Planning is a must – #62
There is no doubt that “Twitter” has a major Customer – Our President – that not only contributes to the consistent profitability that has been there for the last 7 quarters, a contrast to years of sustained losses that the company had reported after going public in 2013, and on any given day, 139 Million active users “tweet”.
Here’s the problem – with a Management message as follows: Don’t be misled by top line revenue constantly, but look at the bottom line which is so vital to every leader running a business. While revenue had increased 18% to $841M due to increased ad sales in the U.S., with profit ballooning to $1.12 Billion, its largest ever. This whole success story reflects the investments that “twitter” has made to make it easier to use the system, and we are witnessing the payoff. However, looking behind the numbers we quickly see that profits exceed revenue – A BIG RED FLAG – and we identify the “culprit” as a one-time return of a tax asset of $1 Billion. In fact, increased costs caused a 36% decline in profits to $.05 per share.
The following costs go along with growth and must be planned for in detail. Recruiting at the rate of an additional 100 employees per quarter will take a major portion of the 20% increase in expenses to be expected this year. Good planning should apply in years to follow. Using our guidelines for clearly identifying the importance that HR will play in the future of Twitter.
Twitter pushed forward to rid its platform of toxic, abusive and harassing behavior during the first half of 2019 which led to an 18% decrease in reports of spam or other suspicious behavior. The health of the platform remains a high priority at Twitter – it’s a long-term factor for the company. What are the projected future costs and is there a plan for this major undertaking? What are the plans to handle the increased responsibilities of the 2020 elections? What are the costs?
Twitter continues to work on simplifying the system for new users to find content that matches their interests, leaning heavily on machine-learning technology. This approach involves cost for technology and people to run the programs. Twitter’s cost of revenue also increased in the second Quarter by 21%. Is this on-going expense reflected in a plan for the remainder of 2019 and 2020?
Twitter indicated that the third quarter will be a challenge to match analyst’s projections of $872M. They estimate that they will be somewhere between $815M and $875M. That answer simply means that they don’t have a solid plan to cover the 3rdquarter let alone the entire year of 2019.
Wouldn’t it be a good business practice to have a plan in place that would help this fast growing start-up recognize all those fast growing expenses? I will keep HARPING about the importance of the role of PLANNING. Who is accountable for a $60M spread in forecasting revenues? I am seeing a slowdown in revenue growth from the first half of 2019 and I will be happy with $815M because without a simple plan in place, accepting lame non-quantified excuses such as they are shutting down some ad programs/formats and focusing on some other priorities is not acceptable.
Planning Is A Must