Twitter Plans Hundreds More Job Cuts as Soon as This Week(bloomberg.com)
bloomberg.com
Twitter Plans Hundreds More Job Cuts as Soon as This Week
https://www.bloomberg.com/news/articles/2016-10-25/twitter-said-to-plan-hundreds-more-job-cuts-as-soon-as-this-week
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People have answered this before, and what it boils down to is: because they took VC money, and then went public. If you bootstrap a business from nothing and grow it on its own, then sustainable growth and stable profit is fine. But Twitter got VC and IPO money with a promise that it would have Facebook-like growth in return. I think the analogy I saw used was that they promised investors a Porsche and instead delivered a Toyota Corolla- it might be solid and reliable, and perfectly fit for purpose, but it's not what they promised when they took that money.
The issue is one simple item: "When you take someone's money, their priorities are now your priorities"
If you can bootstrap your business with 30k and make a 20k profit every month, then why do you need 1 million dollars from investors?
When you take the money, it's just a golden handcuff and ties you to that person for the future. If your business lasts longer than 20 years, that may as well be an additional marriage with kids.
If you can bootstrap your business with 30k and make a 20k profit every month, then why do you need 1 million dollars from investors?
When you take the money, it's just a golden handcuff and ties you to that person for the future. If your business lasts longer than 20 years, that may as well be an additional marriage with kids.
Because your competitor can raise those million dollars, and eventually your 20k profit per month becomes 20k loss per month.
You can build all your imaginary arguments about magical businesses that make 20k profit per month while being self-sustained with holocracy, cruelty free, authentic, organic etc. etc. But the reality is that doing big things at bigger scale requires huge capital. If you are willing to pass up on it, someone else will take it and gladly outspend / outmaneuver your. You will watch as your paid product will lose to a freemium one, and as you will write "our incredible journey blogpost", commenters here will mock you for selling out / giving up.
You can build all your imaginary arguments about magical businesses that make 20k profit per month while being self-sustained with holocracy, cruelty free, authentic, organic etc. etc. But the reality is that doing big things at bigger scale requires huge capital. If you are willing to pass up on it, someone else will take it and gladly outspend / outmaneuver your. You will watch as your paid product will lose to a freemium one, and as you will write "our incredible journey blogpost", commenters here will mock you for selling out / giving up.
I run a bootstrapped SAAS business and I make far more than $20K a month profit and have done so for years. The key is choose a niche that is large enough to make the level of profit you want, but too small to attract VC funded competitors. The sort of market size you want is in the range of $5 to $20 million per year. Big enough to be worth the hassle, but too small to attract the big guys.
This reasoning feels safe for services, and risky for software:
* Big companies start small. VCs will tell startups to find something their tech can make them the best at and grow into nearby verticals.
* Software goes to zero. Academia, side projects, whatever. Either you keep up, and reach some sort of scale that you have a moat, or your risk goes up.
* Big companies start small. VCs will tell startups to find something their tech can make them the best at and grow into nearby verticals.
* Software goes to zero. Academia, side projects, whatever. Either you keep up, and reach some sort of scale that you have a moat, or your risk goes up.
You do have to keep working on the business and innovating. It is not a route to passive income (well not until you retire), but it a very satisfying way to build a business and lifestyle.
The downside is the parties aren’t as good :(
The downside is the parties aren’t as good :(
Unfortunately for Twitter, social networking is not that niche.
Similar story, we should be friends :)
Care to comment on the work/life balance you have?
Care to comment on the work/life balance you have?
Well I work hard, but I live a very good life. I enjoy my work (well most of it as I am not too keen on accounting and taxes). I get to work and live in a very nice (if expensive) part of the world so I have nothing to complain about.
I can say it took me a long time to get to where I am now and I had quite a few detours along the way. I wrote up the history of my business a while back if anyone is interested [1]. Bootstrapping is certainly not the way to instant riches :)
1. https://www.tillett.info/2015/06/24/why-i-kept-my-startup-in...
I can say it took me a long time to get to where I am now and I had quite a few detours along the way. I wrote up the history of my business a while back if anyone is interested [1]. Bootstrapping is certainly not the way to instant riches :)
1. https://www.tillett.info/2015/06/24/why-i-kept-my-startup-in...
Interesting post. As a fellow Australian (actually, fellow computer programming molecular bio BSc who went to La Trobe), I completely agree with your assessment on the Australian startup scene.
Lol
Not enough angels but lots of devils..
Not enough angels but lots of devils..
Thanks for posting that; great work on persevering!
Me too. Hi.
If an entrepreneur is worried about "Work Life Balance", I think he/she is in the wrong business.
If an entrepreneur is worried about "Work Life Balance", I think he/she is in the wrong business.
I see this meme repeated a lot here on HN. Personally I wildly disagree, as I believe sufficient time away from work makes you make the right decisions. Basically I believe that the "work smarter, not harder" meme, while cliché, automatically happens if you invest time in leisure and sleep.
But I don't know! I truly wonder how many businesses have been run into the ground because of a kamikaze attitude to working hours. But I also wonder how many businesses missed gigantic opportunities while the founders were off doing unimportant things like putting their kids to bed. Neither are measurable, as far as I can see.
If anyone has any stats on this, any at all, consider me recommended!
But I don't know! I truly wonder how many businesses have been run into the ground because of a kamikaze attitude to working hours. But I also wonder how many businesses missed gigantic opportunities while the founders were off doing unimportant things like putting their kids to bed. Neither are measurable, as far as I can see.
If anyone has any stats on this, any at all, consider me recommended!
I think you've got this wrong: the big opportunity here is for founders to be able to put their kids to bed. Fuck the money and so-called business opportunities, if you already have enough to do what you want every day.
Stats don't even matter, because at that level of financial independence, it's a personal choice whether you spend time with your family or pursue another business opportunity.
Stats don't even matter, because at that level of financial independence, it's a personal choice whether you spend time with your family or pursue another business opportunity.
Yep!
I recall when I was in charge of a small billing system for a uk telco. One mothly billing run when I got to 36 hours with out sleep and starting to see things - that I should stop and got bed and come into the office later the next day.
I say one should always go for the sustainable path.
Why this? Burnt-out entrepreneurs are failed entrepreneurs, aren't they?
There's always a limit on how much time you can spend per day, and this limit is far below the time you are awake. Push it too far, and you do not only lose your working power, but also your motivation and your inspiration.
There's always a limit on how much time you can spend per day, and this limit is far below the time you are awake. Push it too far, and you do not only lose your working power, but also your motivation and your inspiration.
When an entrepreneur is excited about a thing she's building, the truthful answer to "how many hours per day do you work" is typically "zero or twenty-four, depending on what you consider work."
I agree entrepreneurs can get burnt out, but at that point it's become a "job" and is probably time to move on.
I agree entrepreneurs can get burnt out, but at that point it's become a "job" and is probably time to move on.
you are incorrect in assumption that burnout can happen only once you lose passion for your work. one of endless examples in history - look up medical volunteers during WWI - passionate for saving lives all the time, yet burnout happened to many of those.
there are limits to stress your body can sustain, and your mind can be totally disconnected with it, pushing and pushing.
there are limits to stress your body can sustain, and your mind can be totally disconnected with it, pushing and pushing.
> you are incorrect in assumption that burnout can happen only once you lose passion for your work
The assumption is not only incorrect, but I believe it is exactly reverse: Losing passing is one of the consequences of a burn-out. It is not a cause, but instead one of the (most visible) symptoms.
The assumption is not only incorrect, but I believe it is exactly reverse: Losing passing is one of the consequences of a burn-out. It is not a cause, but instead one of the (most visible) symptoms.
To those who downvoted this: Do you care to explain why you don't think that burn-out leads to losing passion?
One can be passionate about multiple things at the same time.
> If an entrepreneur is worried about "Work Life Balance", I think he/she is in the wrong business.
If your only business advantage over your competitors is a willingness to sacrifice your life for money, then you'd better either be okay with doing so indefinitely or be making enough money you can call it quits before you're too old to maintain that pace.
If your only business advantage over your competitors is a willingness to sacrifice your life for money, then you'd better either be okay with doing so indefinitely or be making enough money you can call it quits before you're too old to maintain that pace.
I think the more critical you are to the business, and the more pressure and responsibilities you have, the more critical it is to worry about work/life balance. People aren't robots, and we don't have infinite capacity to work, our ability to make rational decisions, understand the market, customers, employees, think critically, etc. is all dependent on having a healthy working brain- and that requires rest and recreation.
For founders, and really anyone heavily invested in early stage startups or companies looking for a lot of growth, responsibilities are 24/7 and the line between work and life get blurry, and it's a lot more difficult to make sure the balance is there, but also a lot more important.
For founders, and really anyone heavily invested in early stage startups or companies looking for a lot of growth, responsibilities are 24/7 and the line between work and life get blurry, and it's a lot more difficult to make sure the balance is there, but also a lot more important.
What's your point? Twitter isn't in that niche, obviously.
I would suggest that Twitter is a niche. It is in a brand management and customer engagement niche, and without some giant platform change, I think that trying to profit by increasing the number of eyeballs is always going to be challenging to the bottom line if the business value does not dramatically increase. The noise in twitters ecosystem from all those users, while interesting and good for research data sets, will eventually be a counter business/profit feature. The value proposition for users, in my mind, has been access and audience, but the value should have been focused on authoritative sourcing and customer recovery/engagement as soon as they took outside investment.
Not disagreeing or anything your comment just brought this to mind.
Not disagreeing or anything your comment just brought this to mind.
Twitter a billion dollar company, a social network used by presidential candidates and tens of millions of people is a niche?? Do you understand the dictionary meaning of the term "niche" if anything Twitter is opposite of it.
The entirety of Twitter is a subset of one feature of Facebook - that's why its referred to as niche.
features don't make it niche, user base does and twitters user base is anything but niche, it's potentially the connected whole world.
Niche: the situation in which a business's products or services can succeed by being sold to a particular kind or group of people
or a specialized market
Size is not necessarily a function of the word niche it only implies that the good or service being sold targets a group that is not a majority of all of the market participants. In twitters case 3.4B users on the internet, with only some subgroup that participates on social media and then only a subgroup of that group that wishes to participate with limited post length and then, business wise, just the business niche that have a large customer base within that subgroup of internet/social media/short form.
As an example BMW is a niche business, luxury auto, that had 92B in revenue last year.
or a specialized market
Size is not necessarily a function of the word niche it only implies that the good or service being sold targets a group that is not a majority of all of the market participants. In twitters case 3.4B users on the internet, with only some subgroup that participates on social media and then only a subgroup of that group that wishes to participate with limited post length and then, business wise, just the business niche that have a large customer base within that subgroup of internet/social media/short form.
As an example BMW is a niche business, luxury auto, that had 92B in revenue last year.
totally agree. Twitter may have a limited set of features which may make it seem "niche", but it's market is basically everyone.
Twitter's niche is media types, for sure.
Twitter is a niche in my humble opinion. They are basically a short messaging pubsub service for humans, and even artificially limited themselves to that niche, by not increasing message size limits in any obvious way, by not implementing other "social" features people actually use like better photo sharing, galleries and gallery sharing, games, etc. They didn't try to become a full-fledged social network and thus competitor to Facebook (and what Google+ was supposed to be) with messaging and a ton of other stuff.
Even that One Big New Thing they announced, namely Moments, still operated exclusively in that short messaging pubsub niche entirely (and turned out not to be something their users cared about that much so far).
Now their niche market seems kind of saturated, user numbers mostly peaked, and Facebook also started competing even more in that niche when they introduced searchable #hashtags and ways to follow accounts without becoming mutual friends, while still offering their other core features and "external" services like instagram (in direct competition to twitter) or whatsapp (in direct competition to twitter DMs). Tumblr is still there, which to me always felt mostly like a "twitter" for longer-form messages. I saw people switch from twitter to Slack (and recently Discord) and embrace their not-globally-visible pubsub models in some cases, so there is some competition there too.
So in conclusion: twitter seems to me like a pretty niche service (albeit large niche), and has competitors left and right now. It isn't in "that" niche, but in a niche.
Even that One Big New Thing they announced, namely Moments, still operated exclusively in that short messaging pubsub niche entirely (and turned out not to be something their users cared about that much so far).
Now their niche market seems kind of saturated, user numbers mostly peaked, and Facebook also started competing even more in that niche when they introduced searchable #hashtags and ways to follow accounts without becoming mutual friends, while still offering their other core features and "external" services like instagram (in direct competition to twitter) or whatsapp (in direct competition to twitter DMs). Tumblr is still there, which to me always felt mostly like a "twitter" for longer-form messages. I saw people switch from twitter to Slack (and recently Discord) and embrace their not-globally-visible pubsub models in some cases, so there is some competition there too.
So in conclusion: twitter seems to me like a pretty niche service (albeit large niche), and has competitors left and right now. It isn't in "that" niche, but in a niche.
I was just responding to the parent post who suggested that you can’t bootstrap because some better funded company will come along and put you out of business. You can if you choose the right niche.
Of course Twitter as a business did not have this choice - they had to go big or go home. For the founders though it might have been better to have built something else.
Of course Twitter as a business did not have this choice - they had to go big or go home. For the founders though it might have been better to have built something else.
> For the founders though it might have been better to have built something else.
I doubt it. All of the founders are mega wealthy now both as a result of Twitter and other ventures. Twitter might not have reached the dizzy heights they aspired to, but like it or loathe it Twitter is a household name and the founders are "famous".
I doubt it. All of the founders are mega wealthy now both as a result of Twitter and other ventures. Twitter might not have reached the dizzy heights they aspired to, but like it or loathe it Twitter is a household name and the founders are "famous".
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You are right but the problem is finding that niche, so it is a business exploratory issue. Also, $ 20k is low if you need to growth your business, even, a little bit (e.g. hire people).
Its 20K a month in profit, not 20K a year. If you genuinely think it is hard to hire people at that point (not suggesting the GP should), then you have probably not explored all your options.
> If you genuinely think it is hard to hire people at that point...
Where? In US, SV, New York, China, Ukraine, Argentina? If you growth it can be difficult to scale without having higher profits or outside investments.
Where? In US, SV, New York, China, Ukraine, Argentina? If you growth it can be difficult to scale without having higher profits or outside investments.
This. There is always a niche. Some people just don't want to use the other offerings for XYZ reasons.
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This is a bitter comment, but it's so very true. The only thing I disagree with is the assumption that this is just a problem for companies that want to scale or - as someone commented down below - businesses that are "only" worth a few million a year and are presumably too small to attract VC attention....
Because maybe that holds for B2B businesses where no-one outside of the industry knows you exist, but for any B2C startup the reality is that there are a ton of people with connections and stupid money (or pre-funded teams looking to "pivot") that will throw lots of resources into competing with you. These teams tend towards self-delusion (over-estimating market size, pretending that it is a world-changing product, imagining it as a stepping-stone to world domination) because this is necessary for them to raise capital.
Lots of people romanticise lifestyle businesses, but it is miserable competing against funded businesses when your competitors have free money. I have done it twice and one of the worst feelings you can have as a founder is when you've spent a year building a business and your customers start complaining because your service is more expensive than your funded competition. It is psychologically taxing.
Because maybe that holds for B2B businesses where no-one outside of the industry knows you exist, but for any B2C startup the reality is that there are a ton of people with connections and stupid money (or pre-funded teams looking to "pivot") that will throw lots of resources into competing with you. These teams tend towards self-delusion (over-estimating market size, pretending that it is a world-changing product, imagining it as a stepping-stone to world domination) because this is necessary for them to raise capital.
Lots of people romanticise lifestyle businesses, but it is miserable competing against funded businesses when your competitors have free money. I have done it twice and one of the worst feelings you can have as a founder is when you've spent a year building a business and your customers start complaining because your service is more expensive than your funded competition. It is psychologically taxing.
> This is a bitter comment, but it's so very true.
Only partly.
I mean, yes if you get competition you have to get a huge amount of money from somewhere, but the later you do it, the more money you get for much lesser 'cruel' VC wishes.
Only partly.
I mean, yes if you get competition you have to get a huge amount of money from somewhere, but the later you do it, the more money you get for much lesser 'cruel' VC wishes.
I own a business that grew 10% per year for quite some time, making way more than 20k per month in profit for many years.
I am sure the VC and growth path can be good for some, but if you think this is the only realistic way to make decent money, you drink too much the VC kool-aid.
I am sure the VC and growth path can be good for some, but if you think this is the only realistic way to make decent money, you drink too much the VC kool-aid.
No imagination necessary, check out Basecamp. I believe they've actually cut their freemium offering recently.
Slack hasn't put them out of business yet.
Slack hasn't put them out of business yet.
Slack and Basecamp are fundamentally different tools. I use both on a daily basis and they are not interchangeable. I also can't remember a freemium model on basecamp either - it's been a paid service ever since. They did change their pricing structure when moving to BC3, so now it's mostly flat and not tiered by team size and resource consumption.
