In anticipation of its public offering, Twitter revealed that it currently has 218 million users with 500 million tweets sent each day. While both figures are impressive, the social media site lost $69 million dollars in the first half of 2013 on revenues of $254 million dollars. One need not have an MBA or be a financial genius to understand that the math simply does not add up. Some estimates claim the company to be valued at $10 billion dollars. On sales of $254 million dollars? How in the world does a company that lost $69 million dollars raise a billion. It’s insane actually. Only a fool sees that math and thinks it works. What if Twitter was to suddenly fall out of favor? What if it never makes money? Facebook, which still has no reason to celebrate has seen a large stock price increase based purely on speculation because it certainly hasn’t increased so dramatically due to its performance. It’s being held up at an artificially high price. That’s one of the reasons Occupy Wall Street protests started in the first place.
Analysts are claiming that the company is showing strength and signs of growth from $28 million in 2010 to $317 million dollars in 2012. E-Marketer, estimates that, “Twitter’s revenues from advertising sales will increase by more than 100% by the end of this year.” Like Facebook, if advertising is going to be its main source of revenue, no one owning the stock should plan on retiring early. However, if one gets in and gets out at the right time, he/she may be able to make some money. But this is not a long-term strategy. All signs point to the fact that on-line advertising is not growing and has, in fact, leveled off.There is simply no evidence to believe that Twitter will be able to generate the types of revenue the company is suggesting. A more accurate assessment is that those with the stock options will parachute out rich men and women. The stockholders however, will be left trying to figure out what happened.