Happy 10th birthday, Twitter Inc (TWTR)! It’s hard to believe you’re already 10 years old.
On the flipside, although CEO Jack Dorsey celebrated the micro-blogging’s 10th birthday with current owners of TWTR stock by sharing a roadmap and vision for the next 10 years, it’s unlikely the company will last until then … at least not as we know it today.
OK, it’s not the happiest of discussions on this momentous day. That doesn’t mean it’s not true, however.
The only thing that has kept Twitter alive this long has been sheer willpower and its novelty.
The business model itself just wasn’t built to last.
Has it Really Been 10 Years?
Yes, Twitter proverbially opened its doors on March 21, 2006.
It may not seem like it’s been that long because the initial promotional effort was practically non-existent. In fact, the company’s founders originally started their venture by building a podcasting platform called Odeo. The introduction of Apple Inc.’s (AAPL) iTunes shortly after that made Odeo a bit pointless, so out of necessity, Dorsey — along with Evan Williams and Biz Stone — decided to develop the microblogging site as a standalone business instead.
But still, 10 years? Yes.
Don’t confuse the company’s inception with the company’s IPO; TWTR stock didn’t begin trading until November 2013. By that point in time, Twitter had developed a name for itself, though it was still largely unmonetized.
As is the case with so many tech startups, chatter of a promising future was enough to draw in “here and now” buyers.
Since then, the once-greatly ballyhooed idea has become something of a sore spot with investors. As former CEO Dick Costolo and current CEO Jack Dorsey have learned the hard way, TWTR shareholders expect progress down the path to profitability — an expectation that simply doesn’t exist when an organization isn’t publicly traded.
Twitter Probably Won’t Be Celebrating Its 20th
It’s an unpopular premise among the Twitter-faithful and owners of TWTR stock, but that doesn’t mean it’s not true — Twitter, as we know it, probably won’t be around in 2026. The fact that Twitter shares are presently down 77% from their December-2013 peak and within easy reach of new 52-week lows says the majority of the market agrees.
Fans and followers will be quick to cite the company’s still-unfurling history of growth. At the end of the fourth quarter of 2015, Twitter boasted 320 million active users … up from 2014’s tally of 292 million.
We may literally be in the midst of the topping-out sequence, however. That 320 million? That’s the same number of users Twitter reported as of the end the third quarter of last year. Twitter didn’t add (net) any users in Q4 2015 despite a concerted effort to do exactly that.
And no, Twitter can’t fix it with a couple of small tweaks here and there.
It’s been said before — in greater detail here — but long story made short, Twitter doesn’t have a revenue problem. It doesn’t have an operation problem. Those are symptoms of the actual problem.
Twitter, above all else, has a lack-of-interest problem.
It’s just not as entertaining as Facebook Inc (FB), and doesn’t appeal to individuals’ vanities the way Facebook does. Facebook is a destination. Twitter is the site that users pass on the way to somewhere else on the web.
Bottom Line for TWTR Stock
Don’t misunderstand. In 2026, a website called Twitter will still exist, and may even look and feel a lot like the Twitter we all know at this time. There is a viable business model buried somewhere in there. The scale of whatever the platform’s business model will be, however, is still smaller than the current value of TWTR stock reflects.
That said, of all the potential outcomes, bankruptcy is the least likely of them.
Twitter has money. As of the last look, Twitter had $3.5 billion in cash or liquid investments. Sure, it’s still losing money…. around $100 million or so per quarter, though the loss seems to be shrinking. Operationally speaking, it’s cash-flow-positive.
The books aren’t the issue, or the point.
The issue, again, is the platform itself. As a standalone business, the product just isn’t all that marketable. It would be better used as a platform to help promote another business model, suggesting an acquisition will materialize before bankruptcy becomes inevitable.
On the other hand, it’s not like TWTR stock is in a position to thrive between now and then. The best-case scenario is a company and stock that treads water, waiting for a suitor’s lifeline … a suitor that can and will wait for Twitter investors to become frustrated, desperate and willing to sell at almost any price.
In other words, there’s not a lot to look forward to here, other than ending the disappointing saga.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.