Read the parents. Twitter and other social media are fundamentally different; most product businesses are going to give a different offering. The guy is saying that competition in the space will steal eat your lunch for you if you don't take investor money, and that's just not true.
I wasn't aware about the details with the pricing of Basecamp. I just knew it changed recently and that it wasn't freemium. The point I was making with that still stands.
I wasn't aware about the details with the pricing of Basecamp. I just knew it changed recently and that it wasn't freemium. The point I was making with that still stands.
This is simply not true. Perhaps its significantly more true for certain industries - especially Saas and similar software. But even then it is no rule.
Nothing lasts forever.
Having said that, the number of bootstrapped / angel-funded companies sitting there cheerfully producing a large-enough-to-be-useful profit for years on end is pretty huge. Others have given examples in other replies to this comment, but I just wanted to point out - they're not outliers, they're a trend.
The claim that the model doesn't work is rather easily falsified.
Having said that, the number of bootstrapped / angel-funded companies sitting there cheerfully producing a large-enough-to-be-useful profit for years on end is pretty huge. Others have given examples in other replies to this comment, but I just wanted to point out - they're not outliers, they're a trend.
The claim that the model doesn't work is rather easily falsified.
Then the investors will get tired of subsidising the other company, it will get more and more user-hostile and quite possibly run out of money altogether and shut down, and users will be worse off in the long run.
Oh yeah and eventually Diaspora will overtake Facebook. Oh wait...
If the VC model did not work it would have simply gone out of business. The reality of business is that doing things at larger scale requires capital. Sure you might be able to pull-off your lifestyle, but its going to be hard to motivate employees when the VC funded competitor gives them michelin star chefs, 50% higher salaries and a shot at windfall in few years. Sure twitter might be laying off few employees now. But before that it made its founders billionaires and several employees millionaires.
If the VC model did not work it would have simply gone out of business. The reality of business is that doing things at larger scale requires capital. Sure you might be able to pull-off your lifestyle, but its going to be hard to motivate employees when the VC funded competitor gives them michelin star chefs, 50% higher salaries and a shot at windfall in few years. Sure twitter might be laying off few employees now. But before that it made its founders billionaires and several employees millionaires.
The VC model works best for the VCs. Sure, a few entrepreneurs win too, but the model expects way more failures than homeruns. And that's if you get to the place where you're deemed worthy of their capital.
I'm part of that successful bootstrapped crowd (way more than $20k/mo profit). I'm not a billionaire but my lifestyle is pretty amazing. Bootstrapping is a legitimate way to grow a real business.
I'm part of that successful bootstrapped crowd (way more than $20k/mo profit). I'm not a billionaire but my lifestyle is pretty amazing. Bootstrapping is a legitimate way to grow a real business.
But before that it made its founders billionaires and several employees millionaires.
Without ever earning a penny in profit for its shareholders. What a system!
Without ever earning a penny in profit for its shareholders. What a system!
If the VC model did not work it would have simply gone out of business.
It has, on a macro scale, three times now. On a micro scale, it does every day, but there is always some new money who is sure they can get it right this time.
It has, on a macro scale, three times now. On a micro scale, it does every day, but there is always some new money who is sure they can get it right this time.
That's not necessarily true. I don't see how a microblogging service could be bigger than Twitter is.
I was at a startup in the UK before the first dotcom bust and we took VC money. It was extraordinary. A key metric that the VCs seemed to be interested in was head-count. We had this system that effectively acted as a trading exchange and I was sitting there saying 'hang on guys, with a little bit of work, this can pretty much be automated and you can sit back and watch the money roll in' but there was tremendous pressure to keep hiring people to demonstrate growth. I was not very young - but clearly naive.
Measuring company growth by number of people employed is a clear indicator of why the dotcom bust was a bust.
Are they liable for those promises though? I am legitimately curious to know if they are contractually obligated to grow at a certain rate or be at certain valuation at this point in time.
Companies stop growing all the time: it happens all the time, and no company grows forever. A stock price is not just the value of a company's business today: It has future growth and risk priced in. What the stock market has been saying to Twitter is that the public believes that Twitter's ceiling is far lower than we thought in 2014.
In practice, this says that all the bets on hypergrowth were wrong, and the company must adapt: The stock grants that looked competitive before don't look competitive today, so top engineers leave. Staffing plans designed to keep a system operable at 10x of Twitter's current volume stop making sense, so projects change, and people are laid off.
So this has nothing to do with liability to promises (they've already IPO'd), but with the pain of becoming a less promising company. Twitter is too important to disappear in the near term; all you have to do is look at how big they are for journalists and presidential candidates to figure that out. There is, however, an opportunity for someone to make a competing product that fits the same needs and is easier to monetize.
In practice, this says that all the bets on hypergrowth were wrong, and the company must adapt: The stock grants that looked competitive before don't look competitive today, so top engineers leave. Staffing plans designed to keep a system operable at 10x of Twitter's current volume stop making sense, so projects change, and people are laid off.
So this has nothing to do with liability to promises (they've already IPO'd), but with the pain of becoming a less promising company. Twitter is too important to disappear in the near term; all you have to do is look at how big they are for journalists and presidential candidates to figure that out. There is, however, an opportunity for someone to make a competing product that fits the same needs and is easier to monetize.
If they are staying stable, do they really need those top engineers? The probably need a different set of engineers who can find a cheaper way of doing what they are already doing.
Staying stable finanically is okay, but staying stable and no optimization (better algorithms) might hurt. Hiring good engineers is surprisingly expensive and hard.
They are liable in the sense that they report to a board chosen by their investors. So if I bought or invested in company XYZ at a valuation that assumed a lot of growth and company XYZ suddenly stopped pursuing that growth I would probably vote out current management. So yes most companies are beholden to investors; don't raise money if you don't want a new boss.
> I would probably vote out current management
That presumes that you think new management could successfully grow the company. Twitter's growth might be done.
That presumes that you think new management could successfully grow the company. Twitter's growth might be done.
I don't know that they're "liable" in the sense that people could win a shareholder suit- the bar for those is set pretty high and I doubt Twitter would qualify. My comment was more in response to the accusations that the market is somehow being "unfair" for "punishing" Twitter's lack of continued growth. They're only punishing Twitter for failing to meet the expectations Twitter itself set.
Even the word punishing is really too strong. The stock market isn't making a moral judgement. It's merely an estimate of the value of the company. As twitter's growth prospects decrease the value of the company goes down.
Well yeah. "They" would be fired, and new leadership would be brought in to do better. When you're reporting to the board or shareholders they run the show. And they want more money.
They are not contractually obligated to grow at a certain rate.
However, if the majority of your shareholders are members of the public looking to earn a return, they're your boss. You might be CEO, but if your priorities aren't their priorities, they'll replace you. Even if you own the majority voting control in the company, there's a certain amount of good-faith effort you need to put into growing the profits of the company. In most jurisdictions, a public for-profit company is organized with the belief that the company exists to create as much profit as it reasonably can and shouldn't be operating in a way that avoids that. That doesn't mean doing scummy things or things that might realize short-term profits at the expense of the brand, but sometimes it becomes clear that a company is no longer operating with its (potentially minority) shareholders in mind.
There's actually a type of corporation that specifically notes that maximizing profit isn't the goal of the enterprise (https://en.wikipedia.org/wiki/Benefit_corporation). Twitter could have been formed as a B-Corporation and told its investors that it might make profit, but that profit wasn't its only goal.
But the thing is that Twitter isn't just making too little money. It's losing money. It would be like a coffeeshop that sold coffee for 10¢ a cup with 50,000 customers/mo and rent of $8,000/mo. They'd bring in $5,000 from their customers and be $3,000 in the hole at the end of the month. Now, there are a few ways to change that situation. 1) Get more money per customer. Twitter could sell more or better ads or you could give them money. That's hard. 2) Get more users. If Twitter earns $X/user/month in revenue and they're able to get double the number of users, that's double the revenue. If costs don't go up linearly with users, their situation will get better. If the coffeeshop gets 100,000 customers/mo, they'd be making $2,000/mo. 3) Twitter can lower costs. They can fire excess employees working on marginal projects; they can get rid of app features that might be computationally expensive to deliver.
The issue with many startups isn't always growth or investors, but even keeping one's head above water.
Now, even if Twitter can keep its head above water, is that enough? If Twitter became a non-profit and just advertised itself as a public service to the world, would that be enough to keep users around? So many companies are gunning to take down Twitter. Would Twitter survive if it slimmed down its staff and just kept Twitter alive? Would users migrate to other services that offered new, cool things?
I feel like Wikipedia is the only really high-traffic non-profit, but they're doing something that requires a lot less engineering (ie. most of the page can be easily cached and is the same for all users vs. Twitter).
The thing is that it's hard to bootstrap services with huge network effects like Facebook or Twitter and keep a small staff. It's often a winner-take-all (or most) market. Remember Pownce? Probably not. There were lots of microblogging companies and Twitter destroyed them all. To do that, they needed to staff-up as you handle scaling issues and add features. Once you're big, you want to keep focusing on growth since layoffs are demoralizing and if you stop growing, what's to stop a new company from coming along and knocking you off?
It's easy to think that Twitter could be run with less of an eye for growth or profit, but given that it's losing money right now and that can't continue forever, it at least needs to get to a head-above-water place. The most promising ways of getting there are things like getting more users, cutting costs like staff, and figuring out how to get more revenue per current user. In fact, one could argue that the layoffs are part of Twitter not prizing growth above all else. They're trading growth (that could be driven by those employees) for cost (the salaries of those employees). Twitter is going the route of the less-growth, slimmed-down company looking to just keep chugging along. But even then, Twitter needs to get its head above water and this is kinda part of that (unfortunately).
However, if the majority of your shareholders are members of the public looking to earn a return, they're your boss. You might be CEO, but if your priorities aren't their priorities, they'll replace you. Even if you own the majority voting control in the company, there's a certain amount of good-faith effort you need to put into growing the profits of the company. In most jurisdictions, a public for-profit company is organized with the belief that the company exists to create as much profit as it reasonably can and shouldn't be operating in a way that avoids that. That doesn't mean doing scummy things or things that might realize short-term profits at the expense of the brand, but sometimes it becomes clear that a company is no longer operating with its (potentially minority) shareholders in mind.
There's actually a type of corporation that specifically notes that maximizing profit isn't the goal of the enterprise (https://en.wikipedia.org/wiki/Benefit_corporation). Twitter could have been formed as a B-Corporation and told its investors that it might make profit, but that profit wasn't its only goal.
But the thing is that Twitter isn't just making too little money. It's losing money. It would be like a coffeeshop that sold coffee for 10¢ a cup with 50,000 customers/mo and rent of $8,000/mo. They'd bring in $5,000 from their customers and be $3,000 in the hole at the end of the month. Now, there are a few ways to change that situation. 1) Get more money per customer. Twitter could sell more or better ads or you could give them money. That's hard. 2) Get more users. If Twitter earns $X/user/month in revenue and they're able to get double the number of users, that's double the revenue. If costs don't go up linearly with users, their situation will get better. If the coffeeshop gets 100,000 customers/mo, they'd be making $2,000/mo. 3) Twitter can lower costs. They can fire excess employees working on marginal projects; they can get rid of app features that might be computationally expensive to deliver.
The issue with many startups isn't always growth or investors, but even keeping one's head above water.
Now, even if Twitter can keep its head above water, is that enough? If Twitter became a non-profit and just advertised itself as a public service to the world, would that be enough to keep users around? So many companies are gunning to take down Twitter. Would Twitter survive if it slimmed down its staff and just kept Twitter alive? Would users migrate to other services that offered new, cool things?
I feel like Wikipedia is the only really high-traffic non-profit, but they're doing something that requires a lot less engineering (ie. most of the page can be easily cached and is the same for all users vs. Twitter).
The thing is that it's hard to bootstrap services with huge network effects like Facebook or Twitter and keep a small staff. It's often a winner-take-all (or most) market. Remember Pownce? Probably not. There were lots of microblogging companies and Twitter destroyed them all. To do that, they needed to staff-up as you handle scaling issues and add features. Once you're big, you want to keep focusing on growth since layoffs are demoralizing and if you stop growing, what's to stop a new company from coming along and knocking you off?
It's easy to think that Twitter could be run with less of an eye for growth or profit, but given that it's losing money right now and that can't continue forever, it at least needs to get to a head-above-water place. The most promising ways of getting there are things like getting more users, cutting costs like staff, and figuring out how to get more revenue per current user. In fact, one could argue that the layoffs are part of Twitter not prizing growth above all else. They're trading growth (that could be driven by those employees) for cost (the salaries of those employees). Twitter is going the route of the less-growth, slimmed-down company looking to just keep chugging along. But even then, Twitter needs to get its head above water and this is kinda part of that (unfortunately).
Insightful post, thank you.
I feel like Wikipedia is the only really high-traffic non-profit, but they're doing something that requires a lot less engineering (ie. most of the page can be easily cached and is the same for all users vs. Twitter).
WhatsApp comes to mind as an example of complex engineering (storing and delivering messages for millions) and they pulled it off with a small team at first. And more: once the core product is established/engineered, do you need as many people to maintain it?
I feel like Wikipedia is the only really high-traffic non-profit, but they're doing something that requires a lot less engineering (ie. most of the page can be easily cached and is the same for all users vs. Twitter).
WhatsApp comes to mind as an example of complex engineering (storing and delivering messages for millions) and they pulled it off with a small team at first. And more: once the core product is established/engineered, do you need as many people to maintain it?
WhatsApp is a simple, single purpose app.
It's not a complex engineering problem at all. Maybe it could be if it were done in the year 2000. It is not nowadays.
[Granted, there is still work to be done to make a decent product, they had great people and they executed very well.]
It's not a complex engineering problem at all. Maybe it could be if it were done in the year 2000. It is not nowadays.
[Granted, there is still work to be done to make a decent product, they had great people and they executed very well.]
And isn't Twitter a simple, single-purpose app, too? (At least before they purchased Vine and Periscope.)
Twitter and Wikipedia were created more than 10 years ago. It was way more challenging at the time.
Just think about the infrastructure for example. There was no SoftLayer/AWS to save your ass. You had to handle servers/hardware on your own. That alone could use a (small) company.
Just think about the infrastructure for example. There was no SoftLayer/AWS to save your ass. You had to handle servers/hardware on your own. That alone could use a (small) company.
Who does "they" refer to in your sentence? Twitter management? If so, then it's not about a contract but about what the owners of the company (the shareholders) have hired them to do.
It's murky, and depends entirely on how concretely they made those promises. To me, common sense should dictate no, but to others, it might [1].
(Story covers lawsuit against Twitter for misleading shareholders on user growth numbers).
[1] http://www.bloomberg.com/news/articles/2016-09-17/twitter-su...
(Story covers lawsuit against Twitter for misleading shareholders on user growth numbers).
[1] http://www.bloomberg.com/news/articles/2016-09-17/twitter-su...
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They aren't liable for the "S-1 promises" as long as they clearly mentioned the risks in the appropriate section.
Their main responsibility at this point is to satisfy the shareholders, and given their limited growth is not an easy feat.
Their main responsibility at this point is to satisfy the shareholders, and given their limited growth is not an easy feat.
It's bigger than that though. The real issue is that they don't have a choice because as long as they aren't profitable they need to find a way to fund the operation.
In many ways VC funding is the worst and shouldn't be applied to most companies.
In many ways VC funding is the worst and shouldn't be applied to most companies.
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And what should also concern people about this is that our entire issuance of money as debt demands constant growth ahead of interest rates. Or you can have a time where you continually cut rates, print and call it growth, until you get to zero and it all falls apart.
I'm not sure either are a good outcome from a bad idea.
I'll also put my other question in this post seeing as I have tripped the HN rentier alerts by using words that may upset our parasitic rentier VC gods, leading to the weasel "you're submitting too fast" after one post.
What is patio-11 ?
I'm not sure either are a good outcome from a bad idea.
I'll also put my other question in this post seeing as I have tripped the HN rentier alerts by using words that may upset our parasitic rentier VC gods, leading to the weasel "you're submitting too fast" after one post.
What is patio-11 ?
> What is patio-11 ?
https://news.ycombinator.com/user?id=patio11
https://news.ycombinator.com/user?id=patio11
But if they IPO, then the early investors already got their money back. And startups get acquired all the time, also putting an end to investors' growth.
Well then they're pretty much doomed to failure. There's only so much blood you can squeeze out of a 140-character stone.
What I find ironic about this is that if they actually tried to be a Toyota Corolla, they might have given off the perception of being a Porsche. Even if they didn't give off the perception, they would have at least put money in shareholders' pockets.
Not everyone is like a cannonball wanting to burn so hot as to melt themselves. I would also like a patio-11 type of software business; so you're not alone!
