Eden Chen

Commentary on Twitter and Their 30% Earnings Spike

Eden Chen July 30, 2014

Commentary on Twitter and Their 30% Earnings Spike

Sometimes you’re flush and sometimes you’re bust, and when you’re up, it’s never as good as it seems, and when you’re down, you never think you’ll be up again, but life goes on. -Fred Jung in the movie Blow

After Twitter went public they experienced the typical IPO tech hype machine. Twitter’s movement is much like another company’s… wait for it…. Facebook.

After Facebook’s IPO it dropped from $40/share to $20/share on mobile monetization concerns where it stayed for about a year before it began its year long ascent to $75 when those concerns were alleviated.

In much the same way, Twitter investors took the stock down 40% this year on concerns that there was no user growth. Today, Twitter is up 30% on user growth increasing faster than expected. Investors obviously have no idea what drives user growth. Let me give you a clue — Twitter has become a commentary tool, and what better to comment on than a much more successful than anticipated World Cup?

Although as noted in my last blog post, I’m not the biggest long term fan of Twitter, I had been telling people for the last month that Twitter was a great short term investment because it would likely follow the exact same extremes that Facebook did.

Outside of the founder story, why don’t I love Twitter? It just seems intuitive to me when I get on Instagram. I put up a picture and I get multiples of more interaction than Facebook (keep in mind Instagram was only purchased for $1 billion and Twitter is worth $25 billion). I look at articles that have 200 Facebook shares and 10 Twitter tweets. I look at my Medium reference traffic and I have 400 views driven from Facebook and 1 from Twitter. And I’m an active Twitter user.

Investors rightly point to the problem of user growth for Twitter. People in today’s culture just don’t want to read or write anymore. Heck, I didn’t want to write this. They want something faster. Videos and images. 24 pictures of cute dogs. Spoon fed reading.

Unfortunately user growth and the trajectory of a company are not linear but are subject to the extremes and vicissitudes of the market.

Weekly musings delivered to your inbox