How Can Twitter Not Be Profitable
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?
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.