As far as twitter, they unfortunately took a bite of "poison apple" of public investment, and as such are beholden to investors, so must perform (and grow) to ever more higher levels. What would happen - i wonder - if twitter became private again, or better yet some sort of non-profit? What if their platform somehow became the genesis of the new, decentralized web somehow...In other words "phoenix" their way out of this mess by literally -reinventing themselves...If by "reinventing themselves", it might be really more of a major tweak to their operation mode. If twitter - the protocol - as opposed to twitter - the ad/communication platform - reinvented itself in that way, i think i might consider going back and using it; that is, if I'm able to retain control of my own content. Until then, I'll stick with matrix.org (specifically riot.im).
[http://matrix.org/] [https://riot.im/]
As far as twitter, they unfortunately took a bite of "poison apple" of public investment, and as such are beholden to investors, so must perform (and grow) to ever more higher levels. What would happen - i wonder - if twitter became private again, or better yet some sort of non-profit? What if their platform somehow became the genesis of the new, decentralized web somehow...In other words "phoenix" their way out of this mess by literally -reinventing themselves...If by "reinventing themselves", it might be really more of a major tweak to their operation mode. If twitter - the protocol - as opposed to twitter - the ad/communication platform - reinvented itself in that way, i think i might consider going back and using it; that is, if I'm able to retain control of my own content. Until then, I'll stick with matrix.org (specifically riot.im).
[http://matrix.org/] [https://riot.im/]
I'm not sure they vision you're describing is the direction private equity would take it, but with the major tech buyers shying away it does seem like a private exit is the most likely way this ends.
John Hempton summed up this view well: http://brontecapital.blogspot.com/2016/10/some-comment-on-tw...
John Hempton summed up this view well: http://brontecapital.blogspot.com/2016/10/some-comment-on-tw...
what is patio11 ! Is it this guy? http://www.kalzumeus.com/?
Yes, he started his business with Bingo Card Creator (IIRC). He wrote some interesting blog posts on his business. His HN handle is patio11.
I see. Thanks for demystifying the folk-lore.
>Why can't Twitter just be happy being Twitter, knowing its limits and making a stable profit?
The short answer? Because they don't make money.
I guess it's possible you could grow your company to a point where you say "Okay, we've filled our niche. Growing more doesn't make sense, so we'll just extract as much cash as we can."
The problem is you have to make money to do that. Twitter doesn't make money and never has. They can say "Well, we're still growing, and that costs money, but at some point we'll monetize that growth and make tons of money," but it's only credible as long as they're growing.
The short answer? Because they don't make money.
I guess it's possible you could grow your company to a point where you say "Okay, we've filled our niche. Growing more doesn't make sense, so we'll just extract as much cash as we can."
The problem is you have to make money to do that. Twitter doesn't make money and never has. They can say "Well, we're still growing, and that costs money, but at some point we'll monetize that growth and make tons of money," but it's only credible as long as they're growing.
I think they have good revenue, but their insanely high expenses (coming mostly from the high number of employees, but probably other things that assume hyper growth too) make it impossible to turn a good profit.
They have just under 4,000 employees and spent $2.7 billion last year. Surely that can't be just it?
I think if Twitter settled down and optimized they could probably be making a healthy profit. That's sort of what I was getting at in my OP.
I doubt they can do it. We'll see.
On a longer timeframe, if you don't grow, you die.
Scenario time...
Let's say I have a company that is growing pretty well. After some time, I feel the easy growth stops. Let's say this is the "right size" point you are alluding to, and I was able to recognize it, spot on. I stop hiring and just work with the existing resources that I have. In theory everything should be good for a long time.
Unfortunately, I do not exist in a vacuum. I have competition, and this competition continues to expand. Eventually, if they continue to invest and grow, even past their "right size", they will take away my market share. As they grow stronger, I will grow weaker. This may cause my company to lose enough sales that I will have to fire people.
The fallacy is that there is a "right size" that will continue to be the "right size" through time. A market is a dynamic system that does not stand still. What was the right size at one point, may be too large or too small in the future, due to things beyond my direct control.
As a smart businessman, I have to understand this. I have to expand when there is room, and try to outperform the competition when the market is crowded. I need to downsize when the time is right to protect the rest of the business.
What you are saying is easier done on a smaller scale. There are many so-called "lifestyle" businesses which live by a philosophy that is closer to yours and farther from Twitter's. On a global scale, it much more difficult to follow the "lifestyle" business philosophy and succeed.
Scenario time...
Let's say I have a company that is growing pretty well. After some time, I feel the easy growth stops. Let's say this is the "right size" point you are alluding to, and I was able to recognize it, spot on. I stop hiring and just work with the existing resources that I have. In theory everything should be good for a long time.
Unfortunately, I do not exist in a vacuum. I have competition, and this competition continues to expand. Eventually, if they continue to invest and grow, even past their "right size", they will take away my market share. As they grow stronger, I will grow weaker. This may cause my company to lose enough sales that I will have to fire people.
The fallacy is that there is a "right size" that will continue to be the "right size" through time. A market is a dynamic system that does not stand still. What was the right size at one point, may be too large or too small in the future, due to things beyond my direct control.
As a smart businessman, I have to understand this. I have to expand when there is room, and try to outperform the competition when the market is crowded. I need to downsize when the time is right to protect the rest of the business.
What you are saying is easier done on a smaller scale. There are many so-called "lifestyle" businesses which live by a philosophy that is closer to yours and farther from Twitter's. On a global scale, it much more difficult to follow the "lifestyle" business philosophy and succeed.
> I have competition, and this competition continues to expand.
Fallacy is here.
Fallacy is here.
I think the answer is that when Twitter IPO'd there were very clear expectations for the company to perform similar to its perceived contemporaries: Facebook and Google. If you look at the perpetually meteoric rise of GOOGL or FB, it's understandable why shareholders are disappointed -- Twitter burns a lot of capital.
So, if its growth has petered out and this is as much money as it can produce, it's understandable to me the line of thinking would then be to cut costs as much as possible so the profit margin can grow. 4k people makes sense when your company is adding value every day, but to these shareholders those aren't translating into results.
My $0.02 -- thoughts?
> Personally I dream of making a living establishing a patio11-type software business. Something where I can do a high quality job and own all of the decision-making.
I have that dream too, but when I have it I always wonder if given that situation I'd be able to stop myself from wanting my baby to keep growing, even if it meant giving up those decision-making abilities and taking on investors.
So, if its growth has petered out and this is as much money as it can produce, it's understandable to me the line of thinking would then be to cut costs as much as possible so the profit margin can grow. 4k people makes sense when your company is adding value every day, but to these shareholders those aren't translating into results.
My $0.02 -- thoughts?
> Personally I dream of making a living establishing a patio11-type software business. Something where I can do a high quality job and own all of the decision-making.
I have that dream too, but when I have it I always wonder if given that situation I'd be able to stop myself from wanting my baby to keep growing, even if it meant giving up those decision-making abilities and taking on investors.
In 1994, I registered bikeworld.com and helped my dad put his local bicycle store chain online. It was wild from day one. We didn't even have a proper shopping cart for the first few months--you had to fax or email your order and credit card--but the orders just came in. I was fresh out of the early days of Silicon Valley dotcom startups and I begged my dad to let us take some VC money and go big with this thing. I wanted to do a printed catalog (all the big players did one at this time) and hire some marketing people and front end designers.
Dad wouldn't have it. He had run this successful brick and mortar business since 1971 and there was just no way that he was going to trade away ownership for cash to get growth that he didn't want. The stores afforded him amonthly draw that supported him and paid for a nice house and the freedom to pursue his hobbies. He was in his early fifties and all of the tough years taught him to recognize the good thing he had.
It was a great lesson for me and his experience as a businessman is a big part of the reason why I never pursued entrepreneurship myself, opting instead for the stable life of a salaryman.
Dad wouldn't have it. He had run this successful brick and mortar business since 1971 and there was just no way that he was going to trade away ownership for cash to get growth that he didn't want. The stores afforded him amonthly draw that supported him and paid for a nice house and the freedom to pursue his hobbies. He was in his early fifties and all of the tough years taught him to recognize the good thing he had.
It was a great lesson for me and his experience as a businessman is a big part of the reason why I never pursued entrepreneurship myself, opting instead for the stable life of a salaryman.
> Why can't Twitter just be happy being Twitter, knowing its limits and making a stable profit
Your assumption, that Twitter is profitable, is unfortunately wrong.
Your assumption, that Twitter is profitable, is unfortunately wrong.
It is not, but it could if twitter would stop spending huge piles of money that makes them go nowhere.
That is exactly what many on Wall St have been telling them to do for years. Despite the popular perception of investment bankers, they do value "patio11 style businesses" more highly than the Twitter style of spending and losing billions of dollars and not going anywhere.
I actually don't think anybody values the later.
I actually don't think anybody values the later.
"Investment bankers" do absolutely love companies that raise money (and the faster they burn it the better, so they come back to raise more).
Their revenue almost doubled from 2014 to 2015, and is on track to be a bit higher than 2015. It's silly to pretend they're just burning money for fun.
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The answer is in your example. Patio's business was barely profitable for a few years until closing down.
Growth or death is true for most businesses, just need to decide on the growth acceleration
Growth or death is true for most businesses, just need to decide on the growth acceleration
> barely profitable
Patrick wrote "year in review" posts going back to 2006, and they include full numbers, so you can see for yourself. Profit margins in 2014 (the most recent review) were at a whopping 60% across all his businesses. (See here: http://www.kalzumeus.com/2014/12/22/kalzumeus-software-year-...)
> closing down
He sold his SaaS businesses, and they are operated by other people. Here's a podcast episode about it: http://www.kalzumeus.com/2016/08/26/kalzumeus-podcast-episod...
They are still in operation, and presumably still profitable:
https://www.appointmentreminder.org/
https://www.bingocardcreator.com/
> Growth or death
Not really. Moving past patio11 as an example, just look at local businesses in your community. The ones that have been there the longest (> 50 years) have undoubtedly gone through periods of both growth and decline (I don't mean decline toward death, I mean decline for a bit and then start growing again). Many of the ones that have been there for about 20 years will have reached a sort of "asymptote" of growth--they would have grown for the first 10 or 15 years and then stabilized around a size that feels "comfortable". There are many more businesses in the world than just start-ups and public companies.
Patrick wrote "year in review" posts going back to 2006, and they include full numbers, so you can see for yourself. Profit margins in 2014 (the most recent review) were at a whopping 60% across all his businesses. (See here: http://www.kalzumeus.com/2014/12/22/kalzumeus-software-year-...)
> closing down
He sold his SaaS businesses, and they are operated by other people. Here's a podcast episode about it: http://www.kalzumeus.com/2016/08/26/kalzumeus-podcast-episod...
They are still in operation, and presumably still profitable:
https://www.appointmentreminder.org/
https://www.bingocardcreator.com/
> Growth or death
Not really. Moving past patio11 as an example, just look at local businesses in your community. The ones that have been there the longest (> 50 years) have undoubtedly gone through periods of both growth and decline (I don't mean decline toward death, I mean decline for a bit and then start growing again). Many of the ones that have been there for about 20 years will have reached a sort of "asymptote" of growth--they would have grown for the first 10 or 15 years and then stabilized around a size that feels "comfortable". There are many more businesses in the world than just start-ups and public companies.
>whopping 60% across all his businesses
Software built by 1 person will always have good margins. According to his numbers, BCC was making $60k in good years. 60% of that is $36k, which is a fraction of what a solid Dev can make (and an even smaller fraction of what he patio11 was making consulting). Clever side project income for sure, but not a staggering work of business genius.
Software built by 1 person will always have good margins. According to his numbers, BCC was making $60k in good years. 60% of that is $36k, which is a fraction of what a solid Dev can make (and an even smaller fraction of what he patio11 was making consulting). Clever side project income for sure, but not a staggering work of business genius.
Sure, and I suppose "barely profitable" could be interpreted as "producing a small amount of absolute profit", but I read it as "barely producing more revenue than expenses", which is obviously incorrect in this case.
[deleted]
Would you buy a stock that is guaranteed to stay flat for the discernible future? No? Then you have your answer.
(let's not forget that, thanks to inflation, 'flat' is actually losing money over time.)
(let's not forget that, thanks to inflation, 'flat' is actually losing money over time.)
If a that stock over time covers inflation and pays a dividend, absolutely.
You're leaving beta. Any stock that fluctuates with the market is expected to have a much higher return than inflation, and with good reason.
Presumably the parent meant a stock whose share price tracks inflation in spite of its dividend. So if you reinvest the dividend, you beat inflation and potentially beat the market, depending on the dividend yield.
At that point wouldn't bonds make more sense? Seems like the risk vs. reward balance is skewed the wrong way if you own a piece of stock that stays flat.
If inflation shoots up, your bond will have the same payout but one can at least hope that dividends rise accordingly.
On the flip side, if the company goes bankrupt, bond holders are at or near the front of the line to be made whole.
[deleted]
Given that I generally hold for income rather than value, that's precisely what I look for. The last thing I want is a security that goes up in (real) value since that means they're not paying me the dividends they could.
Hah. I think patio11 just joined Stripe, one of the fastest growing startups around :) Anyway, besides many of the usual answers, talent is a key one often forgotten. People want the chance to do new and ever changing things so as to be challenged. It's hard to retain good people when they know it's going to be a smaller company with modest growth. What often kills companies with slowish growth is that they lose their best people to other companies with a more dynamic environment.
> What often kills companies with slowish growth is that they lose their best people to other companies with a more dynamic environment.
Till the best people get tired of stuff everchanging and breaking, combined with the lack of resources and the 70 hours startup week.
Then they drop the 'dynamic environment' and come back to Big Goompany :D
Till the best people get tired of stuff everchanging and breaking, combined with the lack of resources and the 70 hours startup week.
Then they drop the 'dynamic environment' and come back to Big Goompany :D
I can't tell you how true this is. A lot of my friends still in the startup world call me a "burn out" and accuse me of having "no ambition."
Yeah, I have no ambition. Yet I can totally take a week off and head to Puerto Rico. Not only does the world not end, but I don't get called with an emergency while I'm hiking through the rainforest to find a swimming hole.
I get to go out every weekend. I go out on Sundays. I go out whenever. I pretty much key in 40 hours and work 35 hours a week (10 a.m. to 5 or 6).
Yeah, maybe I don't get paid above $200,000, but my life is straight out of some Oprah "Live your best life" book. So bite me. I'll take no ambition over that startup life any day.
Yeah, I have no ambition. Yet I can totally take a week off and head to Puerto Rico. Not only does the world not end, but I don't get called with an emergency while I'm hiking through the rainforest to find a swimming hole.
I get to go out every weekend. I go out on Sundays. I go out whenever. I pretty much key in 40 hours and work 35 hours a week (10 a.m. to 5 or 6).
Yeah, maybe I don't get paid above $200,000, but my life is straight out of some Oprah "Live your best life" book. So bite me. I'll take no ambition over that startup life any day.
> why do so many companies feel like they have to grow perpetually?
Because, in a nutshell, the "economy" is a massive ponzi scheme that depends on constant growth. This isn't a popular opinion among many of the VC crowd that believe in the myth of the meritocracy, but its an irrefutable truth. For example, the FED (and other central banks) set a target inflation rate (usually around 2%, but it can vary). That means if you are "stable", and the central bank has its way, you are actually shrinking.
Its obviously much more complex then this, but that is the crux of it. Unfortunately "sustainability", whether economic or environmental, isn't a priority for those .000001% of the oligarchs that run the show and make their money off debt servicing.
Because, in a nutshell, the "economy" is a massive ponzi scheme that depends on constant growth. This isn't a popular opinion among many of the VC crowd that believe in the myth of the meritocracy, but its an irrefutable truth. For example, the FED (and other central banks) set a target inflation rate (usually around 2%, but it can vary). That means if you are "stable", and the central bank has its way, you are actually shrinking.
Its obviously much more complex then this, but that is the crux of it. Unfortunately "sustainability", whether economic or environmental, isn't a priority for those .000001% of the oligarchs that run the show and make their money off debt servicing.
> ponzi scheme that depends on constant growth.
Can you recommend any references for a non-economist to learn about this theory?
Also, is this related to why financial markets are so obsessed with profit growth? I always wondered why being profitable wasn't a good enough indicator of success.
Can you recommend any references for a non-economist to learn about this theory?
Also, is this related to why financial markets are so obsessed with profit growth? I always wondered why being profitable wasn't a good enough indicator of success.
>Can you recommend any references for a non-economist to learn about this theory?
This TED talk by professor Franz Hörmann does a good job of explaining.
https://www.youtube.com/watch?v=88ksYFsleto
Simply put, when money is created by the bank for a loan, only the amount for the loan (the principal) is created and given out. The problem is that an extra fee (interest) is charged on top, but the money to pay that fee was never created.
