
Twitter’s stock falls toward IPO-level prices - zhuxuefeng1994
http://techcrunch.com/2015/08/03/twitter-collapses-5-tumbling-toward-ipo-level-prices/
======
tinco
It's just the delusion of wall street. They expect hockey stick growth figures
from a single product company that clearly already dominates their niche. Even
though most people feel Twitter is declining, it's actually still growing.

The graphic shows the twitter bird in a freefall, but what's actually
happening is the public markets traders worst nightmare, the bird is just
flying straight on.

~~~
thetrb
I wouldn't call it a delusion. Investors were valuing Twitter at close to $40
Billion because they were expecting Facebook-like growth. Now that they don't
see that growth they currently value it at around $20 Billion. Based on simple
things like P/E that's still a good number.

I still think there's a good chance of a turnaround for Twitter. It's widely
used by the media and celebrities. If they come up with a better way to
consume this then I think they have a good chance of getting back to their
recent highs in their stock.

~~~
theseatoms
I agree. It's the opposite of delusion, quite grounded in reality.

And I agree with your second point. Their current level of network effect /
lock-in should give them plenty of runway to find new ways to grow and/or
monetize.

~~~
boomzilla
I am not so sure. They actually have negative earning, GAAP-wise, caused by a
huge amount of stock based compensation and acquisition costs. Even with all
these spending, Twitter is not showing any growth. Twitter will lose more
engineering and product talents as the stock price goes down. They can't also
use stock to acquire growth either. It's a dead spiral. Twitter has been
leveraging Wall street goodwill and hype but I think it's the start of the
end.

~~~
theseatoms
I wasn't aware of the extent of stock compensation costs, but I do realize
that they haven't turned a profit.

You don't deny the power of the platform, network, and brand themselves,
right? I forget the buzzword for this type of non-fungible, unique asset. I
guess we just wait and see what sort of valuation it fetches in an
acquisition.

~~~
boomzilla
No I am not denying the value of the brand and the network, but I don't know
how to valuate these assets. I don't see how they are worth 20B, but maybe
some others do. In terms of the engineering platform, I am quite confident a
similar platform can be built with much less than 1B. Twitter platform is not
that special in terms of engineering challenges.

------
staunch
Twitter needs multi-level threaded discussions and "sub-tweets" that are more
than 140 characters. Right now Twitter is an exercise in frustration. It takes
so much work to understand other peoples' views that few bother, leading to
endless misunderstandings and fights.

A miscommunication platform. #DescribeTwitterIn3Words

~~~
untog
The character limit is part of the usefulness in Twitter, for me - make your
point. Be succinct.

This is why I hate people doing things like tweetstorms.

~~~
jljljl
Character limit also means that the views that make good sound bites have a
better chance of winning vs more nuanced views. Succinctness is good, but it
isn't necessarily the same as 140 characters

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code4tee
...and there's really nothing stopping it from falling much much more. There's
really no justification for the value placed on this company--or many other
tech companies that have interesting offerings but haven't actually managed to
create a real business.

TWTR will likely be marked as a turning point for the 'tech bubble 2.0' when
tech companies get put in two camps. Those that are real business and those
that are not. I don't think we're in a 1999-esque tech bubble but there are a
lot of hyped up companies that aren't real businesses that need to get washed
out of the system.

~~~
austenallred
So a company that does $2B/year in revenue isn't a real business?

Overvalued, maybe. But that's real cash.

~~~
loganfrederick
But their net income is around -$600 million annually.

You can have a business that tells people that if they give you a dollar,
you'll give them $1.50.

Twitter right now (oversimplified) generates $2 billion in revenue by giving
away $3 billion. Of course they could try tightening their financial belts,
but that'd probably hurt their growth.

~~~
beambot
They could recoup $600M pretty easily.... in employee salaries alone if they
relocated out of San Francisco.

------
akrymski
Twitter's valuation is down to $19B, which is what Facebook paid for WhatsApp.
I wouldn't be surprised if Facebook would make a bid for Twitter at this
price, even though FB+Insta combo seems to be killing them.

