Hi Kamutula,

The profitability, or lack thereof, of Twitter has been a sore point for a while, especially since it is so popular and has been a disruptive force worldwide. Ultimately it is a concern is several quarters that unless the firm finds a way to become, at the very least sustainable, especially since it is a publicly traded company on the NYSE, its future will be bleak at best.

What do you think would be the impact of a implementing some kind of fee, either paid by users, or by telecoms firms, or some other party (govts, e.g), or a combination of those three?

Thoughts… anyone…?

I did comment in an earlier article at the time of Twitter’s IPO listing, that to the extent that it differs in the underlying business approach from that of Facebook, we may have to see a lot more of hurdles for the social media.

Facebook listed with a better, positive and optimistic financial position. Twitter ever since its listing has always posted losses.

But it is not just about the bottom line performance. A cursory glance at Twitters financials does not give a happy prospect, at least not for the moment.

For example in their respective previous years, compared with Facebook, Twitter spent about half of revenue on R&D ( a very necessary spend and a critical metric in their industry ). Facebook spent only about 22%. In the following year, the latest year, Facebook increased its spend to about 27% while Twitter decreased it to about 36%.

A similar trend can be seen across marketing and sales spend. Twitter is “drastically” easing on key operating spending ( clearly to mitigate loss reporting ), while Facebook is “moderately” increasing on the same. Conversely, admin costs ( salaries, etc ) for Twitter appear to be above 10% of revenue. Facebook records below 8%.

Another component of interest is Facebook’s management of gross margins, an aspect that appears not under good control in the Twitter camp.

If Twitter continues to record losses, it shouldn’t surprise anyone with business open eyes.