Somebody Better Buy Twitter Inc (TWTR) Soon

twitterLawrence Meyers:  It was only a matter of time before the new clothes fitting the social media emperor named Twitter Inc (NYSE:TWTR) were exposed for what they were.

buy Twitter

Its fourth-quarter earnings report was a dud, led by the awful news that it posted a sequential decline in monthly active users (MAUs), from 307 million to 305 million. MAUs were still up 6% year-over-year, but it is sequential numbers that matter more. Twitter is not a seasonal business. It’s supposed to be on a consistently upward trajectory.

The numbers themselves, as far as financials, were mixed. Fourth-quarter revenue was $710 million, which does represent a very robust increase of 48% year-over-year. In fact, if we cancel out currency effects, revenue would have been up 53%. Ninety percent of this revenue came from advertising ($641 million) and of that, 86% came from mobile advertising, much like Facebook (NASDAQ: FB).

The other revenue source, data licensing, provided $70 million in income, also up 48%.

But that’s where the good news ends. Twitter cannot seem to counterbalance the revenue growth with more efficient expenditures, because the company lost $90 million in the quarter and a whopping $521 million for the year.

Somehow, despite a 50% revenue increase for the year, Twitter only improved its losses by 10%, or about $50 million.

Which brings us to the big problem with Twitter and Facebook: neither of them solve any problems. The world can get along without them, and that’s why I don’t think either are sustainable businesses. Or, if they are, they only serve as digital advertisers. So while CEO Jack Dorsey issued a lengthy letter explaining all the great things that Twitter is up to, none of them seem to be related to finding some other way to monetize the platform.

Now, some advertisers clearly find the platform useful. There are now 130,000 advertisers, up 90% year-over-year. Other companies report that conducting customer service via Twitter is helping their internal satisfaction ratings. Ad engagements grew 153%, thanks to integrating auto-play video, while the cost per engagement fell by 41% for the same reason.

Thus, advertisers are getting more engagement at lower average cost-per-engagement than click-to-play ads.

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