Why Twitter Stock Is A Bad Investment
I can hear the "Twitteristas" and social media gurus hatin' on me now, saying things like:
"I've got 55,349 followers and bunch of re-tweets every day... how can this be a bad investment?"
"Look how many gazillions of people are on Twitter!"
"Dude... You just don't get the power of the Twittersphere! #doesntgetit "
I know that a bunch of people are on social media sites like Facebook, Twitter and LinkedIn. However, sheer numbers and popularity by itself doesn't make anything a good investment.
And I know that Gary Vaynerchuk owns Twitter stock. He's a successful businessman, but I don't think he's made a wise decision... and I'll tell you why.
Mark Twain said that history doesn't rhyme, but it often repeats itself.
The business tune that Twitter is playing sounds an awful lot like the companies from the Dot.Com Boom who aren't around anymore: Pets.com, Global Crossing and MCI WorldCom, to name a few.
Pets.com had a sock puppet as their mascot who was on a lot of TV shows in the late 90s. It promoted "buzz" and the dreaded "brand awareness," but in the end this wasn't enough
These companies in the Dot.Com Boneyard had a lot of PR and hype... and little to no earnings to show for it. That's exactly what I see with Twitter - especially when the company is losing $2.50/share, and over $635 million for FY 2013.
That's over a half a billion dollars, financial sports fans, and I haven't heard how they plan to make money. Sounds overly simple, but it's true: Before you decide to invest in a business, you should see if it's turning a profit.
Vaynerchuk is also a well-known social media disciple, which gives Twitter and its stock credibility. But the numbers are the numbers and the company has been in business since 2006 - which should be plenty of time to figure out how to turn a profit.
If Biz Stone and his crew can't make money after eight years, that's a big red flag from an investing standpoint.
Does Twitter have some value to conduct keyword and question research, to network and connect with like-minded people? Yes.
However, if you want to invest your hard-earned money in Twitter stock, there are plenty of better investments I can think of.
"I've got 55,349 followers and bunch of re-tweets every day... how can this be a bad investment?"
"Look how many gazillions of people are on Twitter!"
"Dude... You just don't get the power of the Twittersphere! #doesntgetit "
I know that a bunch of people are on social media sites like Facebook, Twitter and LinkedIn. However, sheer numbers and popularity by itself doesn't make anything a good investment.
And I know that Gary Vaynerchuk owns Twitter stock. He's a successful businessman, but I don't think he's made a wise decision... and I'll tell you why.
Mark Twain said that history doesn't rhyme, but it often repeats itself.
The business tune that Twitter is playing sounds an awful lot like the companies from the Dot.Com Boom who aren't around anymore: Pets.com, Global Crossing and MCI WorldCom, to name a few.
Pets.com had a sock puppet as their mascot who was on a lot of TV shows in the late 90s. It promoted "buzz" and the dreaded "brand awareness," but in the end this wasn't enough
These companies in the Dot.Com Boneyard had a lot of PR and hype... and little to no earnings to show for it. That's exactly what I see with Twitter - especially when the company is losing $2.50/share, and over $635 million for FY 2013.
That's over a half a billion dollars, financial sports fans, and I haven't heard how they plan to make money. Sounds overly simple, but it's true: Before you decide to invest in a business, you should see if it's turning a profit.
Vaynerchuk is also a well-known social media disciple, which gives Twitter and its stock credibility. But the numbers are the numbers and the company has been in business since 2006 - which should be plenty of time to figure out how to turn a profit.
If Biz Stone and his crew can't make money after eight years, that's a big red flag from an investing standpoint.
Does Twitter have some value to conduct keyword and question research, to network and connect with like-minded people? Yes.
However, if you want to invest your hard-earned money in Twitter stock, there are plenty of better investments I can think of.
Labels: Biz Stone, Facebook, Gary Vaynerchuk, LinkedIn, social media, Twitter
posted by Brian Ochsner | 1:30 PM
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