So basically it is an impossible contract to fulfill on a macro scale. A negative sum game.
This TED talk by professor Franz Hörmann does a good job of explaining.
https://www.youtube.com/watch?v=88ksYFsleto
Simply put, when money is created by the bank for a loan, only the amount for the loan (the principal) is created and given out. The problem is that an extra fee (interest) is charged on top, but the money to pay that fee was never created.
So basically it is an impossible contract to fulfill on a macro scale. A negative sum game.
"Can you recommend any references for a non-economist to learn about this theory?"
It's not a theory, it's armchair cynicism.
Some high growth startups are kind of like Ponzi schemes, in the sense that some investors know they won't ever get to the full valuation needed to justify the investment - but that someone down the line, after the IPO will be left 'holding the bag', but the economy itself is not a 'ponzi scheme'.
It's not a theory, it's armchair cynicism.
Some high growth startups are kind of like Ponzi schemes, in the sense that some investors know they won't ever get to the full valuation needed to justify the investment - but that someone down the line, after the IPO will be left 'holding the bag', but the economy itself is not a 'ponzi scheme'.
> That means if you are "stable", and the central bank has its way, you are actually shrinking at 2% a year.
No, inflation means, in aggregate, the price businesses charge goes up.
No, inflation means, in aggregate, the price businesses charge goes up.
That's completely wrong. Its a lost cause to try to explain economic theory on a forum but suffice to say that central banks factor completely arbitrary variables to get the number they want.
http://www.bls.gov/cpi/cpihqaitem.htm
>The CPI is calculated using prices for a fixed basket of goods and services through time. While the basket is periodically revised to reflect changing consumer expenditures, some items being priced in the sample come and go from the marketplace, making collection of these prices from month to month difficult. When an item is no longer available in the marketplace, a similar replacement item is selected. Often there are no similar items from which to choose, and as a result, a less comparable item is selected, potentially introducing quality change and an associated price differential into the index. The hedonic quality adjustment method removes any price differential attributed to a change in quality by adding or subtracting the estimated value of that change from the price of the old item.
That toilet paper you used to buy costs twice as much? Well the FED says the new toilet paper is of a higher quality, so it is actually counted as being lower priced then the toilet paper you bought for half as much last year.
http://www.bls.gov/cpi/cpihqaitem.htm
>The CPI is calculated using prices for a fixed basket of goods and services through time. While the basket is periodically revised to reflect changing consumer expenditures, some items being priced in the sample come and go from the marketplace, making collection of these prices from month to month difficult. When an item is no longer available in the marketplace, a similar replacement item is selected. Often there are no similar items from which to choose, and as a result, a less comparable item is selected, potentially introducing quality change and an associated price differential into the index. The hedonic quality adjustment method removes any price differential attributed to a change in quality by adding or subtracting the estimated value of that change from the price of the old item.
That toilet paper you used to buy costs twice as much? Well the FED says the new toilet paper is of a higher quality, so it is actually counted as being lower priced then the toilet paper you bought for half as much last year.
Actually, the FED targets something called the PCE price index which is an attempt at measuring price increases across all consumer spending. But those are just measuring details, if you want to you can go to economic conferences and argue the finer details of these measurements with rooms full of PhDs. The point though is that inflation targeting is about trying to keep the cycle of rising wages and rising prices going. And the point of that is to avoid deflation during recessions. The main losers from inflation are not businesses but lenders, which is why lending rates and inflation are closely related.
>You don't need a PHD to understand what this means, you need only basic reading comprehension and minimal intelligence:
Quote from FED:
>The hedonic quality adjustment method removes any price differential attributed to a change in quality by adding or subtracting the estimated value of that change from the price of the old item.
What do you think "attributing a change in quality" or subtracting "estimated value" means? If you don't understand how the introduction of these arbitrary variables, invented by a politicized FED, completely nullify any informational value, nobody can explain it to you.
Quote from FED:
>The hedonic quality adjustment method removes any price differential attributed to a change in quality by adding or subtracting the estimated value of that change from the price of the old item.
What do you think "attributing a change in quality" or subtracting "estimated value" means? If you don't understand how the introduction of these arbitrary variables, invented by a politicized FED, completely nullify any informational value, nobody can explain it to you.
You seem to fail to grasp even basic common sense: most products and service increase in value over time, and though it's difficult sometimes to measure that value, it's not 'arbitrary'.
For example - as Farmers improve their technology - Tomatoes become bigger, juicier and redder. Clearly - there is 'economic value' in those 'improved tomatoes' and that has has to be taken into consideration when comparing tomatoes grown before, to tomatoes grown now.
Stop misinforming people, take your conspiracy theories to ZeroHedge.
For example - as Farmers improve their technology - Tomatoes become bigger, juicier and redder. Clearly - there is 'economic value' in those 'improved tomatoes' and that has has to be taken into consideration when comparing tomatoes grown before, to tomatoes grown now.
Stop misinforming people, take your conspiracy theories to ZeroHedge.
Tomatoes is a bad example. They contain less nutrition and taste less good each year (Google it).
Maybe cars or something your story works with
Maybe cars or something your story works with
You articulation of the reasoning for 2% inflation targets by Central Banks is completely and utterly false.
Lots of companies don't grow and do fine.
But if your current value is based on a huge amount of projected growth, then going to "no growth" will be hugely painful for investors, founders, and employees.
But if your current value is based on a huge amount of projected growth, then going to "no growth" will be hugely painful for investors, founders, and employees.
Because Twitter has received investment on the promise of eventual profit.
A low / no growth model is only feasible if they don't have investors / shareholders bucking for returns at every decision point. Twitter, has made a deal with the devil in becoming a publicly traded company because at some point needs to show their stakeholders a path to profitability. Job cuts, cutting expenditure whilst hopefully maintaining profits, are a good way to demonstrate this.
If Twitter wants to become a public internet utility, like wikipedia, existing investors will demand something like a share buyback, how will Twitter afford this without a period of profitability?
Finding a sugar daddy to buy them out is one option but the recent sutors probably felt that twitter stock is overvalued, largely because of the lack of profits.
A low / no growth model is only feasible if they don't have investors / shareholders bucking for returns at every decision point. Twitter, has made a deal with the devil in becoming a publicly traded company because at some point needs to show their stakeholders a path to profitability. Job cuts, cutting expenditure whilst hopefully maintaining profits, are a good way to demonstrate this.
If Twitter wants to become a public internet utility, like wikipedia, existing investors will demand something like a share buyback, how will Twitter afford this without a period of profitability?
Finding a sugar daddy to buy them out is one option but the recent sutors probably felt that twitter stock is overvalued, largely because of the lack of profits.
It is not 'making a deal with the devil' to take other people's money on the basis that you'll return a certain amount of profit - and then not do so. The 'devil' it would seem are the Twitter founders, who took investors money on false premises.
So Twitter has hit a ceiling, they are making adjustments, which sadly are op cuts. If they want to hire more people than can grow their numbers.
So Twitter has hit a ceiling, they are making adjustments, which sadly are op cuts. If they want to hire more people than can grow their numbers.
> why do so many companies feel like they have to grow perpetually?
Public companies have investors and those investors who have put in capital (money or time) either in the beginning or during operations expect a return on their investment. The company taking the investment keeps selling shares to get more capital getting them stuck on a ROI treadmill.
The only way to escape the ROI treadmill is to self-fund from operations profits and not take outside investments.
Unfortunately many of these startups depend on debt to keep operations going.
Public companies have investors and those investors who have put in capital (money or time) either in the beginning or during operations expect a return on their investment. The company taking the investment keeps selling shares to get more capital getting them stuck on a ROI treadmill.
The only way to escape the ROI treadmill is to self-fund from operations profits and not take outside investments.
Unfortunately many of these startups depend on debt to keep operations going.
> Dr. Srikumar created a life changing business school course so powerful that it has its own alumni association. He is the author of Happiness at Work and has helped thousands of executives find greater fulfillment in both life and work.
https://www.youtube.com/watch?v=bGBoXTaitr0
Worth watching because his words of advice did help me when trying to grow my own business. I didn't reach my numbers, but having a goal gave me a sense of direction, and there was a sense of movement. I think we're only at a loss in business when everything falls still. I'm no expert, but I don't sense that Twitter is falling still just yet, and there's still movement.
As you said: "Why can't Twitter just be happy being Twitter". I can't imagine the web without Twitter and it still feels like some sort of plumbing, or public utility at this stage. Twitter is there like water (hopefully). You turn on the tap, and it's there like water.
https://www.youtube.com/watch?v=bGBoXTaitr0
Worth watching because his words of advice did help me when trying to grow my own business. I didn't reach my numbers, but having a goal gave me a sense of direction, and there was a sense of movement. I think we're only at a loss in business when everything falls still. I'm no expert, but I don't sense that Twitter is falling still just yet, and there's still movement.
As you said: "Why can't Twitter just be happy being Twitter". I can't imagine the web without Twitter and it still feels like some sort of plumbing, or public utility at this stage. Twitter is there like water (hopefully). You turn on the tap, and it's there like water.
I have to point out that this last point is totally ridiculous. Twitter is functionally just like like Xanga or Livejournal or any other dead blogging platform you care to name. Just because you have a community of dedicated users and a better UI doesn't mean the service is unique. It's as if you thought Evian(R) or Dasani(TM) are public utilities.
Frankly, I think we're going to see a backlash against information overload - social media has lost its novelty, and most consumers need far less of it than the producers want to provide.
Frankly, I think we're going to see a backlash against information overload - social media has lost its novelty, and most consumers need far less of it than the producers want to provide.
"than the producers want to provide"
Yes this is the analogy to TV where the market provided precisely 3 channels (plus PBS) for decades and a third of the population reliably watched each show on each channel, but that was 1970 and now in 2010s there's 500 cable channels and a wildly success narrowcast might reach as many as 1 in 40 citizens. Usually far less, of course, as little reach as 1 in 300 is possible with aggressive enough advertising budgets. Of course there is the superbowl but its only a couple hours per year and there's only one and that one is already here.
It has certain implications for future startups. It would be doom for current startups that financed assuming they'll be the one site that all 6 billion humans use. If the social media market follows the TV model, in 20 years we'll be back to multiple tribal sized BBSes, more or less, with the occasional temporary cultural fad resulting in short term scaling headaches. For about a month, about a billion of us, will try to simultaneously log into the pokemon go server, then we'll all try to forget it ever happened, which actually is a big enough problem to keep many engineers employed.
I'm not sure the financial markets know what to think of legacy TV right now, much less what will, by then, be legacy social media.
How do you finance or account for a one month pokemon go, times hundreds per year, when thats the new normal not an aberration?
Yes this is the analogy to TV where the market provided precisely 3 channels (plus PBS) for decades and a third of the population reliably watched each show on each channel, but that was 1970 and now in 2010s there's 500 cable channels and a wildly success narrowcast might reach as many as 1 in 40 citizens. Usually far less, of course, as little reach as 1 in 300 is possible with aggressive enough advertising budgets. Of course there is the superbowl but its only a couple hours per year and there's only one and that one is already here.
It has certain implications for future startups. It would be doom for current startups that financed assuming they'll be the one site that all 6 billion humans use. If the social media market follows the TV model, in 20 years we'll be back to multiple tribal sized BBSes, more or less, with the occasional temporary cultural fad resulting in short term scaling headaches. For about a month, about a billion of us, will try to simultaneously log into the pokemon go server, then we'll all try to forget it ever happened, which actually is a big enough problem to keep many engineers employed.
I'm not sure the financial markets know what to think of legacy TV right now, much less what will, by then, be legacy social media.
How do you finance or account for a one month pokemon go, times hundreds per year, when thats the new normal not an aberration?
Not sure tv analogy plays out.
We have many shows because people want different stuff to watch sure.
Why couldn't Reddit be the only BBS of the internet? Everyone in the same website, but live in a unique subreddit.
TV doesn't work like that.
We have many shows because people want different stuff to watch sure.
Why couldn't Reddit be the only BBS of the internet? Everyone in the same website, but live in a unique subreddit.
TV doesn't work like that.
The problem with Reddit is its bigger than the Dunbar number so its possible to predict there's going to be severe problems with politics and censorship (and hey, golly, it turns out there is!).
Meanwhile in the Slashdot 90s a weblog discussion type site took a lot of money and an entire corporation to kinda run, but in the 10s a splinter group like Soylent News takes like three part time dudes, if that much, to serve up more than Slashdot ever did in the 90s.
So anything big automatically leads to political problems and 20 years ago, or even today, people just have to tolerate it, but as technology advanced eventually you'll be able to do more than reddit does with a simple $30 model 2025 raspberry pi and a sd card, so people will just move there instead.
Or rephrased the primary network effect of sharing Reddit is the joy of being a victim of raids from SRS, so people will be quite happy to leave.
Also I'd say we have very few TV shows because of expense and the resulting risk aversion. We have many nearly identical shows none worth watching. If the cost of TV shows scaled downward with technology we'd have some pretty interesting diversity of TV shows, but we don't.
Meanwhile in the Slashdot 90s a weblog discussion type site took a lot of money and an entire corporation to kinda run, but in the 10s a splinter group like Soylent News takes like three part time dudes, if that much, to serve up more than Slashdot ever did in the 90s.
So anything big automatically leads to political problems and 20 years ago, or even today, people just have to tolerate it, but as technology advanced eventually you'll be able to do more than reddit does with a simple $30 model 2025 raspberry pi and a sd card, so people will just move there instead.
Or rephrased the primary network effect of sharing Reddit is the joy of being a victim of raids from SRS, so people will be quite happy to leave.
Also I'd say we have very few TV shows because of expense and the resulting risk aversion. We have many nearly identical shows none worth watching. If the cost of TV shows scaled downward with technology we'd have some pretty interesting diversity of TV shows, but we don't.
Bear in mind: Twitter has lost money (billions) over its lifetime, let alone failed to multiply the investment. More: http://money.cnn.com/2016/03/21/technology/twitter-10th-anni...
That mindset is prevalent in people who can't understand any business being more valuable than a lemonade stand (preferably cardboard, so you can profit from day 1).
In the tech industry it seems like growth (or perceived growth potential) is the only thing that matters, profitability far less so (Amazon for example). Growth is what makes stock go up, so investors want to see growth every single quarter or they bail. If a tech company doesn't show growth, its stock doesn't stand still- it'll drop, maybe significantly. For publicly traded companies, executives can be replaced by the board if they don't deliver, and the board is supposed to represent the shareholders' interests (which for the tech industry means maintaining growth to keep the stock from tanking). It's a pretty messed up antipattern in the business environment IMO. The alternative is staying private, and perhaps limiting (or doing without) external investment.
Related to your point about your ideal sort of business, I enjoyed reading Rand Fishkin's reflections on his experience with Moz. On raising money[1]:
> As a result, the behavior VCs generally need to encourage is growth at any cost. If a company burns out trying to become that 100X star in the portfolio, it’s OK. But if they choose to grow slow and steady and build a sustainable but not particularly dominant business over 10–15 years, that’s non-ideal for the portfolio or the fund’s returns.
[1]: https://medium.com/@randfish/what-id-change-keep-the-same-do...
> As a result, the behavior VCs generally need to encourage is growth at any cost. If a company burns out trying to become that 100X star in the portfolio, it’s OK. But if they choose to grow slow and steady and build a sustainable but not particularly dominant business over 10–15 years, that’s non-ideal for the portfolio or the fund’s returns.
[1]: https://medium.com/@randfish/what-id-change-keep-the-same-do...
A stock price takes into account future growth. When growth begins to stagnate, then the ticker will fall. People lose money.
In most cases it probably isn't a huge deal, but the fact that Twitter isn't profitable is likely a (large) factor. Without a given amount of users, it won't be profitable and decreased growth obviously means that profitability is further out. Hence them cutting costs.
There's obviously nothing wrong with a bootstrapped / lifestyle business. The people at Basecamp are big proponents of it. https://www.youtube.com/watch?v=lBfVxBj61z0 Here's one interview out of plenty where they talk about this kind of thing.
In most cases it probably isn't a huge deal, but the fact that Twitter isn't profitable is likely a (large) factor. Without a given amount of users, it won't be profitable and decreased growth obviously means that profitability is further out. Hence them cutting costs.
There's obviously nothing wrong with a bootstrapped / lifestyle business. The people at Basecamp are big proponents of it. https://www.youtube.com/watch?v=lBfVxBj61z0 Here's one interview out of plenty where they talk about this kind of thing.
The VC answer is good, but I think growth is necessary to sustain the social part of a social network as well.
I joined Twitter very late, to get news when the Boston marathon bombing was happening, and while the feeling that twitter is a forum that covers the whole internet is still there, it's at late stages.
Most people are well and truly over the idea that twitter is worthwhile in and of itself, and most people are pretty much following as many people as they want to be. It's much more likely that long time users are cutting down on follows than adding new ones.