I can't believe Twitter's product people are so asleep at the wheel. The
success of Instagram shows how consumers want to consume content. If twitter
was as simple as Instagram (and got rid of its silly 140 char limit) then it
would have a chance of going mass market. You can already tweet photos,
videos, but not more than 140 characters? Really? You can't have threaded
comments? It's a mess, and the management is much too afraid to change the
product. Zuck made many changes to FB over the years with users revolting at
every stage. Twitter stood still. It's obvious now which strategy is the right
one. Twitter needs to grow up and get serious if it wants to grow beyond its
niche.

------
chollida1
[https://news.ycombinator.com/item?id=9961314](https://news.ycombinator.com/item?id=9961314)

[https://news.ycombinator.com/item?id=9937778](https://news.ycombinator.com/item?id=9937778)

I've been pretty negative on Twitter for a while. I just don't see what they
offer to justify their valuation.

They have an estimated P/E of 87 and yet they aren't growing. On the other
hand their short interest is growing:(

TweetDeck is awesome. Their real time news is awesome. Their main website is
awful. It's like a worse myspace.

Twitter, find a way to clean news data and deliver it to me in under a second
identified with sentiment and stock ticker and I'll pay.

~~~
sagarun
I thought P/E is calculated for companies with a positive EPS. Twitter is
loosing money. Not sure how you came up with P/E of 87.

~~~
chollida1
> I thought P/E is calculated for companies with a positive EPS. Twitter is
> loosing money. Not sure how you came up with P/E of 87.

Short answer I got it from my bloomberg terminal.

Long answer.

P/E is different from estimated( or forward) P/E. See
[https://en.wikipedia.org/wiki/Price%E2%80%93earnings_ratio](https://en.wikipedia.org/wiki/Price%E2%80%93earnings_ratio)

------
dimbirol
One thing I've noticed with celebrity accounts: an increasing amount of tweets
is just a link to a new instagram post.

A tweet gets maybe a few likes and retweets, but the linked instagram post has
500 likes & 25 comments within 30 minutes. That's quite alarming!

e.g:
[https://twitter.com/taylorswift13/status/626084866631667712](https://twitter.com/taylorswift13/status/626084866631667712)
18k likes on twitter, 866k likes on instagram.

let these numbers do the talking.

------
pitchups
The reason both Twitter and Google+ are struggling to grow their user base,
IMO is because many folks I have talked to - find both products difficult to
understand and use. Surprisingly most normal folks don't really get what
"follow" means, and the slightly arcane terminology of twitter. The learning
curve is a bit steep - and most users sign up, hang around for a while, don't
really invest in discovering and following the right people, and soon just
give up and never come back. The same is true for G+ - as in both cases your
experience is defined by who you follow. Facebook got this right - as the
simple concept of a "Friend" request translates perfectly to the real-world
analog of making friends. While Follow is an abstract, invented concept with
no real-world analog. That together with the torrent of noise and information
on Twitter, and no good tools to filter and manage the feed efficiently, make
Twitter a tough product to use even for experienced users. I personally love
Tweetdeck - and have managed to tame the newsfeed with lists etc - but it is
still tiresome and inefficient.

~~~
otis_inf
> Surprisingly most normal folks don't really get what "follow" means, and the
> slightly arcane terminology of twitter. The learning curve is a bit steep -
> and most users sign up, hang around for a while, don't really invest in
> discovering and following the right people, and soon just give up and never
> come back.

Question, do these people who find it hard to grasp how twitter works have
facebook accounts? As facebook is way more complicated than twitter is (which
is just a textbox, a submit button and that's basically it).

~~~
pitchups
Yes, every one of these folks - mostly friends and family - has a Facebook
account and are active users of Facebook. It is not the simplicity of having a
textbox and a submit button that matters in this case - they all know how to
post a tweet. It is that once they do that - nothing happens. In FB - a post
often immediately gets a reaction - a like or a comment - even if they have
only a few friends. The stuff you post on FB is not as transient - while your
Tweet most likely disappeared in a few seconds from the timeline of your
followers.

------
kumarm
Company that never made money, Priced at 12+ times Sales, little Growth. Stock
falling?

While companies are making real money, Twitter like companies are creating the
Bubble chatter this time.

------
uptown
Part of Twitter's problem is a mismatch between people who hold the largest
megaphones compared to people they need to stick-around if their user growth
is to continue.

