Bottom Line: Can Twitter Break Through Its Plateau & Grow?

Twitter Inc (TWTR)

Bottom Line: Between sluggishness in its user base and advertising dollars not able to outpace overall costs, what can TWTR do to jump-start growth and alleviate investor concern that it has hit a wall? How would you improve TWTR? Can the firm afford to change its service without alienating its dedicated users? See my opinion at the end of this post!

Twitter Inc (TWTR) is quite an interesting company in this day and age, as a rare “mature” social media company. Three years after its IPO, it has released its 2015 results and the news is mixed despite best efforts to jump-start growth. Which begs the question, has TWTR reached its plateau for users and revenue potential? Or will users respond positively to it adapting its strategies as it matures?

Quick snapshot, revenue is up more than 50% to $2.2 billion however the company is still losing money as it has for years (according to Generally Accepted Accounting Principles, or GAAP, the standard used in the States). Though, it is losing less money this past year per below. I will note that the company reports “adjusted EBITDA” which is their non-GAAP measure of profit, as it excludes certain expenses.


TWTR Financial Summary 2015


Main concern is that for the first time ever, the company’s monthly average users were flat for the last quarter of 2015. Though annual users were up 9% to 320 million, this is the first time that TWTR’s user base has stagnated on a quarterly basis. Note that the vast majority of these users are outside of the United States, and in fact its users in the States declined during this time frame.


TWTR Monthly Users 2015


The firm reassures that users have since come up for the month of January, but we won’t know for sure until next quarter’s earnings. This is an essential detail, because users have been slowing down across 2015 compared with earlier years culminating in a flat quarter indicating that the firm may be hitting the dreaded plateau that maturing tech companies sometimes see. Investors have responded with skepticism, with the firm’s stock declining around 60% since beginning of 2015.

Still, like all companies, it’s about monetization. Its business is split across two areas: Advertising and Data Licensing & Other. The former segment is the main revenue driver, and grew to $2 billion last year primarily due to an increase in advertisers. Still, the company has substantial sales and marketing costs plus research and development which combine to $1.6 billion per year. It’s an example of a firm growing sales, but costs aren’t being held in-check at the same rate. It’s also interesting to me that a company like TWTR, which seems ubiquitous in today’s society, spends so much on marketing itself but perhaps this is akin to Pepsi Inc running TV ads to maintain its brand identity.

Another couple of items I’d like to mention are its young CEO Jack Dorsey returned to the firm last year and has started to reshape the look and feel of its core services, plus expand in areas like video streaming (via Periscope) and “Moments” which displays current news items and topics but is only available in three markets so far. The firm has the lofty goal to reach across the entire globe, but for some perspective, it is still small compared to a peer like Facebook which has 5 times the amount of users.

Personally, to answer my initial questions, I think the user experience is key and making it as easy as possible to on-board new users should be a cornerstone. Additionally, continuing to present itself as the go-to source for “live” interaction across a broad sweep of people with expanding “Moments” into more markets and supporting its existing video offerings is also a key strategy. I think the firm is doing a good job at integrating non-intrusive ads into its user experience and offering self-service for advertisers, it’s just that costs of doing business in particular marketing costs are still high and without further user growth, profitability and investor confidence seems a ways off.

Sources: Twitter Inc 2015Q4 Earnings, NY Times



Bottom Line: Disney Record Results But Market Outlook Negative?

Walt Disney Co. (DIS)

Bottom Line: Star Wars brand drove a quarter with record income for DIS, but contraction in Media Networks is a concern for analysts and investors going forward. It should be an interesting year for DIS as pipeline includes Finding Dory, Captain America: Civil War, more Disney Infinity but the main areas to watch are Star Wars merchandise and the future of ESPN.

Questions: What other areas or products can drive growth for DIS this year? Are you positive overall on ESPN? Can Star Wars alone, between licensing and merchandise, abate concern with Media Networks at least this year?

Dissecting a huge media conglomerate’s financials is a monumental task, so I won’t necessarily be posting every single stat or figure but want to address the above question while overviewing the company’s current business.

DIS reported 2016Q1 earnings this week, with record net income however the market sentiment is still negative as indicated by the firm’s stock movements after earnings release. So what’s behind this divergence? The firm’s main profit drivers are Media Networks (cable channels, ABC & ESPN etc) and Studio Entertainment (movies, including Star Wars and Marvel titles) with the latter almost doubling income since last year due to Star Wars: The Force Awakens release.

