Twitter and Wall Street not chirping in harmony

By January 13, 2015
Twitter and Wall Street

Although the 500 million tweets sent every day are a clear indication of Twitter’s reach and popularity, the microblogging platform is having less success on Wall Street. Since early 2014, its shares have lost nearly half their value while those of Facebook and LinkedIn continue to attract stock market investors.

In contrast with its iconic logo, the skies over the stock exchange remain less than blue for Twitter. A little more than a year after the firm launched an Initial Public Offering on the New York Stock Exchange, the microblogging network is struggling to interest investors in its equity. In one year, the stock saw a 47% fall to $35.9 at 31 December closing, while the Facebook share price has risen 43% over the same period, now standing at $78 – the highest level since its launch in May 2012 – and LinkedIn has seen an 11% increase to $229.7. With annual turnover of $169 million at the time of the Wall Street IPO, Twitter was valued at over $10 billion and had good reason to be optimistic, especially since it had achieved this valuation without ever making a profit or indeed expecting to do so before 2015. However Twitter stock closed its first day already trading at a discount to the launch price. Since then the shares have seen a high, touching $75, before again heading south very rapidly as investors questioned the future business prospects of the microblogging site.

Inadequate engagement with the site?

So what is it about Twitter that turns potential investors off? First and foremost audience size. Once again an unfavourable comparison is being made with Facebook, which has 1.35 billion active users. Twitter’s numbers pale beside this figure. At the end of October, when it published its third quarter results, Twitter did in fact announce a 23% increase in the number of active users, to 284 million, following a similar rise – 24% – in the second quarter. But investors do not seem to believe that these rising numbers will suffice. They are looking at another key indicator –timeline views per user, a standard metric for ‘user engagement’, taking account of the number of times a user interacts with tweets – with a reply, a retweet, adding it to their favourites page, clicking on a link, etc. This indicator slipped 7% globally to 636 per user. Moreover some analysts and investors have expressed the fear that Twitter activity is bound to fall given the increasing popularity of other online social networks and messaging systems. Business news media Reuters recently pointed to the general enthusiasm for other platforms and networks.

Instagram gaining ground

Aside from Facebook, which continues to run ahead of all the other social networks in popularity and whose positioning in any case differs from that of Twitter, Instagram is one of those social networks that has been finding increasing favour with users. The photo-sharing site, which was bought by Facebook in April 2012 for $1 billion, has been showing very strong growth – 50% in less than nine months – and, with its 300 million members, it has just overtaken the Twitter count. Moreover, Instagram also appears to be doing better on the engagement front. This has led some observers to claim that images are now getting the upper hand over written messages. However, it remains a fact that activity on Twitter, with 500 million tweets daily, is much higher than on Instagram, with its 70 million photos and videos published each day. And, crucially, the Twitter social network is now becoming recognised as a ready source of breaking news and lots of people look at Twitter without officially registering. However, over 44% of the 974 million existing accounts have never actually sent a tweet, revealed Twopcharts, a site which provides statistics on Twitter, last April. Basically, though, members of the two communities use the platforms differently – Twitter for public messaging and Instagram essentially for private use, so the two networks are not really competing head-on. Meanwhile LinkedIn is having a better time of it on the Stock Exchange. The professional network boasts some 300 million members and, like Twitter, is constantly growing its turnover but so far failing to make a profit. Interestingly, LinkedIn management have decided to attack the market in China, where there is no direct competitor, an approach which would be hard for Twitter to emulate since the huge popularity of Sina Weibo, a Chinese microblogging website that is a sort of cross between Twitter and Facebook, would make it very tricky to find a foothold there.



Legal mentions © L’Atelier BNP Paribas