Is Twitter a viable business?

Since its foundation in 2006, Twitter became one of the most useful tools companies have to communicate with their customers. By the year 2014, Twitter was the second most used social network service by companies in several markets.

However, different technology analysts have expressed their concerns about Twitter business viability due to current financial issues that are undermining investors’ trust in the future of the company.

In the year 2012, Twitter had 500 million subscribers who wrote an average of 340 million “tweets” per day. Most of the traffic is generated in highly globalized markets such as the United States (40%), Japan (23%), Spain (7%), England (6%) etc. That same year, Twitter search engine made 1.6 billion searches each day.

Yet, in the year 2015, eight years after its foundation, Twitter Inc. had not yet reached a break-even point (BEP) or the point at which cost or expenses and revenue are equal, even though for the same year the opportunity costs had been paid and capital has received the risk-adjusted expected return.

Twitter financial uncertainty 

Although, Twitter financial statements show annual profits, the uncertainty about its future as profitable business is still unclear. For instance, in the fiscal year 2013, Twitter’s net revenue were US $400 million, its shareholders investments during the same period was US $ 1.16 billion and its brand value was about US$ 8 trillion. Such numbers have made many financial analysts to believe that the company is highly overvalued.

It is important to remember that Twitter’s main source of income is the sale of advertisement spaces within their site platform and the sale of the so-called “promoted tweets”. Therefore investors might be asking:

  • Should Twitter Inc. implement a business model that can help to increase the company’s profits? What alternatives can Twitter Inc. explore in order to improve its business efficiency from a financial point?
  • Which managerial strategies that have been used by other internet social networking service companies’ and that have proved to be successful, could Twitter Inc. undertake as an opportunity to redirect their financial statements?
  • Are Twitter Inc. future financial goals unattainable in the highly competed market of internet social networking services? Should Twitter Inc. consider the possibility of a business “take over” by other technology companies such as Facebook Inc. or Google Inc. in order to survive?

Twitter

Leave a Reply

Your email address will not be published. Required fields are marked *