The growing popularity of e-sports is also in the sphere of the company's interests: the largest championships for Dota 2, CS:GO, Overwatch and LoL are broadcasted via its platform. Online broadcasts are gradually becoming one of Twitter’s main bets, as the company is determined to create added value for both old and new users of the social network.

Competition with Facebook was very painful for Twitter’s development, but against the background of news about the spread of Russian propaganda on the Facebook platform and a slight weakening of users' interest in the world's leading social network, Twitter began to revive. Now Facebook changes the principle of issuing in the newsfeed, as a result of which the users' friends, not advertisements, will receive priority.

In this situation, Twitter is a good alternative for advertisers, as the number of its users is growing well, and the company offers them promotional products.

Financial indicators of Twitter are improving as the company develops. Revenues have recently been growing at an average of 50%. After three-digit figures in the first few years, their growth rates in 2016 slowed to 14%, and in 2017, even decreased by 3.4%, to $ 2.4 billion. In addition, over the past year the company recorded a loss of $ 108 million.

Revenue for the fourth quarter of 2017 added 2% to $ 731.6 million, but, most importantly, the company made a profit of $ 141 million for the first time in its history. In addition, Twitter managed to get in the black thanks to improved operational efficiency. Operating expenses of the company decreased by 20%. Sources of profit were advertising revenues (86.4%) and provision of platform data for analysis (13.6%).

The company has a small debt on its balance sheet, unlike its competitors Facebook and Snap. The ratio D/E is 35.5%, which is optimal for the company.

The main risk for Twitter is the inability to build up an audience and profit due to competition with other social networks. The Facebook audience is almost seven times larger, and the number of Snap users is also growing. Competition for users is intensifying, and any wrong operating decision can provoke their outflow and withdrawal of advertisers.

Other risks include measures to regulate social networks after scandals involving interference in elections. The success of such new Twitter services as video streaming prompts at the company's ability to withstand competition.