Stock based compensation: Who Twitter pays to retain? An analysis vs Facebook.

Twitter Stock-based Compensation Distribution over the Past 5 Quarters (in $millions)
Facebook Stock-based Compensation Distribution over the Past 5 Quarters (in $millions)
Percent distribution of Twitter SBC on various functions (Q1 2016)
Percent distribution of Facebook SBC on various functions (Q1 2016)
  • Twitter spends a lot to retain sales/marketing talent. In Q1 2016, they spent 30% of their SBC on sales/marketing compared to 11% which Facebook spent on the same.
  • More tellingly, in absolute terms, Facebook spent $82M in SBC on sales/marketing talent in Q1 vs. Twitter’s $46M. This seems very disproportionate given Facebook’s Q1 revenue was 9x greater than Twitter’s! This means Twitter is spending ~5x more than Facebook in SBC on sales/marketing talent per revenue dollar.
  • On the other hand, while Facebook uses 78% of their SBC to retain R&D talent (which is essentially engineering/product employees per their 10-Q), Twitter uses 50% of their SBC expenses for R&D.
  • Given the challenges Twitter is facing to increase their MAUs and engagements, one would have expected them to shore up their engineering resourcing to focus on building new products to help with that. However, in absolute terms while Facebook spent $586M in SBC (in Q1 2016) on R&D talent, Twitter only spent $76M. Of course, Facebook is a much bigger (and richer) company, but this difference in R&D SBC expenses is telling given sales/marketing SBC for the two companies were quite comparable.
  • Lastly, Facebook’s SBC expenses in Q1 amounted to 13.8% of their total revenue; Twitter’s was 25.4%.
Twitter’s distribution of SBC over the past 5 qtrs (% of total SBC)
Facebook’s distribution of SBC over the past 5 qtrs (% of total SBC)
  • From these trend charts, one can notice that Facebook’s R&D SBC expense has been steady at ~80% over the past 5 quarters. Also, their sales/marketing SBC expense has been steady at around 10%.
  • For Twitter, their R&D SBC expense has fallen from ~60% to 50% while sales/marketing R&D expense has increased from 22% to 30%. There was considerable movement that happened in Q1 across these two curves — notably because of the layoffs which happened at Twitter in Q4 2015 that mostly affected their product/engineering talent. Also, Twitter hired a new CMO in Q1 2016 which might have added to sales/marketing SBC expense as well.

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Product Manager & Tech Analyst

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For What It’s Worth

For What It’s Worth

Product Manager & Tech Analyst

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