Twitter: The Tale of the Tape

When Elon Musk offered $54.20 per share to buy Twitter on April 13th, it was near a bottom, having fallen from an intra-day high of $72.20 on 13 July 2021, to an intra-day low of $32.40 on 7 March 2022.

Chart created with Yahoo Finance, annotations added

To some extent, the fall in Twitter might have been due to the softening of the stock market. But, as you can see in the above chart, Twitter’s fall preceded that of the S&P 500 index. Plus, Twitter stock has a relatively modest five-year beta of 0.8, so that its tendency to rise or fall with the S&P 500 index is only by that fraction.

No, the fall of Twitter was not much due to the stock market, but was due to company-specific events. In particular, while revenue has been growing strongly, earnings have not. The company’s operating profit margin has been narrow, and its net income negative. While the company formerly enjoyed a high valuation based on potential, its valuation fell as the company failed to turn that potential into a profit.

A seemingly similar problem has impacted Disney, except that nobody has made, or maybe could make a play on that company because of its tremendous size. Disney, a mature media conglomerate, has suffered a similar downturn in its fortunes during the past year.

Chart created with Yahoo Finance, annotations added

Mass marketing companies such as Twitter and Disney offend the sensibilities of the mass market at their own peril. It is different, of course, for niche marketers. Niche marketers specifically want to connect their image as well as their product to their target customers. Mass marketers must, on the other hand, seek to be non-offensive, something that is difficult in the best of times, and maybe impossible at others.

These being times of polarization pose real challenges to mass marketers. The above charts suggest that certain mass marketers could do better.

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