It still has a culture where you can talk to strangers on the internet, but a pretty big etiquette has grown up around that, and that can also be intimidating coming in late.
I joined Twitter very late, to get news when the Boston marathon bombing was happening, and while the feeling that twitter is a forum that covers the whole internet is still there, it's at late stages.
Most people are well and truly over the idea that twitter is worthwhile in and of itself, and most people are pretty much following as many people as they want to be. It's much more likely that long time users are cutting down on follows than adding new ones.
It still has a culture where you can talk to strangers on the internet, but a pretty big etiquette has grown up around that, and that can also be intimidating coming in late.
The simple answer is if you IPO at a certain price and declare you don't plan on growing at all, then nobody will participate in your offering or buy your shares in the open market. It's just a fact of life that as a public company you need to prove to your shareholders that next year your shares will be worth more than right now. Otherwise outside investors have no reason to invest in your company rather than keeping their money in a savings account (or a low risk alternative). The same basic premise applies to VC investments.
That's not to say that a patio11-style business is wrong, just that it's very different. It's personal preference if you've started the business and there's no right or wrong way.
That's not to say that a patio11-style business is wrong, just that it's very different. It's personal preference if you've started the business and there's no right or wrong way.
Even worse, once you've convinced investors that you're an essential component of the internet and you get a monster valuation, the only solutions worth looking at are ones that will fulfill a destiny that recedes with every passing day. Who is going to be the CEO who says "fuggeddaboudit, we ain't never gonna be Facebook. Learn to live with Twitter as the unfiltered (and therefore troll-infested) breaking news utility and whatever valuation that brings us."
Because society works better when it's growing. In a positive-sum game, coöperation is a winning strategy. In a zero-sum game, the only way to get ahead is by taking.
"why do so many companies feel like they have to grow perpetually?"
-> Capitalism - growth, year over year, leads to higher stock price (market valuation) which in turn justifies higher payouts to ceo's, bonuses to employees... as growth == innovation
If you din't keep growing and managed to keep the business profitable (hit the ceiling), then you weren't 'innovating' and should be replaced ...
... that's the mindset. I don't agree with it.
If you din't keep growing and managed to keep the business profitable (hit the ceiling), then you weren't 'innovating' and should be replaced ...
... that's the mindset. I don't agree with it.
Yeah, it's a symptom of the way that companies are valued on the open market. No one can be content with well enough as long as our pricing and ownership models work the way they work.
You need some growth, even if just to battle inflation. Inflation is nibbling away at the value constantly.
Keeping up with inflation isn't growth.
You knew exactly what was meant but just in case - you still need nominal growth to avoid negative real growth
Thanks, and yes that's what I meant :-)
This is comforting to read, because I was beginning to think I was the only one with that particular dream. I hope we both do it. Cheers!
They don't. Or at least once a company is public they don't.
At a very high level, one of the arbitrary ways to divide up stocks is into growth stocks, value stocks, and income stocks. You can google those terms if you want a deeper level of understanding i provide, since those are the terms of art used in financial circles.
Growth stocks are stocks for companies that you/investors feel will continue to see increasing profits/revenues/earnings compared to the market.
Value stocks are companies that you/investors feel will are undervalued compared to their fundamentals.
Income stocks are companies that you/investors take for the dividend payments.
Continuing at a super high level (ie these are still generalities with examples to the contrary), growth stocks have higher price to earnings ratios and are valued primarily based on capital appreciation ("i think this stock's price is undervalued compared to its actual value"), which very much depends on how successful someone thinks a company will be, whereas value stocks have low price to earnings ratios and are valued primarily based on expected dividends payments (sidenote: one way for determining the value of a stock is to take the limit of the sum of all expected dividends from now until infinity). Income stocks aren't priced incorrectly the way the other two are and tend to match what investors expect the dividend payments to be (sidenote: all stocks can/do pay dividends, but that's generally not what drives the purchase of value/growth stocks).
Tech companies are almost all growth stocks. People buy them on the expectation that they will execute better than the rest of their competitors and that this will result in a large growth in revenue. Profitability doesn't really matter that much here as long as they have enough money to keep operating, because the expectation is that profitability will come later after revenue increases.
Once the company thinks that a business unit has saturated the market to the point where it can no longer grow revenue beyond the average rate of the market, it will transition to an income stock by focusing on cutting costs and trying to increase profitability as much as possible (since a priori revenue can't really increase in relation to the market).
If a company wants to remain a growth stock it needs to 1) successfully transition business units from growth to income without losing too much revenue (and simultaneously becoming profitable based on expected revenue levels, ie driving down expenses below revenue), and 2) identify new emerging markets where they can create a new business unit that can drive growth. If you do this right, you can fund 2 with 1 and remain a growth stock indefinitely. If you do this wrong, then investors will get angry and force you to pay higher dividends and sell off or shut down the growth parts of your business.
Growth stocks have advantages for (tech) companies due to the focus not being on profitability: Paying employees with RSUs (no one really does options anymore if they're public, but sure, options, too) is attractive to employees because the stock is expected to increase in value and RSUs/options are allocated in constant amounts of stock, not constant amounts of dollars (at an income stock company, stocks aren't as attractive as cold hard cash to employees, because of all the hassle of turning them into cash for essentially no gain, and this lowers profitability for the company compared to paying straight cash due to the way accounting works). Companies can lavish nonstandard and standard benefits on employees to attract top talent without investors batting much of an eye (at an income company it's much tougher to justify super great benefits due to the focus on profitability (why pay a top-tier person if a middle tier-person costs less than revenue loss associated with not going with the best).
After a company is public it's not so much VCs as it it the stockholders in general (of which the VCs are usually still a substantial member). But in general, they'd both say the same thing: either increase revenue substantially (preferred) or gracefully transition to income stock (less preferred). VCs will hang onto the stock as long as they think that it's a good investment for their fund (i don't know when this means they sell it, but it's not necessarily immediately after IPO).
Companies get in trouble when they are having trouble growing revenue. Investors will quickly push for them to transition to an income stock if they lose confidence in the company's ability to continue to grow. This is because in order for the stock price to not drop revenue has to keep increasing or the company has to become profitable enough to justify its stock price when considered as an income stock.
Twitter wants to remain a growth stock, but investors want to see increasing revenue for that. Since twitter can't do that, it's got to focus on increasing profitability by cutting expenses.
I left off value stocks so far. Essentially, if you fuck up the transition from growth to income stock for a business unit or you fuck up identifying new markets to grow into, your stock price will go down accordingly. If people think that this was a mistake that the company can correct and learn from, then they will see the price as undervalued compared to how they think the company will perform. This belief that the market has overreacted is what allows people to consider a certain stock a value stock.
At a very high level, one of the arbitrary ways to divide up stocks is into growth stocks, value stocks, and income stocks. You can google those terms if you want a deeper level of understanding i provide, since those are the terms of art used in financial circles.
Growth stocks are stocks for companies that you/investors feel will continue to see increasing profits/revenues/earnings compared to the market.
Value stocks are companies that you/investors feel will are undervalued compared to their fundamentals.
Income stocks are companies that you/investors take for the dividend payments.
Continuing at a super high level (ie these are still generalities with examples to the contrary), growth stocks have higher price to earnings ratios and are valued primarily based on capital appreciation ("i think this stock's price is undervalued compared to its actual value"), which very much depends on how successful someone thinks a company will be, whereas value stocks have low price to earnings ratios and are valued primarily based on expected dividends payments (sidenote: one way for determining the value of a stock is to take the limit of the sum of all expected dividends from now until infinity). Income stocks aren't priced incorrectly the way the other two are and tend to match what investors expect the dividend payments to be (sidenote: all stocks can/do pay dividends, but that's generally not what drives the purchase of value/growth stocks).
Tech companies are almost all growth stocks. People buy them on the expectation that they will execute better than the rest of their competitors and that this will result in a large growth in revenue. Profitability doesn't really matter that much here as long as they have enough money to keep operating, because the expectation is that profitability will come later after revenue increases.
Once the company thinks that a business unit has saturated the market to the point where it can no longer grow revenue beyond the average rate of the market, it will transition to an income stock by focusing on cutting costs and trying to increase profitability as much as possible (since a priori revenue can't really increase in relation to the market).
If a company wants to remain a growth stock it needs to 1) successfully transition business units from growth to income without losing too much revenue (and simultaneously becoming profitable based on expected revenue levels, ie driving down expenses below revenue), and 2) identify new emerging markets where they can create a new business unit that can drive growth. If you do this right, you can fund 2 with 1 and remain a growth stock indefinitely. If you do this wrong, then investors will get angry and force you to pay higher dividends and sell off or shut down the growth parts of your business.
Growth stocks have advantages for (tech) companies due to the focus not being on profitability: Paying employees with RSUs (no one really does options anymore if they're public, but sure, options, too) is attractive to employees because the stock is expected to increase in value and RSUs/options are allocated in constant amounts of stock, not constant amounts of dollars (at an income stock company, stocks aren't as attractive as cold hard cash to employees, because of all the hassle of turning them into cash for essentially no gain, and this lowers profitability for the company compared to paying straight cash due to the way accounting works). Companies can lavish nonstandard and standard benefits on employees to attract top talent without investors batting much of an eye (at an income company it's much tougher to justify super great benefits due to the focus on profitability (why pay a top-tier person if a middle tier-person costs less than revenue loss associated with not going with the best).
After a company is public it's not so much VCs as it it the stockholders in general (of which the VCs are usually still a substantial member). But in general, they'd both say the same thing: either increase revenue substantially (preferred) or gracefully transition to income stock (less preferred). VCs will hang onto the stock as long as they think that it's a good investment for their fund (i don't know when this means they sell it, but it's not necessarily immediately after IPO).
Companies get in trouble when they are having trouble growing revenue. Investors will quickly push for them to transition to an income stock if they lose confidence in the company's ability to continue to grow. This is because in order for the stock price to not drop revenue has to keep increasing or the company has to become profitable enough to justify its stock price when considered as an income stock.
Twitter wants to remain a growth stock, but investors want to see increasing revenue for that. Since twitter can't do that, it's got to focus on increasing profitability by cutting expenses.
I left off value stocks so far. Essentially, if you fuck up the transition from growth to income stock for a business unit or you fuck up identifying new markets to grow into, your stock price will go down accordingly. If people think that this was a mistake that the company can correct and learn from, then they will see the price as undervalued compared to how they think the company will perform. This belief that the market has overreacted is what allows people to consider a certain stock a value stock.
Growth comes from reinvestment of capital into the business. This makes sense from a shareholder perspective when the risk-adjusted return on this invested capital outweighs the returns capital could get elsewhere (other stocks).
Some companies will actually stop growing and start paying dividends/sharebuybacks for this reason.
Some companies will actually stop growing and start paying dividends/sharebuybacks for this reason.
One simple answer to your question - speaking generally, as I know nothing about Twitter, specifically - is Twitter has yet to realize the expectations the _existing_ investors placed on it.
Real money was spent on real dreams, and the dreams failed to materialize. To give up on the BIG is to accept that their returns will fall sadly short.
Real money was spent on real dreams, and the dreams failed to materialize. To give up on the BIG is to accept that their returns will fall sadly short.
It's not just VCs, it's the current owners. When you market value is much higher than sales and earnings, owners expect growth. This is the natural consequence of getting outside equity. Please note that the owners (equity holders) demanding this growth include the employees and managers.
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That's the nature of capitalism. If one company is growing faster than another, relative to the cost of their shares, the capital will move to the company that is growing faster until the price has adjusted.
Because they are public, have investors and are for sale. They are going to keep cutting until they appear cheap enough to buy. And once they are bought there will be more cuts. Twitter is having death pangs
You say that it's very sad for people to lose their jobs, but how sad is it if a business does not grow as fast as it might have, and so doesn't employ those people in the first place?
When you get institutional investors your shareholders becomes liquid. When a company goes public, new shareholders (banks, funds, individuals) want growth FOREVER.
You nailed it, taking investor money and being guided by it to grow until your business breaks. Really appreciate your last paragraph.
Because money people expect the second derivative to be positive (because they only make money if that's the case).
usually, the business that does not grow is just one step away from going into decline. Do not remember where I heard it from. The idea is that a business has to grow; if a business is stagnating, it's too easy for it to slip into a decline and then oblivion.
You can open a bakery and run it for a hundred years selling the same bread to the same folks.
They're shedding costs in anticipation of delivering poor subscriber and revenue numbers this Thursday.
If the stock falls below $10, pretty much any company can swoop in and buy them for a song.
If the stock falls below $10, pretty much any company can swoop in and buy them for a song.
Quarterly Earnings Reports.
Companies have to report earnings quarterly. Investors expect quarterly growth. If they don't get it they punish the company.
Companies have to report earnings quarterly. Investors expect quarterly growth. If they don't get it they punish the company.
Simple answer: net marginal customer revenue.
I'm not sure if that is an accounting term but I've seen it used in similar situations to describe how the business model works, or doesn't work.
It goes kind of like this:
Lets say that 1 SRE engineer, 1/4th developer, 1/3rd customer support agent, and 1/10th of a manager can support 10,000 users. (all made up numbers of course for this example). You can't really cut up manager's in 10ths so you really need 10x this to have 10 SRE engineers,4 developers, 3 customer support agents, and 1 manager.
So that is 100,000 users. But the cost of all those people don't bring in enough revenue from those users.
But there is a "scaling" effect, such that if you have twice that many people, instead of 200,000 users you can support 225,000 users. Four times and instead of 450,0000 users you can support 500,000 users. So the trick is to find the point in the model where you have enough users to make enough revenue to pay for all those people, and the hardware that supplies the service. At that point you're "break even", and then if you can push past it, you start generate cash above what you need, or net profit.
The more you can grow, the more net cash you can generate, and the "value" of your company, is typically a function on your earnings before you start paying taxes, and costing depreciation (EBITDA).
A web business like Twitter's (or Facebook's for that matter) then can be valued based on how many users they have and the revenue per thousand user metrics they can drive minus the cost per thousand users.
If you stop growing before your generating net income, you die. So there is a minimum you have to hit. And if you're well managed, you are constantly trying to minimize costs and maximize revenue to get a bigger income factor.
Here is another issue, generally, like with "blade computers" you get the most money by having just enough people and resources to handle all of your load. When you anticipate growth, if you build out more resources and that growth doesn't come, your stuck with the costs. Like having a computing blades chassis with just one blade in it. A really expensive computer. So you back off and lay off those folks you hired to get your costs back under control so you don't lose a ton of money.
Again, a well managed company will attempt to grow without hiring resources right up until they can't grow any further, and then hire. So that when the next tranche of people show up, you are ideally already net positive on income, just not by as large a margin as you used to be.
At the end of the day you're managing costs, user growth, and revenue per user. If you can't juggle all three you run a high risk of becoming an acquisition by someone who can.
I'm not sure if that is an accounting term but I've seen it used in similar situations to describe how the business model works, or doesn't work.
It goes kind of like this:
Lets say that 1 SRE engineer, 1/4th developer, 1/3rd customer support agent, and 1/10th of a manager can support 10,000 users. (all made up numbers of course for this example). You can't really cut up manager's in 10ths so you really need 10x this to have 10 SRE engineers,4 developers, 3 customer support agents, and 1 manager.
So that is 100,000 users. But the cost of all those people don't bring in enough revenue from those users.
But there is a "scaling" effect, such that if you have twice that many people, instead of 200,000 users you can support 225,000 users. Four times and instead of 450,0000 users you can support 500,000 users. So the trick is to find the point in the model where you have enough users to make enough revenue to pay for all those people, and the hardware that supplies the service. At that point you're "break even", and then if you can push past it, you start generate cash above what you need, or net profit.
The more you can grow, the more net cash you can generate, and the "value" of your company, is typically a function on your earnings before you start paying taxes, and costing depreciation (EBITDA).
A web business like Twitter's (or Facebook's for that matter) then can be valued based on how many users they have and the revenue per thousand user metrics they can drive minus the cost per thousand users.
If you stop growing before your generating net income, you die. So there is a minimum you have to hit. And if you're well managed, you are constantly trying to minimize costs and maximize revenue to get a bigger income factor.
Here is another issue, generally, like with "blade computers" you get the most money by having just enough people and resources to handle all of your load. When you anticipate growth, if you build out more resources and that growth doesn't come, your stuck with the costs. Like having a computing blades chassis with just one blade in it. A really expensive computer. So you back off and lay off those folks you hired to get your costs back under control so you don't lose a ton of money.
Again, a well managed company will attempt to grow without hiring resources right up until they can't grow any further, and then hire. So that when the next tranche of people show up, you are ideally already net positive on income, just not by as large a margin as you used to be.
At the end of the day you're managing costs, user growth, and revenue per user. If you can't juggle all three you run a high risk of becoming an acquisition by someone who can.
facebook wants new users so it came up with free basics shit.