People with millions of followers probably don't need to interact with any of
them, but will maintain or grow their follower count through whatever
celebrity got them their original following. They'll likely get retweets and
replies to virtually everything they post - but may not even read any of it.

On the other side of the spectrum, people just starting out on the platform
probably have few or no followers, nor are they likely to immediately find the
people posting about content they want to follow. It's like walking into a
party where everybody is already 3 or 4 beers deep and trying to join the
conversation.

Twitter seems to think the answer to this problem is to encourage you to
follow Barack Obama or Katy Perry, which seems like a really stupid suggestion
if you're trying to show a new user that they can use their platform to
establish networks of people interested in similar things that keep you coming
back.

Most users will never get any personal reply from either Barack Obama or Katy
Perry ... so maybe Twitter should research how to push new users towards
people more-likely to reply. Once you find people you can corespond with on
their platform, it establishes a natural hook to encourage you to return.

By lining up virtual "nobodies" with the most famous celebrities on the planet
they're setting new users up for disappointment unless those users invest time
finding the right people to interact with.

~~~
Yhippa
Another thing I'm thinking of is how authentic are the users? Is Katy Perry
really Katy Perry or is she a team of ghost writers? That really turns me off
about Twitter. Likewise I'm very impressed when the actual account owners
tweet but who knows, It still might not be them.

As for new user onboarding one thing that I think could work is if you get
them to start searching for interests through their search functionality.
That's how I found a lot of interesting accounts.

~~~
uptown
Twitter purports to be an advertising company. Can't they use some of that
retargeting tech to suggest potentially interesting users to follow rather
than sell stuff?

------
vegabook
This stock appears to be the high-beta canary-in-the-coalmine for the rest of
tech.

Tech in general has been cut a lot of slack in the past 10 years by the
market. Anyone with a dream and a disruption pitch was given the benefit of
the doubt. Now the sector is having to compete like the rust belt. If you've
got a flaw in your management, your busines plan, your execution, or you have
a gap in your barriers to entry, you're being punished like the rest of 'em.
Twitter Exhibit A. It has screwed up on monetization, too free for too long,
too many hesitant initiatives, not enough killer instinct ("not enough Zuck",
or if you like, "not enough Bill Gates"). It's the weak giant being taken
down, SOTC-style. It's 2015's Lotus Development Inc. But it's not alone: AAPL
stock performance is also being cut no mercy here on even a minor shipments
hiccup. AAPL is looking IBM-circa-1990. At that time IBM was the only non-oil
company in the Fortune 500 top-5.

It doesn't help that Chinese demand is tanking - the tech waterline is going
downwards and the shipwrecks are starting to show.

------
otis_inf
IMHO a lot of people stop with twitter because they don't get the right social
circle going: they follow a bunch of people but don't gain much followers and
who they gain aren't really engaging in any activity, so it feels as if
they're posting text in a document they store on their own computer: no-one
really sees it nor cares.

Twitter has the downside that it's really 'in the moment': stuff that's
tweeted now is interesting now, not tomorrow. This gives a problem with people
who open twitter occasionally: they're likely not on twitter when something
happens IRL and everyone's tweeting about it. With Facebook this is different,
as things aren't really 'in the moment', or at least aren't depending on that
that much: it's perfectly fine to read someone's post 2 days after it's been
posted.

------
jameslk
I'm surprised Twitter's stock has floated as long as it has. While Facebook
has diversified into different, successful, products and platforms, Twitter
has stagnated, fumbled around and underwhelmed. Much like Yahoo. Perhaps I'm
just a bit cynical and biased against Twitter though. I find the mostly
arbitrary 140 char limit, 6 second video communication concepts a cute gimmick
that will eventually tire.

I wouldn't be surprised when the tech bubble bursts, these social media
experiments will be the first to fall back to earth. Any significant slashing
of advertising budgets (due to e.g. macro economic affairs) will seriously
strain the revenue model (and investor patience) of these services.

~~~
marquis
YMMV? I have much more business engagement on Twitter than Facebook. FB could
disappear tomorrow for all my business cared, but I would certainly notice
Twitter not being around.

------
ibejoeb
Revenues are up. Losses are down. I might buy some discount Twitter...

