Last year, right before Christmas, BusinessWeek got the story: Twitter is profitable. Using some basic math, the publication concluded that Twitter was in the black – using total revenues from the Microsoft and Google “fire hose” licensing deals and subtracting the company’s $20 million in annual expenses. Of course, regular math and accounting math aren’t the same, so what looked like black really turned out to be more red.
Now, let’s come back to the present. Will we see another profitability rumor? Well, the real question I’m asking is this: is Twitter profitable yet?
I have to admit, I bet earlier this year that Twitter would be profitable by this point – thinly, but profitable nonetheless. With its two large “fire hose” deals with Google and Microsoft, not to mention subsequent similar transactions in the first quarter of this year, it looked like Twitter was well on its way. And, that didn’t even include the ad model unveiled at the Chirp developer conference in April. As long as Twitter could keep its expenses down around the $20 million mark reported at this time last year, the future did seem bright for the company’s profitability prospects.
But, a year has passed, and a lot has changed.
Twitter has unveiled its ad model, undergone a redesign and launched more features that encroach on the space occupied by its ecosystem. While this has resulted in greater revenue opportunity, it has also led to additional expense, particularly for headcount. The company’s search for a monetization guru back in January further suggests that the action to come in 2010 (at that point) entailed the pursuit of revenue rather than an austere march to thin profits.
Last year’s speculation was obviously premature, and I’ll admit my guess earlier this year was based on linear assumptions, rather than the multifaceted approach Twitter took. As the company explores revenue streams, it seems safe to assume that profitability isn’t the priority this year.
So, will we see another rumor?
I don’t think that’s too likely. The ease with which the profitability rumor was dispatched in December 2009 and Twitter’s evolving story in 2010 suggest that talk of profits doesn’t make sense at this stage of the game. Hopefully, the rumors will stay where they belong.