I still maintain that screwing over client developers had something to do with it. At the very least it didn't help them "control the twitter experience". Every time I see one of their new ads about how much Twitter loves developers I laugh out loud. There is zero chance I'll ever integrate Twitter into anything I do, period. I'll fight against it anywhere I work and encourage all my peers to do the same.
Did everyone forget they didn't even invent the word "Tweet"? Nor did they write their mobile clients. They had no idea what they were doing and stumbled into success. Then the MBAs turned around and stabbed us in the back.
Twitter can fuck right off.
Did everyone forget they didn't even invent the word "Tweet"? Nor did they write their mobile clients. They had no idea what they were doing and stumbled into success. Then the MBAs turned around and stabbed us in the back.
Twitter can fuck right off.
I feel the same way. I stopped using Twitter after that betrayal and never bothered to come back to it. Don't know if it made the difference to hurting their business, but I feel they missed out on something big by losing developer mindshare.
What "betrayal" are you talking about? I've never used Twitter, so my knowledge lacks a little.
After years of being increasingly hostile to 3rd party developers, Twitter finally decided that you needed their permission to have more than 100k users of your twitter client. That announcement was bundled with tightened rate limiting and stricter controls over how you could display tweets. This was the final stake in the coffin for many Twitter clients.
https://blog.twitter.com/2012/changes-coming-in-version-11-o...
https://blog.twitter.com/2012/changes-coming-in-version-11-o...
There was a period here on HN where every week or two they'd be a story or an Ask HN about someone hitting the limit and having to shut down.
To add a bit more to the context to the parent, all these third party clients made it possible for people to use Twitter how they wanted to, to tailor it to them. Twitter decided they wanted you to use it in their way.
It was a big shift in the culture of twitter. It's hard to quantify as everyone has their own perspective on it.
To add a bit more to the context to the parent, all these third party clients made it possible for people to use Twitter how they wanted to, to tailor it to them. Twitter decided they wanted you to use it in their way.
It was a big shift in the culture of twitter. It's hard to quantify as everyone has their own perspective on it.
The rate limit was bad, but the maximum user limit was a complete killer. Basically, if your app was a success, Twitter would shut it down. Overnight, it became a bad investment to make an app that tied into Twitter.
IIRC, they changed their policies and APIs to being much more restrictive against 3rd party apps. Something to do with rate limits maybe.
They didn't invent the hashtag either.
Yes, Twitter should become a non-profit. They just were spitballing around, then the users came and made them what they are today. All their good ideas, besides starting a micro-blogging platform, came from outside the company.
And how did they thank them? Cutting of 3rd party clients and shadowbanning users?
And how did they thank them? Cutting of 3rd party clients and shadowbanning users?
> Yes, Twitter should become a non-profit.
And what do you tell Twitter's investors ? "Thanks for the money, we are now going non profit!". A public company just can't do that, that's not how it work, investors want return on their investments and they didn't invest in a "non-profit".
And what do you tell Twitter's investors ? "Thanks for the money, we are now going non profit!". A public company just can't do that, that's not how it work, investors want return on their investments and they didn't invest in a "non-profit".
yes, I know they won't do this. But one can dream.
hahah right?
Facebook parted ways with a lot of its developers as well (remember the Friends data API?), but then went on for more fast growth and happy investors.
These are my feelings... about Instagram.
Same with Facebook. It's actually a HUGE reason we're building in a "non-compete" clause into our corporate charter for our platform.
No offense to the people I know working at Twitter, but these cuts aren't deep enough to stem the losses.
While Twitter revenue grew $664M, $1,403M to $2,218M over the past three years, it is going to be a lot flatter than that at the end of this year - and despite that growth they've consistently been losing about $500M p.a ($645M, $577M and $521M respectively)
3,800 people work there - and equivalent cuts last year can barely be noticed on the financials.
The good times are over - they've spent billions over the last few years and not done anything to save them from flat user growth. They really need a wholesale shakeup and doing it over time, like Yahoo did, will just make it worse.
edit: here's a more brutal analysis [0][1]:
> PS. Twitter staff - I am not exaggerating. Look at the young man on your left and the young woman on your right. Only one of you three will keep your job.
[0] part 1 - http://brontecapital.blogspot.com.au/2016/10/some-comment-on...
[1] part 2 - http://brontecapital.blogspot.com.au/2016/10/measuring-how-b...
While Twitter revenue grew $664M, $1,403M to $2,218M over the past three years, it is going to be a lot flatter than that at the end of this year - and despite that growth they've consistently been losing about $500M p.a ($645M, $577M and $521M respectively)
3,800 people work there - and equivalent cuts last year can barely be noticed on the financials.
The good times are over - they've spent billions over the last few years and not done anything to save them from flat user growth. They really need a wholesale shakeup and doing it over time, like Yahoo did, will just make it worse.
edit: here's a more brutal analysis [0][1]:
> PS. Twitter staff - I am not exaggerating. Look at the young man on your left and the young woman on your right. Only one of you three will keep your job.
[0] part 1 - http://brontecapital.blogspot.com.au/2016/10/some-comment-on...
[1] part 2 - http://brontecapital.blogspot.com.au/2016/10/measuring-how-b...
Woah, they only have 3800 employees and spend 2.7Bn/yr? That's 700k per employee. What's all that money for?
Stock options. It starts at the top:
https://pbs.twimg.com/media/Cuplqd1XEAEre6n.jpg:large
Being paid $72M p.a to oversee ~$500M p.a in losses. Great job if you can get it.
https://pbs.twimg.com/media/Cuplqd1XEAEre6n.jpg:large
Being paid $72M p.a to oversee ~$500M p.a in losses. Great job if you can get it.
more info from their filing[0]:
> During the twelve months ended December 31, 2015 and 2014, we recognized $682.1 million and $631.6 million of expense related to stock-based compensation, respectively. As of December 31, 2015, we had unrecognized stock-based compensation expense of approximately $1.25 billion related to outstanding equity awards
[0] see page 47 https://investor.twitterinc.com/secfiling.cfm?filingID=15645...
> During the twelve months ended December 31, 2015 and 2014, we recognized $682.1 million and $631.6 million of expense related to stock-based compensation, respectively. As of December 31, 2015, we had unrecognized stock-based compensation expense of approximately $1.25 billion related to outstanding equity awards
[0] see page 47 https://investor.twitterinc.com/secfiling.cfm?filingID=15645...
To be fair, that guy was previously CFO for the NFL. I'm not saying it's the right decision but they probably had to pay him that much just to draw him away.
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Marketing, running the service and data centers, office space, research and development, capex, etc, etc. Running companies is expensive beyond just the salaries.
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You'd think they would have figured out targeted ads by now. If I follow people who post about RF/Microwave, antennas, SDR, and ham radio, one would think I'd see ads from Keysight and Tektronix, but no, it's garbage like football and pop music. FAIL!
I also don't like that I don't see all the tweets from a person. They are pruning the timeline.
Good riddance to twitter.
I also don't like that I don't see all the tweets from a person. They are pruning the timeline.
Good riddance to twitter.
I at least get tech-related ads, but they are surprisingly useless as well. People trying to sell me tips to market my (non-existing) content better. Companies trying to be "hip" for young people. Ads that clearly haven't been translated by a native speaker. There is some monitoring service whose ads I get shown ALL the time. The ad says "The Pingdom Alternative" in large letters and I can't even remember the name of the company making the ad. So good job anchoring your competitor in my mind...
This means either their targeting is pretty crap or they only get low-quality ads.
This means either their targeting is pretty crap or they only get low-quality ads.
I've used twitter ads to some success, but the cost per acquisition was higher than other social media so after several rounds of optimization I ended up dropping it. I wouldn't write them off just yet, though.
I've spent about $100 trying to promote my history podcast curation site on Twitter, and only got about 5 hits.
In comparison to FB ads (and my experience), Twitter ads are absolutely useless.
And since FB ads are useless, that's saying something
The ads on both platforms are primarily useful for gathering a following local to the platform. For example, on Facebook, you want to buy likes/engagement with your page, not outbound stuff. On Twitter, you want to buy followers. Once you have a following, you engage with them and use the content you post to drive them to your site where you (presumably) make money from them.
The ads on the social platforms are not worth anything if you're using them as general CPC ads to try to drive traffic to your site. In fact, I've found this is even true for Google/Adwords.
The ads on the social platforms are not worth anything if you're using them as general CPC ads to try to drive traffic to your site. In fact, I've found this is even true for Google/Adwords.
I don't understand this logic. I've had great success in driving traffic my FB to websites, and for much lower cost than Adwords.
Buying FB page likes seems like a pointless exercise considering that only a tiny percentage of your users actually ever see your posts unless you boost them.
Buying FB page likes seems like a pointless exercise considering that only a tiny percentage of your users actually ever see your posts unless you boost them.
I have no idea how useful/useless FB ads are for advertisers in general, but as a FB user I definitely click on more ads than I do on Google. Unsurprisingly, the stuff I read, "like" and respond to seems to result in better targeting than the stuff I search for and click away to.
My comment was based upon what I've heard from people who advertise on FB. I filter out the ads so I don't know what I'm missing.
Have you considered running Reddit ads on history-centric subreddits?
Yeah, actually. I also set up /r/HistoryPodcast and spent about $10 on Reddit twice. Both times I had an ongoing AMA with a podcaster and targeted /r/history. I thought that would be a sure thing, but even then I only had a handful of click-throughs.
I really wish reddit had a "show me previous ads" feature. A lot of they ads are stuff I'm interested in, but I don't notice them until I'm moving away from the page.
Reddit ads must be like dirt fucking cheap too, right? Seems like they have a lot of extra inventory, based on the # of "internal" subreddit ads I see.
I love history podcasts! What's your site?
Thanks! It's History-Podcasts.com. I am a couple of months behind in putting in new shows, but there are over 200 there now.
That's a nice site. I remember when the entire marketplace was "The History of Rome" several years ago.
Consider ultra narrowcasting. I don't think the British History Podcast guy (who is awesome to listen to BTW and officially VLM endorsed) is going to demand the full $100 to advertise and would surely result in orders of magnitude more than five clicks, for example.
As a user of your service I'd advise that a big problem with podcasts that are essentially volunteer operations is long dry spells. The bulgarian history podcast, which is much more interesting than it sounds, although the intro music makes my kids cry, had a roughly five month dry spell this spring where I unsubscribed in my podcast catcher because I thought the podcast had completely died. Cool, its not dead. Now I should resubscribe although the point of this story is you need to automate or productize or make more efficient that process, not just dumb luck that I run into the guy who runs the site on HN so I click around some of my old favorites and holy cow the other BHP is back, thru pure luck.
There must be some kind of technological magic that could be spun somehow to help volunteers having a dry spell from having their audience melt away. Reminder service on the web or email to let people know dead podcasts have been resurrected? You might even be able to generalize this magic, whatever it is, to let people know about resurrected open source projects or similar.
"Its not dead, its just pining for the fjords".com or something
Consider ultra narrowcasting. I don't think the British History Podcast guy (who is awesome to listen to BTW and officially VLM endorsed) is going to demand the full $100 to advertise and would surely result in orders of magnitude more than five clicks, for example.
As a user of your service I'd advise that a big problem with podcasts that are essentially volunteer operations is long dry spells. The bulgarian history podcast, which is much more interesting than it sounds, although the intro music makes my kids cry, had a roughly five month dry spell this spring where I unsubscribed in my podcast catcher because I thought the podcast had completely died. Cool, its not dead. Now I should resubscribe although the point of this story is you need to automate or productize or make more efficient that process, not just dumb luck that I run into the guy who runs the site on HN so I click around some of my old favorites and holy cow the other BHP is back, thru pure luck.
There must be some kind of technological magic that could be spun somehow to help volunteers having a dry spell from having their audience melt away. Reminder service on the web or email to let people know dead podcasts have been resurrected? You might even be able to generalize this magic, whatever it is, to let people know about resurrected open source projects or similar.
"Its not dead, its just pining for the fjords".com or something
I don't know if you're taking show suggestions, but I'd like to recommend The Dollop. The Dollop is a bi-weekly* American History Podcast. Every week, Dave Anthony reads a story to his friend, Gareth Reynolds, who has no idea what the topic is going to be about.
It's hysterical, and has a huge following. They do live shows and everything. Just finished up a tour of Australia.
*(bi-weekly means whatever Dave wants it to mean)
It's hysterical, and has a huge following. They do live shows and everything. Just finished up a tour of Australia.
*(bi-weekly means whatever Dave wants it to mean)
Hey, thanks! I was not aware of that show.
As to the first, without seeing their internals, they might simply not have enough ad volume from more niche advertisers to cater to such customers. Everyone loves "brand" advertising because the decision to, say, buy a Chevy is essentially unattributable, and they spend a lot on ads to achieve saturation. By contrast, small "product" advertisers might actually expect to see ROI.
They are leaving an enormous amount of money on the table by not inserting their own affiliate links though.
They are leaving an enormous amount of money on the table by not inserting their own affiliate links though.
They need to follow the google and Facebook advertising models. When they were starting as platforms, I was able to advertise with success, competing with a small budget for niche markets. If they do not have the advertising niche, reach out to entrepreneurs.
Well that's kind of a chicken and egg thing though. If they don't have the features that make for effective ad targeting, then small advertisers don't see ROI.
[deleted]
Is there a third party app which would not show promoted tweets? they are so annoying and un related
What about repetitive tweets? I stopped following so many publications because they would post an article link, then repeatedly change the title or the catch and post the same link. Very frustrating.
The Economist, for one, has a "The Economist, Once" account that only tweets articles once, when they are published!
And yet I rarely ever see anything on my timeline from the 'Once' account, but plenty from the regular account, and not too many repeats. It seems the new curated timeline really hurts the post-once approach.
IIRC, that'd get the apps API access cut off.
But if you want to have fun, keep blocking promoted tweets. After a month or two, things get... "interesting" in terms of what you see. Well, at least entertaining.
But if you want to have fun, keep blocking promoted tweets. After a month or two, things get... "interesting" in terms of what you see. Well, at least entertaining.
Please see my comment here: https://news.ycombinator.com/item?id=12789001
Only one third party app receives Promoted Tweets, and no third party apps are required to display them.
Only one third party app receives Promoted Tweets, and no third party apps are required to display them.
[deleted]
[deleted]
I use Twidere, and don't think I've ever seen a promoted tweet.
All third party apps (except a single Enterprise tool) do not receive Promoted Tweets. They're only requested and displayed within the Twitter "Owned and Operated" clients.
I use Tweetbot on ios and I don't see promoted tweets
Says the frog to the scorpion: "Why have you stung me? We will both die." and the scorpion answers "I'm a VC and I will always aim for the 10x exit, this is my nature"
Twitter is by far the #1 service I use everyday. It's been the most valuable to me from a networking perspective where I've made friends and professional connections. I also happen to be a shareholder. It's been disappointing to watch Twitter try to become a business and completely falling flat.
The acquisition of Vine and Periscope haven't led to much and the user growth from Live video is still t be seen.
The product is immensely complicated compared to something like Instagram or Snapchat. It manages to be everything and nothing at the same time. I've been a fan of Jack Dorsey's work at Square but monetization is a complete different animal in that industry.
To summarize I just don't know what the future of Twitter as a business will hold but I guess I'm here for the ride.
The acquisition of Vine and Periscope haven't led to much and the user growth from Live video is still t be seen.
The product is immensely complicated compared to something like Instagram or Snapchat. It manages to be everything and nothing at the same time. I've been a fan of Jack Dorsey's work at Square but monetization is a complete different animal in that industry.
To summarize I just don't know what the future of Twitter as a business will hold but I guess I'm here for the ride.
> It manages to be everything and nothing at the same time
True.
To me it is mostly a pre-filtered news website. I follow people who talk about stuff that I'm currently intersted in.
But it seems many people using it diffrently.
Some people use it to update their customers. Some to force their political agenda onto the world.
True.
To me it is mostly a pre-filtered news website. I follow people who talk about stuff that I'm currently intersted in.
But it seems many people using it diffrently.
Some people use it to update their customers. Some to force their political agenda onto the world.
I use it as a news site as well, and to resolve customer support issues. On that topic, it's simply amazing how much more responsive a company is if you contact them about a an issue on twitter than in any other form of communication.
I believe twitter should segment and provide platforms for specific types of users.
I believe twitter should segment and provide platforms for specific types of users.
Twitter needs to find a frictionless way to get paid by their regular users that most users won't notice or think much about. Several potentials exist: can charge to follow additional users above a certain threshold; can charge to expand publishing platform (i.e., to be followed by more than a certain quantity of users); can have "premium channel"-style users that only paid members can follow (this may also be a way to allow publishers to monetize; set your feed "paid follower only" and split the revenue with Twitter), and so forth.
