WEBVTT - Twitter Almost Makes a Profit

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<v Speaker 1>After more than a decade, the social networking platform Twitter

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<v Speaker 1>is closing in on having a profitable quarter for the

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<v Speaker 1>first time in its history. I'm Jonathan Strickland, and this

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<v Speaker 1>is tech stuff Daily. Twitter is an odd thing. According

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<v Speaker 1>to a recent shareholders call, the service boast three hundred

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<v Speaker 1>thirty million monthly active users. These users post about five

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<v Speaker 1>hundred million messages or tweets every day. Eight out of

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<v Speaker 1>ten of them are accessing Twitter from mobile devices like smartphones.

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<v Speaker 1>About seventy of the people using Twitter are doing so

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<v Speaker 1>outside the United States. More than half of all Twitter

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<v Speaker 1>users are making at least fifty thousand dollars a year.

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<v Speaker 1>The service is definitely popular. People use it, but despite

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<v Speaker 1>that popularity, the company has yet to turn a profitable quarter.

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<v Speaker 1>Year after year, Twitter operates at a loss. The company

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<v Speaker 1>generates revenue, but not to cover costs. Most of that

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<v Speaker 1>revenue comes from advertising. According to the shareholders meeting, Twitter

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<v Speaker 1>lost about twenty one million dollars over the third quarter

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<v Speaker 1>of That's an enormous amount of money, but it's also

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<v Speaker 1>a seventy nine percent drop in losses compared to the

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<v Speaker 1>previous year, and the fourth quarter could be different. Twitter

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<v Speaker 1>sent out a message via appropriately enough a tweet that read,

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<v Speaker 1>if we reach our high end of our adjusted a

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<v Speaker 1>bit DE range for Q four, we will likely be

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<v Speaker 1>GAP profitable. There's a lot to unpack there, so let's

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<v Speaker 1>get to the bottom of this tweet first. You may

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<v Speaker 1>not be familiar with the term a bit death. That

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<v Speaker 1>initialism stands for earnings before interest, tax, depreciation and amortization.

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<v Speaker 1>It's a way to measure a company's performance before taking

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<v Speaker 1>into account all the complicated financing and accounting decisions that

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<v Speaker 1>can impact the bottom line. Then you may not know

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<v Speaker 1>what GAP or g A a P means. That stands

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<v Speaker 1>for generally accepted accounting practices. So, in other words, you're

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<v Speaker 1>talking about a pretty straightforward approach to analyzing the figures

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<v Speaker 1>rather than putting it through some weird manipulative formula. So

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<v Speaker 1>what that tweet was saying is that if Twitter performs

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<v Speaker 1>closer to the upper end of their projected financial performance

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<v Speaker 1>range in Q four, the amount they bring in before

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<v Speaker 1>adjusting for all of that financial nonsense will be greater

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<v Speaker 1>than their costs. According to generally accepted accounting practices, the

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<v Speaker 1>company will on paper at least turn a profit for

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<v Speaker 1>the first time in its history. That history stretches back

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<v Speaker 1>to two thousand six when Jack Dorsey got an idea

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<v Speaker 1>while working for a podcasting company called Odeo. Dorsey had

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<v Speaker 1>this idea for a new tech that would leverage SMS,

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<v Speaker 1>or short message service better known as text messages. Dorsey's

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<v Speaker 1>idea would let people send out a text message to

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<v Speaker 1>a group of friends rather than just a one to

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<v Speaker 1>one communication. That way, if you wanted to give a

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<v Speaker 1>quick update to a group of people, you could You

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<v Speaker 1>might send out the message grabbing lunch, anyone want to

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<v Speaker 1>join me for a taco, and you could send it

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<v Speaker 1>out to your group of followers. From this humble idea

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<v Speaker 1>grew Twitter. Originally, the service was so poor they couldn't

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<v Speaker 1>afford vowels. The original company was spelled t W T

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<v Speaker 1>t R. But then we know from Wheel of Fortune

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<v Speaker 1>that vowels cost two hundred fifty dollars a pop, so

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<v Speaker 1>that would have been another five dollars they'd have to

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<v Speaker 1>PLoP down to spell Twitter properly. All joking aside, this

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<v Speaker 1>little experiment would end up dwarfing the failing business of Odio.

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<v Speaker 1>It was tough for Odio to go toe to toe

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<v Speaker 1>with other podcasting aggregators, particularly Once Apple seriously gone involved,

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<v Speaker 1>the founders decided to pivot and focus on this new

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<v Speaker 1>platform called Twitter. For the first year, Twitter was pretty

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<v Speaker 1>much an internal product being used by the developers, most

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<v Speaker 1>of whom were racking up enormous phone bills due to

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<v Speaker 1>the increase in text messaging they were engaged in while

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<v Speaker 1>using the tool. In two thousand seven, Twitter made a

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<v Speaker 1>big splash at south By Southwest, the enormous festival in Austin,

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<v Speaker 1>Texas that incorporates a film festival, dozens of concerts and

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<v Speaker 1>musical performances, and interactive or tech based discussions. All in

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<v Speaker 1>a couple of weeks. Tons of influential people from various

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<v Speaker 1>spheres attend south By Southwest, and Twitter gained a great

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<v Speaker 1>deal of attention. It experienced its initial growth spurt that year.

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<v Speaker 1>During those early years, Twitter would frequently outgrow its ability

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<v Speaker 1>to handle traffic. The infamous fail Whale became a common site.

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<v Speaker 1>The cartoon whale would pop up whenever Twitter service was offline,

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<v Speaker 1>typically due to server overload. During big events such as

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<v Speaker 1>tech conferences, sporting events, or award ceremonies, Twitter would often

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<v Speaker 1>struggle to stay online. Twitter retired the fail Whale in

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<v Speaker 1>two thousand thirteen, perhaps in an optimistic move that indicated

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<v Speaker 1>the company expected to all but eliminate downtime for the service.

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<v Speaker 1>That's also the year the company held its initial public

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<v Speaker 1>offering and became a publicly traded stock. During that first

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<v Speaker 1>day of trading, the company's stock price rose at one

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<v Speaker 1>point to see above the initial price. That's pretty impressive

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<v Speaker 1>for a company that was still working out its business

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<v Speaker 1>strategy and had not yet made a profitable quarter. As

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<v Speaker 1>of late October, the market value for Twitter is fourteen

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<v Speaker 1>point to three billion dollars. Everyone seems to agree that

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<v Speaker 1>Twitter is a valuable service, even in the wake of

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<v Speaker 1>harassment scandals and public figures denouncing Twitter for failing to

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<v Speaker 1>curtail abusive behavior of its users. But can a company

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<v Speaker 1>really be worth billions of dollars if it can't make

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<v Speaker 1>enough money to be profitable. So far, the answer appears

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<v Speaker 1>to be yes, but many analysts and journalists are keeping

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<v Speaker 1>an eye on Twitter to see if the other shoe

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<v Speaker 1>ever drops. To learn more about Twitter and everything else

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<v Speaker 1>in tech, subscribe to Tech Stuff. That's my long form

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<v Speaker 1>podcast where I dive into details behind our technological world.

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<v Speaker 1>That's all for today. I'll see you again soon