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Twitter Inc (TWTR) Hasn’t Generated a Cent: Facing $2 Billion Deficit

Twitter Inc, (TWTR)

Twitter Inc (NYSE:TWTR), even with 300 million active users, a brand that is everywhere and a decade-long timespan, has a profit problem. Despite its vast popularity and widespread usage, the microblogging website has a deficit of more than $2 billion since it was launched.

Twitter Has Yet to Make Money

For the last few years, the tech market has embraced the idea of being fancy first and making a profit second. Growth with top-line revenue earnings is the main priority, while the bottom line is often ignored. Many tech firms have put forward billion-dollar valuations without generating a single cent in profit. This has terrified investors in today’s volatile market.

Twitter Inc, (TWTR)

The same line of thinking can be found at Twitter, which has seen its stock collapse in the last 12 months. The firm’s stock may be shrinking, but new documents suggest it hasn’t turned a profit.

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It was Mar. 21, 2006 when Twitter opened its web portal doors. In that time, according to shareholder documents, the website has faced a deficit of more than $2.09 billion.

The tech giant blames the deficit on “significant operating losses” and a “decline in the growth rate of its user base.” Twitter says future revenue growth will rely on new users and a boost in overall engagement. With revenues soaring from $28.3 million in 2010 to $2.22 billion in 2015, Twitter yet to become a profitable venture.

Analysts note that the losses aren’t entirely surprising, but the size is perplexing.

Twitter noted in the documents that the risks it faces are non-users not really understanding “the value of our products and services.” It added that “new users may initially find our product confusing.” The documents show that officials say the perception of Twitter only being for those who always tweet or who have large audiences may be its main problem moving forward.

If it’s unprofitable then how does Twitter make its money? Mostly through ads and marketing.

Twitter has regularly said it wants to compete with Facebook Inc (NASDAQ:FB). Let’s compare Twitter’s $2 billion deficit to Facebook’s recent $1 billion profit.

Profits? We Don’t Need No Stinkin’ Profits!

If a small business or a large corporation had this kind of massive deficit and never once turned a profit in its 10 years, investors, banks and shareholders would be carrying pitchforks to headquarters.

But if others don’t care then why should Twitter?

Twitter co-founder Jack Dorsey has been working diligently over the last 12 months to help steer the ship around. Everything from product updates to new features, Dorsey has realized that it has to attract new users, change its advertising model and boost engagement to return the stock to prominence and stay afloat.

For each new Twitter feature or makeover, its operating costs go up. Some will concur that the website has to try something completely out of left-field to perhaps generate some more dollars. Whether it’s a subscription model or a takeover, investors may soon start to urge Twitter to divert from the red and transition into the black.

Could Twitter finally report a profit in the coming years? Asking that question leads to another question: is this a long-term opportunity stock or is it just a short-term investment?

Year-to-date, Twitter’s stock has shed 20 percent of its value. As of Monday’s trading session, Twitter shares are up two percent at around the $18.40 mark.

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Andrew Moran

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