Changing the Twitter conversation (again)

(Originally posted on Medium.)

Earlier this week Shira Ovide made the argument that, despite the negative sentiment around Twitter in both tech and finance circles and some unexplained deceleration, their sales growth is cause for optimism:

How unusual is Twitter’s revenue clip? Out of more than 100 technology companies with at least $2 billion in revenue over the last 12 months, just one had a faster pace of revenue growth than Twitter in the most recent quarter, according to Bloomberg data.

Shira is right. But comparing Twitter to a basket of 100 technology companies paints a slightly misleading landscape. These are companies with different business models and, more importantly, at different points in their life-cycle. So I was curious and took a deeper look: relative to Twitter’s peers at the same age, how does their revenue and growth compare? Cohort analysis is not just for product and marketing analytics and makes this comparison simple; in theory if not practice.

Here are some findings:

  • Twitter was founded in March of 2006 and is approximately 38 quarters old. Yahoo and Facebook reached this milestone in Q3 of 2004 and 2013, respectively. Different macro environments entirely but comparing the same vintage is a good start…
  • Yahoo revenue grew fastest with strong quarters such as +253% year-over-year growth in quarter #38. Lapping post-bubble comps is one thing but looking at trailing year growth between quarters #31–34 and #35–38 still has Yahoo leading the pack with +63 year-over-year compared to Twitter at +41% and Facebook at +33%.
  • Yahoo added $2B incremental over four quarters compared to only $820M at Twitter. Facebook’s growth is more impressive when you consider their base was 4x the size of both Twitter and Yahoo and by quarter #38 their run rate was almost $7B.
  • Looking further into the future of Facebook and Yahoo shows how quickly they ramped sales at this point in their life-cycle. Facebook’s growth actually accelerated for several more quarters and Yahoo’s rapid growth continued for several years before peaking in 2008.

It’s clear to me that TWTR is at a key inflection point and, while most conversation centers around their product, profitability, and user growth challenges, it remains to be seen whether they will be able to reignite sales growth.

Charts below. You be the judge.