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Facebook, LinkedIn and Twitter earnings tell very different tales

Matt Kapko | Nov. 12, 2014
Facebook, LinkedIn and Twitter are often lumped together as the kings of social media. They are also often unjustly compared. The reality is the companies have little in common, as evidenced by their recent earnings reports.

Follow the Money (or Lack of It)
Users may be the most valuable commodity for these companies, but the money they make (or lose) in return shows just how different the businesses are. Facebook banked $1.4 billion in net income on revenue totaling $3.2 billion during the last quarter. Revenue and income increased by 59 percent and 90 percent, respectively. The profits end there, however; Twitter and LinkedIn continue to lose significant money.

Twitter posted a $175-million net loss on $361 million in revenue, compared to a net loss of $65 million on $168.5 million in revenue the year prior. LinkedIn revenue grew at a slower rate than Twitter, but its losses are much less troubling. The company posted a 45 percent increase on revenue of $568 million and ended the quarter with a loss of $4.3 million. Though both companies remain unprofitable, not everyone is worried -- at least not yet.

"If you look at similar analogues, I think it would be more surprising if Twitter were profitable right now," Shafer says. "I pretty much have zero concern on that part because they have a clear path to make quite a bit of money." 

Shafer isn't discouraged by Twitter's slower growth in MAUs, because its ad revenue sees triple-digit growth quarter after quarter. "It's just not a service that appeals across a family...It's a different offering," he says.

All those unfair comparisons to Facebook took a toll on the company, and Twitter executives are doing everything they can to make it look like Twitter is on par with the much larger social network. 

Twitter CEO Dick Costolo repeatedly tries to convince investors of the untapped opportunity his company represents, but the logic is painful and difficult to follow. He describes Twitter as three "geometrically eccentric circles:" registered users who log in and use the service every month; people who visit Twitter without logging in; and people who see tweets embedded on other sites or syndicated on television.

How Big Is Twitter (and Does It Even Matter)?
Twitter's audience could be equal to or larger than Facebook's audience, but Twitter hasn't quantified how many people engage without logging in, and none of those users see ads anyway. The implication is that Twitter still has spigots it can twist to increase ad revenue, but the company has made no concrete steps in that direction.

Wall Street prefers to focus on the more tangible results, and as such, Twitter's stock was hammered. The company's valuation decreased by more than 17 percent during the past 30 days. Facebook is up 2.7 percent during the same period, and LinkedIn is up more than 17 percent.

 

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