Yeah. The simple part of the story is that Twitter’s revenue plateaued in 2015, and since then it’s been doing pretty well in terms of bringing money in. It just doesn’t compare well to the incredible returns of other big tech companies. In the first few years revenue was almost doubling each year, then it hovered at $2.2, $2.5, $2.4 (billion) up to 2016. Then it got back to steady growth; $3, $3.4, $3.7, $5
. Yet as its revenue increased steadily from $3.4 to $3.7 between 2019 and 2020, it’s net profit went from $1.5 to -$1.1. That’s where things get complicated.
It’d be practically impossible for a company to see a negative $2.6 billion shift in profit in a single year while seeing an increase in revenue, unless it was doing something nuts like trying to build a new company within a company. And Twitter wasn’t.
You can see in its
2020 SEC filings on page 41 that it had increased costs between 2018-2020, but nothing dramatic. Research and development increased from $554m to $682m to $873m. Sales and marketing increased from $771m to $913m, and then pulled back to $888m. As a % of revenue, they spent less on sales and marketing in 2020 than they did in 2018. The overall cost of revenue increased from 32% to 33% to 37%, bringing together admin, sales, marketing and R&D, with most of that coming from R&D.
It’s just a couple of exceptions that made their most commonly reported figures in 2019 unusually high (from the tax deferment) and figures in 2020 unusually low (from the lawsuit payout). If you strip those out you just have a company tha
t struggled to turn a profit for the first 5 years, then did pretty well, and then struggled a bit during the pandemic, like most closely linked to the advertising space.
Clearly there was bloat, mismanagement and underperformance. But it wasn’t a disaster. It wasn’t a financial basket case. That’s just a misreading of the essential facts, and getting wrapped up in the hype.
@shamans
