For the first time in its twelve year existence Twitter has earned a profit. After more than a decade of losses the company closed its last quarter with 91 million US dollars above the line. Twitter’s profit is a good sign, but it also shows how blown up and unsuccessful leading technology companies really are.
When you want to start a business yourself there is no chance in the world you can survive by making losses for over a decade. But tech companies have a major advantage to regular Joe, they are backed by armies of investors that pump money in with the hope profit will some day come. Those patient investors in Twitter are finally getting rewarded. But Twitter’s profit of 91 million US dollars is still a long shot from the billion plus losses the company has made.
Furthermore, the glow the social network had when it started is somewhat fading. User numbers are stagnating and it is being outpaced by competitors like Facebook, YouTube and Instagram. Luckily many mainstream media and eye catching figures like Donald Trump adore Twitter, which really helps boost the medium’s popularity. But will it be enough to make up all that money that was invested and lost in its golden era? I am not so sure.
Twitter is not the only tech giant that suffers from this blown up expectation bubble. In a different field Uber is also making loss upon loss with no end in sight. Yet the hope is that it will some day make a profit. It is a strategy based on ever growing expansion with profits always being three steps away on the horizon. I am not a big fan of it.
Obviously investments must be made to set up a new company and to gain momentum. But shouldn’t that be in line with earnings? Shouldn’t decent profits come after a year or five? Ten maybe? At least in some level of parallel. Perhaps my European background makes me think more cautious than the big, bigger, biggest American expansion drift. But to me it seems common sense no organisation can last that makes hundreds of millions of losses and barely to no profit, consistently.
The very reason why competing becomes hard for the little guy is also this odd playing field where those that follow the rules and grow durably drown under the massive investment power of the big guys, but as it turns out the big guys are really just air, they are not earning a dime and are just promising a golden horizon to investors that never really seems to come.
The funny part of it all is that founders from companies like Twitter and Uber are hailed as the great men of our age. But when looking at what value they have really earned it is nearly nothing. They have personally enriched themselves, but their companies are ten meters below the water.
Exceptions to this entire story are tech giants like Google and Facebook, which are actually making a durable profit for years in a row. For several years I could even call myself a happy Facebook shareholder myself, providing me with a very generous return on investment.
Just like durable energy is good for the environment, durable economic growth and policies by business will help to benefit society as well. For this very reason I urge every investor and business leader out there to focus on companies with durable growth and profits. Once the bubble of ‘maybe next year will be great’ companies bursts we could all suffer the consequences. And we all remember how 2007 went.