DIS Segments 2016Q1

The key here is that Media Networks income contracted since last year despite sales being up, as costs are also increasing on a relative basis. Driving this is partly timing, as the College Football Playoffs occurred during this quarter, but also rate increases for sports programming and production costs going up. A general concern is the sentiment around ESPN in particular, where programming costs are up and cable subscribers are “cutting the cord” adversely impacting advertising potential. To combat this, DIS is trying to expand ESPN mobile offerings, as WatchESPN now displays all live shows and events in order to have more eyeballs on advertising. I’ve even heard rumblings that DIS should consider an approach similar to HBO Now, offering ESPN content separate from a cable contract for a subscription fee. I’d say this is a last resort, at present.

DIS Media Networks 2016Q1

DIS Studio Entertainment 2016Q1

As for gaming, the Consumer Products & Interactive Media is actually quite healthy but this of course seasonal and this quarter included holiday 2015. Revenue and income were boosted by licensing from Star Wars i.e. Star Wars: Battlefront while Disney Infinity results were lower (sales volume down, inventory up). Even compared to last year, when Frozen merch was all the rave especially with kids accumulating annual sales of $3 billion, Star Wars gear has just begun to reap benefits and Nielsen expects it to account for $5 billion in revenue across this year.

Last note is that DIS results are being propped up by the steady Parks and Resorts segment, up more than 20% since last year driven by Americas region. I see this as continuing to be a key component of the firm’s diversified approach, especially as the cable landscape changes and products/interactive media remains seasonal and dependent on the strength of content and titles.

Sources: Walt Disney Co. Form 1oQ February 9, 2016; Walt Disney Co. Q1 FY2016 Earnings; Nielsen




My Approach: Bottom Line, Limited Clutter & Discussion-Oriented

Before I dive into more substantive posts, up front I wanted to address my approach to covering the areas of gaming, media, technology and the like. My experience is in financial data and writing, and part of my process is sifting through all the numbers and boiling it down to the key points. Like any good analysis or argument, I try my best to back these thoughts up with supporting details and sources but ultimately, we all know it’s about the bottom line.

With that in mind, I like to isolate the driving factors behind a certain result or trend. For instance, which underlying business is driving a company’s performance? Why is a game selling well in one region and not another? Should a company diversify across hardware and software, or will the cost outweigh benefits? Sure these are complex matters, but getting caught up in the minutiae is not something I’d like to do.

Note I won’t be striving for covering 24/7 news, or live blogging, or merely presenting statements or numbers without any context. Rather I’d like to drum up discussion. Am I missing something? Do you agree or disagree? As people, we all come from different backgrounds and perspectives so let’s express those viewpoints. As I noted in my first post and my bio, I realize this is the internet and it’s ambitious to think all our chats will be constructive. This is my hope here, and we can go from there!



Introducing Working Casual: Gaming, Media & Tech Blog

Hi all! I know it’s looking basic at this point, but bear with me while I settle in to my new blog. Welcome to Working Casual: Gaming, Media & Tech Blog! Written by yours truly, DomsPlaying (just Dom is fine).

As noted in the sidebar, this is a place where I’d like to interact with the community to discuss video games, the gaming industry and related businesses including media and technology in a way that we all can understand.

My background covers both these various industries and research, business and analysis as I have degrees in both Economics and Journalism & Media Studies, and currently work in the financial data field with hobbies of gaming, following digital media and keeping up on the latest technology. I had a brief foray into blogging earlier in my career, and have been meaning to revisit this interest as the medium evolves and digital media industry expands overall. Not to mention I need to use those writing skills! On a personal level, I’m based in the Tri-State and come from a family-oriented, Italian-American background that loves good food and fun times together.

So ultimately I would like to initiate discussions on topics related to all of these, and provide perspective while also chatting about the games I’m playing, media stories I’m following and technology I’m using. I know that’s ambitious for the internet, but let’s roll with it for now.

I look forward to expanding on this first post, and meeting like-minded folks that have similar interests. Thanks for reading, and feel free to reach out via social media links to the right or email as I’m always open for a good chat or debate.