How Can Twitter Not Be Profitable

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Something keeps bothering me about Twitter losing money. The company claims 330 million active monthly users. If they were overly optimistic, or using a very generous definition of “active,” lets cut that in half to 150 million active users each month. Now, if they could earn just $1 per user, that would be $150 million in revenue per quarter. And, that is about right. The company recently reported $595 million.

But, it has huge operating losses. How can that be? What are they spending all of that money on?

twitter stock losses costs

The most recently quarterly loss was $80 million. Now, I know that corporate financials aren’t all that straightforward, but that means that Twitter spent $675 million in that same quarter.

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Stock based compensation was $151 million for the quarter. In other words, if they just cut back on whoever is getting all of these shares, the company could be profitable. Am I reading this right? I mean that means their stock-based compensation for the year should be something like $450 million!

The Twitter website says that they have 3,800 employees. By my math, that’s $40,000 in stock-based compensation for every employee! (I know it isn’t equally divided, but you get the point.)

Where I come from, revenue growth is way better than cutting expenses, and I stand by that, but in this case, I’m starting to wonder if Twitter really needs to be losing so much money.



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