We’ve been vocal for some time about the negative Twitter Investment Trend. While we often preface our search trend analysis with a clear message that other fundamental factors should be taken into consideration when considering a particular investment, in the case of Twitter, we believe that search trends have a much greater impact on their financial fortunes only because their business model relies heavily on the increase in user traffic to the platform.
Now some may say that this conviction has proven to be wrong over the last few months (see chart below). While we would agree, our argument is that these ‘band-aid’ fixes implemented by management (such as introducing video) which may have led to the uptrend in the stock price will not change their fundamental problem of waning interest and continued losses. Twitter’s business model has proven itself to be unprofitable while search interest was on the rise and attempting to reverse this while interest is waning will be a very difficult task. As of September 2016, worldwide searches for the term ‘twitter’ have dropped to a level last seen in December 2010 and the trend shows no signs of a reversal.
In the face of an appreciating stock price, we continue to maintain that the overall and longer term trend is negative.