Meta (Facebook) investors have enjoyed much better returns than their Twitter counterparts, thanks to Facebook’s superior user growth and better monetisation of users.
Facebook was listed on the Nasdaq on 18 May 2012 at $38 per share. After a shaky start, the share gained momentum and peaked at close to $380 per share.
Even after a disastrous 2022, where the share price halved, it still provided shareholders with a return of over 300% since listing.
Twitter, in comparison, performed poorly. It priced its November 2013 IPO at $26 a share, and the stock price soared 73% on the first day of trading.
Over the next nine years, Twitter struggled to create the same excitement among investors, and its share price did not gain much since its listing.
It raises the question of what Facebook is doing right and where Twitter is failing.
Delving into the financials shows that Meta is far superior to Twitter in generating revenue and profit.
Meta has far more daily active users than Twitter – 2.87 billion versus 229 million – and monetises these users far better.
In the last financial year, Meta generated $118 billion in revenue with a net income of $39 billion.
Twitter, in comparison, generated $5 billion in revenue with a net loss of $221 million.
These numbers reveal that Meta generated $41.09 per year per daily active user, much higher than Twitter’s $22.17.
Twitter also has much more debt relative to its equity than Meta, and its solvency has worsened significantly from 2020 to 2021.
Meta is, therefore, better positioned than Twitter to meet its long-term debt obligations. It is mainly due to a high increase in Twitter’s operating lease- and other long-term liabilities.
It is important for Twitter to grow its user base, and make more money per user, to become profitable and lower its debt burden.
Meta and Twitter’s plans
Meta has big growth plans with great assets like Facebook, WhatsApp, Instagram, and Oculus.
Meta’s main focus is on the Metaverse. It will allow users to interact with a digital world using Meta’s virtual reality (VR) and augmented reality (AR) devices.
Should the Metaverse evolve as expected, it can generate growth as Meta’s standalone VR headset – the Quest 2 – already accounts for 78% of the AR/VR headset market.
Horizon Worlds, Meta’s VR playground, has reached 300,000 monthly active users. It is only a small fraction of its total user base, indicating a large potential market for these products.
Meta will also increase its capital expenditure on short-form videos as 50% of all time spent on Facebook is people watching videos.
Videos are also the fastest-growing content format on Instagram, which gives Meta the potential to significantly increase revenue growth.
Meta is also rolling out the WhatsApp Cloud API to businesses worldwide, allowing companies to integrate WhatsApp into their back-end systems. Meta will charge businesses to use the cloud API.
WhatsApp for Business and WhatsApp Pay are also big potential revenue streams for Meta.
Twitter, in turn, is developing new subscription-based features that will enable users to monetise their Twitter following.
It will range from users being able to create their own newsletters on Twitter to offering paying members access to exclusive content.
These features will be added to the platform as part of Twitter’s attempt to become less dependent on advertisement revenues.
When Elon Musk announced he was planning to buy Twitter, he wanted to increase annual revenue to a mindblowing $26.4 billion by 2028, up from $5 billion in 2021.
He planned to increase the number of Twitter users from 229 million to 931 million and increase the average revenue per user from $22 to $30.
However, Musk pulled out of the deal, saying the social media company had breached multiple provisions of the merger agreement.
It raises questions about Twitter’s prospects and whether Musk’s ambitious growth plans were realistic.
Meta versus Twitter
The table below shows Meta (Facebook) and Twitter’s core financial and operational data.
|Revenue||$118 billion||$5 billion|
|Net Earnings||$39 billion||-$0.22 billion|
|Dept to equity ratio||0.11||1.12|
|Active users||2.87 billion||0.23 billion|
|Revenue per user||$41||$22|