The FREE! model only works out when you can sell your users' attention. Twitter has proven that it can't do that -- for whatever reason, user attention on Twitter is not worth what it's worth on Facebook or Google and they can't make a profit from it. So they need another way to monetize, and IMO that should be the tried and true "make people pay for what they use".
The FREE! model only works out when you can sell your users' attention. Twitter has proven that it can't do that -- for whatever reason, user attention on Twitter is not worth what it's worth on Facebook or Google and they can't make a profit from it. So they need another way to monetize, and IMO that should be the tried and true "make people pay for what they use".
Paying in order to increase the maximum count of followers sounds really bad, given that those are the users that also generate content and hence the reason for why you also have lurkers with under 100 followers that just consume content.
Your proposal is a terrible idea, because Twitter should be paying those that genuinely attract an audience, not vice versa, since those people can always switch. Popular people will be popular anywhere. E.g. Linus Tolvards has a big and active audience on Google+, even though it is in general a ghost town.
Your proposal is a terrible idea, because Twitter should be paying those that genuinely attract an audience, not vice versa, since those people can always switch. Popular people will be popular anywhere. E.g. Linus Tolvards has a big and active audience on Google+, even though it is in general a ghost town.
I imagine that they will try to leveraging/monetizing the influencer marketing trend more.
Essentially a company / influencer marketplace.
They are the ones with the perfect data insight.
This combined w/ a "show ad to people who follow person N (and alike) might be a very strong ad format only they (and instagram, snapchat) can provide
Essentially a company / influencer marketplace.
They are the ones with the perfect data insight.
This combined w/ a "show ad to people who follow person N (and alike) might be a very strong ad format only they (and instagram, snapchat) can provide
Advertising is a great model.
Twitter's problem is that their ads don't work very well (compared to Google and FB), and their audience isn't growing.
Both of these things are solvable.
It isn't at all clear why people think there needs to be a new model. Advertising has worked well for hundreds of years (newspapers/radio/tv/internet) but it needs an audience. Twitter nearly has this.
Twitter's problem is that their ads don't work very well (compared to Google and FB), and their audience isn't growing.
Both of these things are solvable.
It isn't at all clear why people think there needs to be a new model. Advertising has worked well for hundreds of years (newspapers/radio/tv/internet) but it needs an audience. Twitter nearly has this.
My preferred approach would be something like reddit gold; encourage the followers to pay for benefits for those accounts they particularly value.
Actually monetising a twitter account directly is a risky business, as it could easily drive down quality.
Actually monetising a twitter account directly is a risky business, as it could easily drive down quality.
Can we talk about Fabric again? Fabric [1] is a product done by Twitter but heavily de-emphasizes the Twitter association -- it's a value-added Twitter SDK that apps can build into themselves and get crash reporting (ex-Crashlytics) and ad network integration (MoPub) too.
In the scheme of Twitter's self-reflection trying to figure out how to cut costs and find what it wants to do, do you feel Fabric fits into it? Do you feel the 'core platform' i.e. the microblogging site fits into it? Should the less strategic one of these be spun out; or should they be less separated?
[1] https://get.fabric.io
In the scheme of Twitter's self-reflection trying to figure out how to cut costs and find what it wants to do, do you feel Fabric fits into it? Do you feel the 'core platform' i.e. the microblogging site fits into it? Should the less strategic one of these be spun out; or should they be less separated?
[1] https://get.fabric.io
This is why I don't use Fabric. It's really unfortunate.
This great piece of technology doesn't belong to them. I would use it if it was owned by some other company that's more fit for the ownership, such as Google, because I know they have a clear business model and know exactly what they will do with the data they gather. But at this point Twitter has 0 trust among developers.
Why would I depend on a piece of technology developed by a company that's struggling to find a way to make money and will probably do whatever is possible to extract value out of its assets? (Which includes spinning it off to oblivion)
This great piece of technology doesn't belong to them. I would use it if it was owned by some other company that's more fit for the ownership, such as Google, because I know they have a clear business model and know exactly what they will do with the data they gather. But at this point Twitter has 0 trust among developers.
Why would I depend on a piece of technology developed by a company that's struggling to find a way to make money and will probably do whatever is possible to extract value out of its assets? (Which includes spinning it off to oblivion)
Fabric fits in by providing twitter with a boat load of demographic and app usage data. They may still want that data for advertising purposes.
Having said that, I'm personally always wary about using an infrastructure piece for free. If my app relies on something, it's pretty important that it not easily go away. I can't count the HN threads of upset developers, frustrated about something being shuttered that was provided free.
Disclosure: I'm the co-founder of https://raygun.com which does mobile crash reporting, and more.
Having said that, I'm personally always wary about using an infrastructure piece for free. If my app relies on something, it's pretty important that it not easily go away. I can't count the HN threads of upset developers, frustrated about something being shuttered that was provided free.
Disclosure: I'm the co-founder of https://raygun.com which does mobile crash reporting, and more.
And think about how much this costs Twitter! The Fabric SDK allows apps to do phone number verification (SMS/Voice calls) for free. This is usually the single greatest cost associated with running any app that does phone number verification (often even above engineering salaries). Multiply the number of SDK users by the cost of SMS/voice delivery, and that's a ton of money out the door every month.
There were some rumors that Twitter has tried to spin off Fabric into another home, but it sounds like potential buyers balked when they saw the costs associated with it.
The prevailing theory is that Twitter originally saw this as a way to collect user data in the mobile app paradigm in the same way that the Twitter "follow" and "tweet" buttons do in the web paradigm. It sounds like it hasn't paid off, though.
There were some rumors that Twitter has tried to spin off Fabric into another home, but it sounds like potential buyers balked when they saw the costs associated with it.
The prevailing theory is that Twitter originally saw this as a way to collect user data in the mobile app paradigm in the same way that the Twitter "follow" and "tweet" buttons do in the web paradigm. It sounds like it hasn't paid off, though.
You forget that Twitter purchased an SMS aggregator a few years back. SMS sending is near free for Twitter. I still remember integrating all of the VPNs to the carriers to support this mess.
"Near free" is expensive at that scale. Look at Twilio's S1, Twitter's costs can't be much lower than theirs.
Fabric is a good product, but all Apple has to do is wave their hands and it's dead. If/when they launch their own product, third-parties fun will be over.
Fabric's been supporting Android since very early on. I'm sure they don't want to compete with Apple but it certainly wouldn't kill the platform either.
Fabric is an user tracking beacon. You cant sell targeted ads at scale without owning one.
3800 employees, $2700M spent a year.
That's 700k per employee. IT'S FREAKING INSANE!
There are only 4 tech companies in the world who ever made more than $700k in revenue per head, in any recent years: SoftBank, Microsoft, Google, Apple
http://uk.businessinsider.com/top-tech-companies-revenue-per...
That's 700k per employee. IT'S FREAKING INSANE!
There are only 4 tech companies in the world who ever made more than $700k in revenue per head, in any recent years: SoftBank, Microsoft, Google, Apple
http://uk.businessinsider.com/top-tech-companies-revenue-per...
I don't understand how Twitter ended up with almost four thousand employees. If I had to guess how many people worked there, I would have guessed at least an order of magnitude less than that.
When Facebook acquired Instagram, didn't they have something like 15 employees?
When Facebook acquired Instagram, didn't they have something like 15 employees?
Snekay VLM skill, don't tell anyone... business leaders will pretend internal organization is confidential, so all the twitter.com website reports is 40% of personnel are technical and if you've been around the block a few times, thats a way of saying 60% are in sales. So secret of them like trying to peer into the NSA. Then HR posts 50 bazillion job openings totally dropping the docs on every strategy the company has ... if I know which cities are hiring data center operations employees and what skill set they want, then I can tell you where the data centers roughly are, and in some cases exactly how they operate.
So don't tell any business leaders, let them stay in the dark about secrecy, but I can tell you purely as an outsider using their own websites for "about" and "careers" they have about 2000 people in sales, about 200 in engineering support of sales (aka data engineers). About 600 in operations (even 24x7 what is that small army doing?). Several hundred software developers of various requirement sets. A couple hundred deep research R+D types. My numbers are wrong and not in a quantity large enough to matter, at least for investment decisions.
In a way your estimate is about right, takes a couple hundred front line people to literally make it roll. Everyone else is trying to sell or support or develop or otherwise glom on. And are more or less disposable in that they aren't needed day to day to make the place roll. Yeah yeah I know, no accounting dept will get noticed after a couple quarterly taxes are missed, but just on a pure "who needs to show up tomorrow or else the doors close forever" that number is only in the hundreds.
I've been doing this since the 80s for my own investment purposes and stock trading based on published newspaper job reqs and more recently based on job postings is not legally insider trading. If I were to apply and gather data with or without signing a NDA that would be open and shut example of insider trading, so I never invest in companies I apply to work at, just to keep things perfectly clean.
I do extensively research jobs I apply to, and that sometimes freaks people out when I walk in and have insider level knowledge of their operations just from reading the last couple years of employment ads. Gotta keep the power level masked when its unnecessary. "wait wait wait, how could you know we're secretly opening a new engineering center in XYZ when we haven't even told our current employees they're all getting downsized?" "Well you put an ad in the paper to hire them in XYZ so what do you think I should assume, not my problem if your employees don't read the papers."
I was originally inspired by blackhat social engineering stuff from decades ago.. if they're trying to hide the make and model of the minicomputer you're dialing into, don't spend days trying everything when you can just read off the info from the employment ad for the "rsts 10.0 sysadmin" in the newspaper a year ago or whatever.
So don't tell any business leaders, let them stay in the dark about secrecy, but I can tell you purely as an outsider using their own websites for "about" and "careers" they have about 2000 people in sales, about 200 in engineering support of sales (aka data engineers). About 600 in operations (even 24x7 what is that small army doing?). Several hundred software developers of various requirement sets. A couple hundred deep research R+D types. My numbers are wrong and not in a quantity large enough to matter, at least for investment decisions.
In a way your estimate is about right, takes a couple hundred front line people to literally make it roll. Everyone else is trying to sell or support or develop or otherwise glom on. And are more or less disposable in that they aren't needed day to day to make the place roll. Yeah yeah I know, no accounting dept will get noticed after a couple quarterly taxes are missed, but just on a pure "who needs to show up tomorrow or else the doors close forever" that number is only in the hundreds.
I've been doing this since the 80s for my own investment purposes and stock trading based on published newspaper job reqs and more recently based on job postings is not legally insider trading. If I were to apply and gather data with or without signing a NDA that would be open and shut example of insider trading, so I never invest in companies I apply to work at, just to keep things perfectly clean.
I do extensively research jobs I apply to, and that sometimes freaks people out when I walk in and have insider level knowledge of their operations just from reading the last couple years of employment ads. Gotta keep the power level masked when its unnecessary. "wait wait wait, how could you know we're secretly opening a new engineering center in XYZ when we haven't even told our current employees they're all getting downsized?" "Well you put an ad in the paper to hire them in XYZ so what do you think I should assume, not my problem if your employees don't read the papers."
I was originally inspired by blackhat social engineering stuff from decades ago.. if they're trying to hide the make and model of the minicomputer you're dialing into, don't spend days trying everything when you can just read off the info from the employment ad for the "rsts 10.0 sysadmin" in the newspaper a year ago or whatever.
Somehow I find myself unable to get riled up about employee compensation being too high.
Apart from killing their third-party ecosystem, I think Twitter's biggest failure has been their inability to monetize their huge celebrity and brand base, and I wonder if this partly has to do with their "verified account" system. How to charge celebrities/brands without pissing everyone off?
Top-tier celebrities and brands can and would easily fork out high fees to use Twitter. But Twitter can't just charge some blanket fee to verified accounts because right now, "verified accounts" are not exclusive enough. They also include "key influencers", bloggers, industry people, other hangers-on (let's call them Group B) and they can't/won't support the high fees and would revolt.
Twitter could try and create a new way to categorize celebs/brands, but that would confuse things and may make Group B users feel less elite: so they'd revolt as well.
Top-tier celebrities and brands can and would easily fork out high fees to use Twitter. But Twitter can't just charge some blanket fee to verified accounts because right now, "verified accounts" are not exclusive enough. They also include "key influencers", bloggers, industry people, other hangers-on (let's call them Group B) and they can't/won't support the high fees and would revolt.
Twitter could try and create a new way to categorize celebs/brands, but that would confuse things and may make Group B users feel less elite: so they'd revolt as well.
My sense is that while Twitter has been able to hire some very talented engineers (incl. but not limited to those I know personally), the high-level technical leadership hasn't been particularly successful.
Is there room for an independent 'moonshot' team reporting directly to the board?
Is there room for an independent 'moonshot' team reporting directly to the board?
I've thought long and hard about why I believe Twitter as a service isn't very valuable to me and I thing I've come up with the answer. Twitter is great at delivering live information. If I'm following my favorite artist on twitter then I know immediately when his album drops. However, that one important tweet that matters to me is mixed in with a 100 other tweets of people I follow retweeting or posting irrelevant things. For that reason the situation in which Twitter truly shines for me (instant, up to date information) is overshadowed by the fact that many people also use Twitter to post funny things which I don't care about.
Have you experimented with turning mobile notifications on for certain accounts? By doing that, I've got a steady stream of tweets from interesting people when I open the app and browse my timeline, but I don't miss tweets from accounts I want to see immediately because their tweets are pushed to my iPhone.
The drawback is that you have to get all of that account's tweets pushed to you even if you only care about a few of them.
The drawback is that you have to get all of that account's tweets pushed to you even if you only care about a few of them.
Twitter should be bought by a non-profit and get re-opened to 3rd party tools like it used to be.
I hate the current Twitter, but can't neglect the benefits it has for the entire world (and not only twitter users)
I hate the current Twitter, but can't neglect the benefits it has for the entire world (and not only twitter users)
There is value in twitter. Even the people who joke about twitter probably realise there is value in it.
There is still nothing that enables one to broadcast information and enable real time conversations better than twitter for companies, governments orgs or celebrities.
That twitter cannot extract value from these cash rich and price insensitive entities is a gigantic mystery.
There is still nothing that enables one to broadcast information and enable real time conversations better than twitter for companies, governments orgs or celebrities.
That twitter cannot extract value from these cash rich and price insensitive entities is a gigantic mystery.
It's risky -- it's hard to compete with 'free', because it takes no money and very little effort.
If Twitter charges even just a little for influencers to post, lots of them will just shift more of their announcements to Facebook status updates -- a somewhat similar feature of the other social app everyone already has installed.
Despite no one platform offering exact feature+UX parity with Twitter, there are several other free platforms that are good enough for people. If Twitter makes changes that make posting on it harder, its still-organically-growing competitors could see an influx of people who will choose to abandon Twitter.
If Twitter charges even just a little for influencers to post, lots of them will just shift more of their announcements to Facebook status updates -- a somewhat similar feature of the other social app everyone already has installed.
Despite no one platform offering exact feature+UX parity with Twitter, there are several other free platforms that are good enough for people. If Twitter makes changes that make posting on it harder, its still-organically-growing competitors could see an influx of people who will choose to abandon Twitter.
I'm used to seeing junk on Fb and constantly ignore it; I don't think Twitter suffers from that.
In both cases, Twitter and Facebook, the content you see is entirely based on who you follow.
Right? I really don't get it. There are entire industries built around producing content that goes viral. Charge Coca Cola $eleventy million for "super tweets" that look like normal tweets. Maybe this is already happening?
in order to extract value, isnt it first necessary to define that value (of broadcasting info and enabling real time conversations)? that would seem to be a big mystery.
Twitter should have a tweet quota and charge people who tweet too much. People who chase hashtags and reply with reaction gifs have turned it into low-brow garbage.
I'm pretty sure tweet count is used as a growth metric somewhere, so it's not gonna happen.
Same story with bots and "active users".
Too much tweeting caused them to summarize and ignore chronological order, so one would hope they realize that too much of a good thing is a bad thing.
Why the 4a PDT earning call? Ahead of opening of (TYO) Tokyo stock exchange Friday am which trades Softbank?
Their explanation, I believe, was that their planned time would have overlapped with several other calls, so analysis requested that they moved it.
https://investor.twitterinc.com/releasedetail.cfm?ReleaseID=...
https://investor.twitterinc.com/releasedetail.cfm?ReleaseID=...
I have a market need of being able to broadcast messages megaphone-style to the internet, but they have to be artificially constrained to ..
I'm just back from a holiday in south east Asia. All the time I was there I was getting ads on twitter targetted to the local market (in the local language) presumably based on my roaming IP.
Maybe my grasp is a bit simplistic but isn't this just intensely stupid? My twitter profile is explicitly Western European is twitter's location based advertising really just as dumb as matching IP addresses to regions?
If I were an advertiser I wouldn't be too happy about twitter claiming 'impressions' like this.