~~~
jusben1369
You have to ask yourself what _drove_ that initial valuation that you're now
being "cheaply" That initial valuation was driven by the belief that they
would be aggressively adding new users. It wasn't based on them doing a great
job of extracting a better profit from a fairly static install base.

~~~
ibejoeb
I agree. I understand wall street is looking for massive user growth. That
seems to be a wild misunderstanding of what Twitter is, though.

I'm in the same camp as a few other commenters. It seems that Twitter's value
is really in being a broadcast platform for big names. I don't think there is
a viable contender out there. That population is finite, and "followers" can
be passive consumers. I'm not sure that there is going to be much growth in
the user base, and I think that's a natural property of twitter. I think it's
still valuable and can be relevant for quite a long time.

------
blizkreeg
The whole point of Twitter is to know what's going on in the world of people
and things you're interested in, BUT, and perhaps more importantly, IMHO
foster conversation. The latter is completely opaque to someone who is new to
the service. Conversation threads are buried under a click/touch and even
then, it's hard to parse it.

I think the best thing Twitter could do is to downplay the importance of
favorites and retweets (though they are important for growth but are a proxy
for ego boost for the average user and not easy unless you're popular or
important), and make the replies and conversations to a tweet/news story more
prominent and "always-on" (with some limit of course, lest you see 500 replies
to a Britney Spears tweet -- but then again, if you're following someone like
that, may be you want to know what people are saying about it).

Engage more people in the conversation and surface it better. New users will
have a much better grasp on what Twitter is if they do this.

My 2c.

~~~
MrBuddyCasino
Fully agree - it took me a while to figure out "conversations" on Twitter, its
very un-intuitive.

~~~
glomph
Honestly I still don't understand them. They are not always in chronological
order and their seems to be no logic behind the way tweets are grouped.

------
Domenic_S
One of the disappointments for me about Twitter has been the lack of
engagement. Many (most?) people use it as a broadcast medium. The longest,
most engaged threads I see are (big surprise, internet) trolling and fighting.

Here's an idea: gamify engagement for verified accounts. If you're a big
enough personality to have a verified account, you must @reply to, say, 1% of
your followers before you can write another naked tweet. Or you can buy tokens
that let you tweet without forced engagement, price determined in part by your
follower count.

For a normie like me, the novelty of seeing your favorite celeb or software
hero or whoever on twitter quickly wears off once you realize they send tweets
once in a blue moon and never reply. You might as well be on their mailing
list instead.

~~~
eterm
Celebrities are only on Twitter because it is a broadcast mechanism. It is
precisely the unidirectional nature of Twitter that meant it caught on for the
media industry.

Without that it would be nothing.

~~~
Domenic_S
But we don't need another mechanism for celebrities to beam their thoughts
into our heads, and I think that's become pretty evident by the slowdown in
user adoption. Twitter could differentiate by being the place for celebrity
_engagement_.

Clearly some exceptions would have to be made, e.g. for news agencies and
such.

~~~
jerf
Celebrity engagement is essentially impossible. The numbers don't work. No
celebrity can "engage" with a million people when there's only 86,400 seconds
in a day. If you don't like the "million", put whatever number you like in
there that is still comfortably greater than the number of seconds in a day.
Engagement doesn't scale.

You can create the illusion of engagement, but that's all.

Note the lack of the word "Twitter" in the reply up until this sentence. It's
not even about Twitter. It's just generally impossible.

~~~
erehweb
Correct. However, the illusion of engagement can be powerful. e.g. Obama and
Clinton campaigns were able to use dinner w/ candidate or famous supporters as
a fund-raising lottery tool. Would people engage more with Twitter if they
knew there was a small but real chance of getting a non-canned response from
celebs?

~~~
rhino369
But isn't that how Twitter works. There is a small chance the celebrity will
tweet back at you.

~~~
rmxt
Correction: There is a small chance that the celebrity/politician's publicity
agent will tweet back at you. There is an even smaller chance the celebrity
will tweet back at you.

I think that this is part of the reason why it's really the "illusion of
engagement" and not _real_ engagement. The elite will perpetually be separated
from the masses... the specific medium may change, but the separation will
persist.

