In 2013 Mark Zuckerberg was quoted saying that Twitter is such a mess –

“it’s as if they drove a clown car that fell into a gold mine”.

Born out of a defunct podcasting company Twitter was the brainchild of Jack Dorsey who has been the on again off again CEO of the company since. Since its inception, it has grown its user base to approximately 400m monthly active users, has taken on significant investment from heavyweight private equity investors and was the apparent ‘medium of choice’ for a certain U.S. President. Despite this, the Twitter share price is still below its day 1 price close in late 2013.  Perhaps investors should’ve heeded Zuckerberg’s comments...

Released early in February 2022, this Business Breakdowns episode dives deep into who Twitter was recording before the Elon Musk takeover frenzy began. Throughout the episode, we hear about the strategic value and latent potential within the Twitter business, which likely goes part way into why it has the potential to be an attractive takeover target.

So, what is this strategic value that long-suffering shareholders would like to see recognised one way or another? There is a lot of friction in the Twitter ecosystem which needs to be removed. Improving the user onboarding process, improving user engagement and also improving the protection and health & safety of users are all core requirements going forward. If achieved this would have the effect of making users ‘sticker’ and allow Twitter to have a far greater opportunity to monetise their user base. The company has done a lot of work on getting its core technology stack to a point of stability whereby now future requirements should only be incremental.

If the friction is removed and if the cost growth is only incremental then, the future profit margins Twitter may be able to generate, could be very significant. For a business that went from a ‘high flyer’ to generating negative returns, it will be interesting to see if it can finally take full advantage of the upside opportunity. Adding Elon Musk to the equation and who knows what will happen… perhaps space is the limit!