Maybe my grasp is a bit simplistic but isn't this just intensely stupid? My twitter profile is explicitly Western European is twitter's location based advertising really just as dumb as matching IP addresses to regions?
If I were an advertiser I wouldn't be too happy about twitter claiming 'impressions' like this.
This is not limited to Twitter. I live in Japan, most ads I see all around the web are in Japanese for Japanese stuff. I went to Germany a couple years ago, and everything was German when I was there. This is even more ridiculous for the unskippable 30s video ads on Youtube.
Meanwhile I'm German, live in Germany and for a while got english ads of the style "Welcome in Germany! As an expat, let us sell you some private health insurance!". What a mess.
it's a very low percentage of users all in all, doesn't really matter especially if you're charging by clicks and not impressions.
How many people does it really take to run Twitter?
If they need more than 100 people I'd be really shocked.
If they need more than 100 people I'd be really shocked.
It's hard for me to understand how Twitter has so many employees when:
a) The site has relatively few major features beyond displaying lots of text in chronological order. b) The site is so overwhelmingly shitty.
They had a great thing going for themselves years back when developers were really excited about building on the Twitter API and experimenting with it in all kinds of ways and creating great new apps daily. That stopped when Twitter started running wild and harassing devs and making investment into the Twitter ecosystem practically impossible. They could have kept their costs down and just needed a small number of employees to keep the infrastructure up.
a) The site has relatively few major features beyond displaying lots of text in chronological order. b) The site is so overwhelmingly shitty.
They had a great thing going for themselves years back when developers were really excited about building on the Twitter API and experimenting with it in all kinds of ways and creating great new apps daily. That stopped when Twitter started running wild and harassing devs and making investment into the Twitter ecosystem practically impossible. They could have kept their costs down and just needed a small number of employees to keep the infrastructure up.
I'd wager a bit more than that to maintain existing services. But they haven't given up on growth yet, disappointing news doesn't = throw in the towel. If these rumors are true, best of luck to those affected.
Even to grow, does twitter really need 3,800 employees? The site hasn't exactly seen much change in the past few years.
Jonathan Blow gave a talk to Berekley college students a few months ago, complaining about the poor quality in modern software.
He picks on Twitter in one part, showing the graph of the number of employees by year, challenges their claims to the complexity of implementing Twitter, and mocks a UI problem he just had.
Twitter starts at 7 minutes: https://www.youtube.com/watch?v=k56wra39lwA
He picks on Twitter in one part, showing the graph of the number of employees by year, challenges their claims to the complexity of implementing Twitter, and mocks a UI problem he just had.
Twitter starts at 7 minutes: https://www.youtube.com/watch?v=k56wra39lwA
http://i.imgur.com/U4mHId3.png
Thanks. Good video.
Thanks. Good video.
How do you even grow like that? The current staff during that spike must have spent most of their time interviewing people.
But 3,750? Does anyone think Twitter needs that many people? Scale back to the bare essentials and regroup. Clearly the people there haven't been good for ambitious growth, time to shake it up, find a buyer (which will be easier with less overhead), or close the doors.
they should focus on being THE platform for key influencers, "thought leaders" and celebrities, mover-and-shaker types, kind of like Yahoo did with Katie Couric!
And how many people do you need to monetize Twitter?
Well, either a lot more or a lot less.
Whats app comes to mind as a comparison. Far more complex. A billion customers. 35 engineers.
Nah, WA started as a 1:1 direct messaging service with next to no server storage - so all the backend had to do was to distribute the incoming messages to the recipient ASAP in order to keep storage load low.
Twitter's backend is far more complex, you have a 1:n distribution (with n occasionally drifting into the double-digit million counts, like President Obama), and all the messages have to be archived and live searchable.
Twitter's backend is far more complex, you have a 1:n distribution (with n occasionally drifting into the double-digit million counts, like President Obama), and all the messages have to be archived and live searchable.
Agreed. The keys to making whatsapp work were tuning an XMPP server for and the Erlang VM for performance, which takes a few very smart people, but not a large quantity.
And targeted ad sales, the complexity of which should not be underestimated.
rodgerd(2)
I don't really have any insightful input into this other than to say, I hope they're cutting the people they most likely don't need.
Twitter is the only social platform I actually like and still use, and the only thing that could replace it would be similar but decentralised and as widely adopted.
Why / where are they failing - are they failing? I know more people on and using Twitter than ever, many of those have left other aging social networks after finding them irrelevant or too invasive of privacy.
Twitter is simple, Twitter is what it is and it doesn't try to be more than that, it does what it does well and it always has done. This - I enjoy in a product.
Twitter is the only social platform I actually like and still use, and the only thing that could replace it would be similar but decentralised and as widely adopted.
Why / where are they failing - are they failing? I know more people on and using Twitter than ever, many of those have left other aging social networks after finding them irrelevant or too invasive of privacy.
Twitter is simple, Twitter is what it is and it doesn't try to be more than that, it does what it does well and it always has done. This - I enjoy in a product.
Agree. I would happily pay $50 to $100 a year just to keep the twitter experience as-is.
I know this is premature, but I can't help but wonder what the effect of Twitter going under would have on the Bay Area tech scene.
Twitter employs around 3900 people total, 2300 in San Francisco (numbers are from some random google sources, so may be off by a bit/time).
In the first quarter, Yahoo laid off 3,135 people in the Bay Area.
Twitter going under would be newsworthy, but I don't think make too much of a splash in the job market -- at least not any more than the normal tides.
In the first quarter, Yahoo laid off 3,135 people in the Bay Area.
Twitter going under would be newsworthy, but I don't think make too much of a splash in the job market -- at least not any more than the normal tides.
Maybe the loss of Twitter as a platform for social media self-promotion would be more significant than the direct effects of 2300 people suddenly on the job market?
Conversely, other platforms have already come along that target some of Twitter's use-cases and offered better UX and user engagement. I'm sure they, or a new player, could fill the void (successfully).
This is also less of a problem today (as opposed to years ago) when everyone with a meaningful social presence cross-posts or maintains a split presence on multiple platforms.
This is also less of a problem today (as opposed to years ago) when everyone with a meaningful social presence cross-posts or maintains a split presence on multiple platforms.
Is this true? At least within the niche of security and crypto academia, I find Twitter to be a very useful tool.
What's the rent decline curve correlation per-100 persons laid off I wonder.
Not enough.
Where did you get the 3135 number for Yahoo from? That is definitely wrong, as far as I know (from being there during the layoffs).
I don't think it would have a profound impact. The current incarnation of Twitter is only lackluster by Decacorn VC standards. The worst case scenario is the limp along like Yahoo has for the last decade. But during said limping a lot of employees made a decent living.
Not to mention journalism. Practically every journalist that I read is addicted to Twitter.
Reporting is hard. Let's quote tweets instead!
Came here to say that I love Twitter and am online on it far more than on any other service.
I even clicked on its served commercials, because Twitter has my professional network and managed to score some ads that triggered my interest, versus on Facebook where I have a list of friends and acquaintances with which I've got little in common with.
Their problem is their ad inventory and their targeting. They should serve more ads and improve their targeting.
I even clicked on its served commercials, because Twitter has my professional network and managed to score some ads that triggered my interest, versus on Facebook where I have a list of friends and acquaintances with which I've got little in common with.
Their problem is their ad inventory and their targeting. They should serve more ads and improve their targeting.
Not cool for Twitter employees to learn about such thing from the press, not officially from their management.
Something I've never been able to wrap my head around is how does Twitter make money? I mean real money. Not valuation of eyeballs, not VC cash, but honest to God profit? It has always baffled me and I wish I knew what the unicorns say to the VC's when (hopefully) someone asks this question.
They have revenue from advertising and from selling access to their data; what they don't have is profits. Twitter raised about $1.8 billion in convertible notes in 2014. The proceeds have helped them plug the revenue shortfall, however, the bonds mature in 2019 and 2021, and since the share conversion price is around $77, the bondholders will be looking for cash instead unless Twitter's stock price increases 4-fold from its current price. The overhang of these bonds is something I have not seen mentioned in comments about Twitter here; it has likely been a large factor for potential purchasers and it will be an increasing worry for the company and its shareholders unless the company manages to become solidly profitable.
Read their SEC filings: https://investor.twitterinc.com/secfiling.cfm?filingID=15645...
If you've never read one of these, you might be surprised how much is disclosed, and in great detail to boot.
If you've never read one of these, you might be surprised how much is disclosed, and in great detail to boot.
Someone else mentioned targeted display ads already, but Twitter also licenses their full data set to Google (and others) previously for millions.
1 - http://venturebeat.com/2015/02/05/googles-slippery-slope-if-...
1 - http://venturebeat.com/2015/02/05/googles-slippery-slope-if-...
Twitter makes ~$530M/quarter from advertising and ~$70M/quarter from selling bulk access to the Twitter data stream.
These are revenue, not profit numbers. They spend a lot on people.
These are revenue, not profit numbers. They spend a lot on people.
Ads. Pretty incredible right?
One of Twitter's problem is not properly controlling their feed. I never use their mobile or web client. I solely use a highly customized Tweetdeck. With this experience, I never once see an advertisement. That's a huge loss for Twitter.
Perhaps it's just me, but I wouldn't have a problem seeing advertisements in my Tweetdeck feed if it meant they'd remain successful. I'd much rather see Twitter succeed as it's the only platform I use to keep up with thousands of professionals and news sources. It's entirely a different experience than Facebook.
I think the Twitter community should suck it up and accept the fact that they get served a couple of advertisements in order to support a news service and contend delivery network unlike any other in existence.
Perhaps it's just me, but I wouldn't have a problem seeing advertisements in my Tweetdeck feed if it meant they'd remain successful. I'd much rather see Twitter succeed as it's the only platform I use to keep up with thousands of professionals and news sources. It's entirely a different experience than Facebook.
I think the Twitter community should suck it up and accept the fact that they get served a couple of advertisements in order to support a news service and contend delivery network unlike any other in existence.
What's bizarre is I thought the whole purpose of cutting off/restricting third-party clients was so that they could control what was in the feed i.e., serve advertisements.
If they still allow some/limited third-party clients and don't force ads into those feeds, what was the point of burning their bridges with the developer community?
If they still allow some/limited third-party clients and don't force ads into those feeds, what was the point of burning their bridges with the developer community?
What Twitter did was install rate limits on free access to the API. This means that to provide a full-service 3rd party client, the app developer has to pay Twitter to get above the rate limits.
So: if your 3rd party app is not showing ads (as most don't), Twitter is still getting some revenue from the app developer.
Personally, to me this seems like a reasonable trade off.
But a lot of 3rd party app developers could not afford to pay those fees, and so lost their businesses. You can see how that would piss them off. But from Twitter's perspective, they were just freeloaders.
So: if your 3rd party app is not showing ads (as most don't), Twitter is still getting some revenue from the app developer.
Personally, to me this seems like a reasonable trade off.
But a lot of 3rd party app developers could not afford to pay those fees, and so lost their businesses. You can see how that would piss them off. But from Twitter's perspective, they were just freeloaders.
Was pondering this for another business and it seems relevant here. How many people would be required to run "the core" of twitter (basic microblogs)?
Seems like that could be very lean...simple UI. A feed. A huge database. For web and apps for the two major mobile O/S.
Now go one step out. Running ads on that feed. Core sales team (those with paying accts) and administrative team. Need a revenue source. Add them back.
Now....what does everyone else do and is it generating cash?
My suspicion is:
- First two groups are lean & covered by revenue - Most of the rest of the team is "strategic" yet not revenue generating - The rest is support and will scale up/down with headcount
Standalone twitter + ads feels like a business you can make ramen profitable.
Seems like that could be very lean...simple UI. A feed. A huge database. For web and apps for the two major mobile O/S.
Now go one step out. Running ads on that feed. Core sales team (those with paying accts) and administrative team. Need a revenue source. Add them back.
Now....what does everyone else do and is it generating cash?
My suspicion is:
- First two groups are lean & covered by revenue - Most of the rest of the team is "strategic" yet not revenue generating - The rest is support and will scale up/down with headcount
Standalone twitter + ads feels like a business you can make ramen profitable.
Wonder if Twitter will end up like Delicious. Even with Pocket, Diigo and such, I'm not sure what people use to save bookmaks these days. Delicious went through several hands, Diigo was almost there but their bookmarklet doesnt let you know if you already have something tagged. Delicious abandoned their FF plugin and so its basically not worth using the site anymore.
I'll be honest, I wont miss Twitter if it dies out, as I'm not a user. The thing I hate is how Twitter killed RSS for many browsers and users. So if Twitter dies, so be it for causing that to happen.
I'll be honest, I wont miss Twitter if it dies out, as I'm not a user. The thing I hate is how Twitter killed RSS for many browsers and users. So if Twitter dies, so be it for causing that to happen.
I can always tell when Twitter is in trouble, because I get a security notice from them that there has been suspicious activity on my account, it has been locked, and I need to login with an assigned password. (I never use my Twitter account). Happened after the last quarterly earnings report and also yesterday.
In other words, "We need more active users, so please log in soon so we can count you as an active user."
In other words, "We need more active users, so please log in soon so we can count you as an active user."
Twitter lost the trust of many users and are now suffering the consequences. It was once supposed to be the place for the freedom of speech and truth and is now just another arm of the left-leaning politicians in the US.
So many conservative/libertarian political figures and personalities have been permanently banned from Twitter in the last year for only posting an opinion that it can no longer be chalked up to circumstance.
Good riddance.
So many conservative/libertarian political figures and personalities have been permanently banned from Twitter in the last year for only posting an opinion that it can no longer be chalked up to circumstance.
Good riddance.
I feel like a takeover is only a matter of time. If you're Alphabet or Facebook you're probably interested (I'd say Alphabet should be more interested, for Facebook it's probably mostly a blocker play). The question is how long do you let them "rot" to drive down the acquisition price?
I wonder why Twitter doesn't do consulting. They have developed a lot of the big data frameworks that we use today and understand how to scale.
They have the talent and are in a unique position of being Twitter.
They have the talent and are in a unique position of being Twitter.
Just out of curiosity, which ones have they developed?
Some software that Twitter has put out:
[1] Heron, a realtime, distributed, fault-tolerant stream processing engine - https://github.com/twitter/heron
[2] Finagle, a fault tolerant, protocol-agnostic RPC system - https://github.com/twitter/finagle/
[3] FlockDB, a distributed, fault-tolerant graph database - https://github.com/twitter/flockdb
[4] Gizzard, a flexible sharding framework for creating eventually-consistent distributed datastores - https://github.com/twitter/gizzard
[5] Twemcache, a Twitter fork of Memcached - https://github.com/twitter/twemcache
[6] Twemproxy, a fast, light-weight proxy for memcached and redis - https://github.com/twitter/twemproxy
[1] Heron, a realtime, distributed, fault-tolerant stream processing engine - https://github.com/twitter/heron
[2] Finagle, a fault tolerant, protocol-agnostic RPC system - https://github.com/twitter/finagle/
[3] FlockDB, a distributed, fault-tolerant graph database - https://github.com/twitter/flockdb
[4] Gizzard, a flexible sharding framework for creating eventually-consistent distributed datastores - https://github.com/twitter/gizzard
[5] Twemcache, a Twitter fork of Memcached - https://github.com/twitter/twemcache
[6] Twemproxy, a fast, light-weight proxy for memcached and redis - https://github.com/twitter/twemproxy
[7] Mesos, abstracts CPU, memory, storage, and other compute resources away from machines (physical or virtual), enabling fault-tolerant and elastic distributed systems to easily be built and run effectively. - http://mesos.apache.org/
Mesos was invented at UC Berkeley but developed and battle tested at Twitter.
Mesos was invented at UC Berkeley but developed and battle tested at Twitter.
Keep seeing people on HN championing Twitters huge employee number by bringing up this stuff.
In the light of this news was any of this time well spent?
Or is it just engineers hoping that dev-facing work is actually of value to a company when the wolves are circling?
In the light of this news was any of this time well spent?
Or is it just engineers hoping that dev-facing work is actually of value to a company when the wolves are circling?
Bootstrap too.
Is there a big enough market for their expertise? There aren't a lot of companies in the world that operate on the same scale.
The sad thing is that the market will love this and the stock will go up, while many engineers wonder where their job went, and mid-managers/execs will reap a profit.
[deleted]
Cuts could mean a different direction which would be good for many peoples' stock portfolios. Time will tell I'm sure but I'm hopeful.
app.net should have waited three years to pivot into a Twitter competitor...
Ah, maybe people won't get shadow banned at the same rates anymore now. Just maybe it's a good thing
gjolund(1)
Is the answer simply that earlier VCs put pressure on the executives to keep growing so they can multiply their investment?
Personally I dream of making a living establishing a patio11-type software business. Something where I can do a high quality job and own all of the decision-making. The ceiling doesn't have to be very high for one guy to sustain himself, and software is appealing because you can automate away nearly all of the "work".