~~~
jerf
But I think it's again worth highlighting that this "separation" isn't because
they're in their ivory towers, but sheer simple math. _Nobody_ can "engage"
with millions of people. It's part of why Internet flash mobs destroying
people's lives is something we need to figure out how to get a handle on
culturally, and start stigmatizing, because nobody can "engage" with a mob to
defend themselves. It's why even if you're only "Internet famous" and you're
running a blog with thousands of readers, you can't afford to spend even a
second a day on each of your readers. It's not really an "elite" problem.

------
rgejman
I predict that Twitter revenue will grow as iOS 9 is released. iOS 9 will
cause mobile advertising to undergo a paradigm shift as app-centered
advertising becomes more important than website-based advertising. This will
lead to increased ad dollar spending on Twitter.

------
sandworm101
Twitter hasn't done anything wrong. They didn't drive the price up. Twitter
doesn't set its stock price, at least not after the IPO. From that day it was
in the hands of investors. They drove up the price. They should only blame
themselves when it falls back.

------
blakeja
Wasn't there some speculation that twitter itself had some bots auto-
generating fake users, sending fake tweets, etc?

Even if they are not doing it, others certainly are for various reasons. I
have always wondered what the true user count is.

------
cordite
What happens if a stock in a tech company goes down to low value? Do they owe
money back to the brokers that made the IPO?

~~~
jusben1369
Nothing whatsoever happens. It's just the market doing its market thing.

~~~
nicksergeant
Not necessarily true - if the value gets low enough it'll get the boot from
the NYSE.

~~~
cordite
But what does that mean to the company and its employees?

I bring this up because of the stock market crash having such ridiculous
effects from the great depression era. Though I may just be uneducated on what
really happened.

~~~
prewett
The stock price need not matter at all to the company; the stock price is
completely independent of the company. Once the shares are sold, the company
no longer owns them, so whatever happens, happens, just like whenever you sell
anything else. If a farmer sells some corn, and the price drops drastically
afterwards, it makes no difference to the farmer.

However, the owners of the company might get together and force the board of
directors to do something, like fire the CEO. The CEO, who probably has a lot
of compensation as stock or options, would like price to be higher, so he is
likely to take actions to get the stock price higher. Such actions may or may
not be wise, and may or may not be helpful for the company. Frequently they
aren't...

~~~
code4tee
"The stock price need not matter at all to the company"

Tell that to the employees holding options. Those options are likely worthless
if the stock price goes down.

------
jusben1369
Now if you were Jack and you were semi-entertaining trying to be co-CEO do you
think events post earnings would absolutely put the nail in the coffin in your
mind of being Twitter CEO? I have to believe you'd be like "Who wants this
job?!" realizing just how far and long the road ahead is. They're basically
Yahoo now with a strong core base of users but little growth prospects.

------
stephengillie
Was there some trigger or cause for this? Did something happen over the
weekend to change investor feelings?

~~~
shepardrtc
A lot of tech companies are down right now. Twitter isn't the worst, but its a
fun target for people.

~~~
itg
No, in fact there are also a number of tech companies up right now because
they are showing growth. Meanwhile twitter has been flat. The investment
community didn't decide to gather around and pick on twitter because it would
be fun.

edit: apparently people didn't take too kindly to pointing out that not all
tech companies are having a downward trend. Here are tech companies that are
up compared to one year ago: $FB, $GOOG, $MSFT, $AAPL, $AMZN

------
drivingmenuts
And here's me still trying to figure out what the hell it's good for ...

------
iask
Do we need better initial valuation standards?

------
shepardrtc
Last year around this time, Cramer was talking about how Twitter would hit $90
before the end of the year.

~~~
hyperbovine
"!cramer" has been a successful trading strategy of mine for over a decade.

------
anon3_
Twitter may out of steam, but the days where being a machine fueled by
runnaway hype IPO's are not going to go anywhere.

I don't think twitter's discourse ever helped anyone, any group, or any
society.

Can someone brighten my day and tell me a way twitter has helped us, somehow?

~~~
jusben1369
Arab Spring (what happened post Arab Spring isn't on Twitter)

------
coldcode
It's not a business, it never was worth even the IPO value. You are trying to
make a business out of 140 character text messages which is pretty silly.

------
smegel
Well if a smartphone app called Yo got funding, why not Twitter?

