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Twitter: Dead or Alive?


Quarterly earnings report causes mass hysteria among investors.

Depending on whom you're listening to, Twitter (NYSE:TWTR) is just lifting off on its trajectory to success or it's dying. Or, possibly, it already died as early as 2009.
Or maybe a lot of people are overreacting to last week's Twitter quarterly earnings report, especially since there were no big surprises there.
Twitter stock slid to below $38 last Wednesday after it reported a loss of more than 10%, its lowest price since the company went public in November 2013. By the end of the week, it had recovered only a little, to $38.80. The earnings report showed that the company lost a lot of money, although an even greater loss was expected. For the first quarter of the year, Twitter reported a net loss of more than $132 million, or $0.23 a share, on sales of about $250 million.
There was some upbeat news there, including a big 125% jump in advertising revenue. The company raised its revenue estimate for the year to a range of $1.2 billion to $1.25 billion.
But the mass freak-out was caused by the part of Twitter's report that showed a continuation of its slowing rate of user growth. Its numbers of active monthly users grew to 255 million, an increase of only 5.8%. It was the fourth quarter that enrollment showed a decelerating pace of growth.
Worse, timeline views were flat. That measurement is arguably more important than the number of enrollments, as it suggests how active its users really are and how compelling its content is to them.  
Despite all the negative talk, Twitter is really a glass-half-full-or-empty story. What's not to like in a media company that has a global audience of more than a quarter of a billion and is still growing at an annualized rate of more than 20%?
The short answer is: Facebook (NASDAQ:FB) has more users. About four times more.
Whether that's relevant requires a slightly longer answer, or answers. Following are two of them, at opposite extremes.
Twitter Is Dead

After the earnings report, The Atlantic actually posted a eulogy for Twitter, but it didn't say only nice things about the allegedly deceased. The site at its best was described succinctly as "a sort of surrogate newsroom/barroom" for the sharing of news, gossip and opinion.
But that was in its prime, The Atlantic argued. Somehow, the atmosphere in the newsroom/barroom changed for the worse, becoming too often "cruel and petty and fake."
Conclusion: "People are still using Twitter, but they're not hanging out there." They're moving on to Vine, Snapchat, or Instagram.
If you subscribe to this view, you might want to see the blog post by The Washington Post's Caitlin Dewey, who nicely wraps up the greatly exaggerated reports of Twitter's demise, dating as far back as 2009.
Twitter Is a Misunderstood Adolescent

Slate's Will Oremus says investors just don't understand Twitter. That is, it's not a social media site (it's a media platform) and therefore shouldn't be judged by Facebook standards.
He's right. Twitter is a self-curated table of contents to the Web of the moment, linking the user to news, opinion, celebrity rants, political tirades, announcements, and, yes, paid product endorsements. In a sense, it's what Facebook thinks its so-called News Feed is. But, true to its origins, Facebook has remained all about me and mine.
Oremus argues that Twitter will find new ways to monetize, perhaps in the same way that Google did -- by figuring out how to sprinkle its own advertising on pages next to its search results and on pages discovered and viewed from its search results. Specifically, he cites Twitter's acquisition of MoPub, a mobile advertising platform, as one way it's working on making that happen.
Many commentators regularly predict the demise of websites, but it's a sort of nervous mannerism. They picked up this tic after the dot-com boom, when they failed to consider anything less than a brilliant future for

True to the pattern, Twitter is now seen as oversold. On Monday morning, with most stocks in the red, its stock was up a little, back over $39 a share.


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No positions in stocks mentioned.
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