The year Twitter (finally) recovered…
The stock market last Friday left us an interesting little detail: Twitter’s share price closed above $41, the opening price of its shares back in November 8, 2012, the day the company went public. That consolidates a somewhat surprising 2018 that has seen the company’s shares recover by more than 60%, and that some analysts say could continue to improve, thanks to a slow but steady rise in user metrics and a significantly improved advertising portfolio and sales execution.
Under the stewardship of Jack Dorsey, who has also made a success out of his other company, Square, Twitter has managed to reverse its bearish tendencies and is making money and attracting users: it made profits of $91 million in the last quarter of 2017 and $61 million in the first of 2018. Part of its success is down to introducing live video, which seems to be convincing both users and advertisers, along with measures to clean up the garbage that had clogged its network: during the first quarter of this 2018, the company says it has eliminated no less than 142,000 applications using its API, violated its rules, and were responsible for some 130 million low-quality tweets in just three months. In some cases, the spring clean has caused difficulties and interruptions to accounts that use bots to add value and provide services valued by their community, but with service usually restored quickly in those cases.
On June 4, Twitter shares entered the prestigious S&P 500 index, the same day Netflix joined the S&P 100, both replacing Monsanto and reflecting a growing interest in the markets in so-called technology companies. Among the collateral benefits has been an increase in the volume of operations: all the funds and investors that invest in the index have also joined the shareholder base, using it as a benchmark and investing in all its members.
When the company went public in 2013, I commented on a video in English posted on the website of leading Spanish daily El País (link in Spanish) that given the starting price, we were not talking about a speculative investment, but instead something attractive only for long-term investors willing to wait for the market to learn to recognize the value that a company contributes regardless of its growth. In Twitter’s case, growth is perhaps more to do with the explosion of social media than to its having developed a more attractive product.
That said, Twitter is the central nervous system of the planet, the place where news happens in real time, and is increasingly used for anything from press releases and advertising to informal diplomacy and international relations. For many people, myself included, Twitter is the best way to stay informed, thanks to a much better signal-to-noise ratio than its competitors. And as more than one pundit pointed out during its darkest days, if it did go down, somebody would have to re-invent it.
Twitter’s growth over the last six five months far exceeds that of companies like Facebook, which is obviously in another phase of maturity, or Snapchat, which despite a 10% rise last week, has not yet managed to reverse its bearish behavior since its IPO in March 2017.
If the company can generate healthier use dynamics through stricter compliance with its terms of service and avoid the toxicity that lead many users to stop using it or , then perhaps the markets can get on with what they do best and set a lasting trend for Twitter.
(En español, aquí)
