Twitter stock is down 11.5% pre-marker after the company released their first quarter 2021 results yesterday evening and to the surprise of some investors the results were shocking. The company missed out on both revenue and daily active monetizable users while providing a worse than expected second quarter guidance. These results come amid record breaking quarters from their competition including Snapchat, Facebook and Google. Which brings to mind the question, how far can this business model go?
The company reported revenue of $1.04 billion for the quarter, which was up 28% from the prior year. Nothing surprising here, the pandemic hurt most businesses so you wold expect a uptick this year. Most surprising was the guidance for the second quarter 2021. Revenue is expected to reach between $980m-$1.08 billion which was way below analyst expectation of a flat $1.08 billion.
The reduced ad revenue for the second quarter guidance brings into question how the company operates and how it decides who is de-platformed or not. There was a time 6 years ago that people used to think there was a hidden bias against conservative thinkers and political figures, today we find ourselves in no doubt that the company has a slight left leaning bias. The implication here is that from a business standpoint, removing President Trump, wipes out a lot of intrigue users have in the platform and therefore reduced ad spending over time.
True, Facebook and Instagram also banned Trump, yet, recorded fantastic revenue numbers. However, both platforms don’t have the kind of overt bias Twitter clearly displays against right wing thinking. As a result, the company isn’t able to compete. Daily monetizable active users reached 199 million, slightly short of the 200m analyst originally estimated. Which is a far cry short of the 280m Snapchat recorded in their earnings last week.
Twitter is slowly becoming more and more irrelevant in peoples mindset and is being associated with political commentary and angst. Gone are the days where people shared clips, thoughts and their day to day going on’s. Now the company profits from division and political activism. In the long run, I find it difficult to see how a company can continue to be profitable without finding themselves in more and more trouble, whether that be from a new competitor (they are already beginning to circle round twitter), a new scandal or poor financial results.
I am not overly optimistic that the company has anywhere to go other than down in the mid to long term.
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