BUSI 690 _Individual_Case_Study_Part_1_.docx ASSIGNMENTS 2020.pdf

INDIVIDUAL CASE STUDY PART 1

Individual Case Study

Hannah Wallace

Masters of Business Administration, Liberty University

BUSI 690: Policy and Strategy in Global Competition

Dr. Elizabeth Koss

November 29, 2020

INDIVIDUAL CASE STUDY PART 1

Executive Summary

Existing Mission, Objectives, and Strategies

Twitter’s mission statement is as follows, “To give everyone the power to create and

share ideas and information instantly without barriers.” (“Investor Relations – FAQ,” 2020).

Additionally, according to former Twitter CFO Anthony Noto, the company’s objectives, scope,

and competitive advantages all interlock to create the following strategy statement:

Reach the largest daily audience in the world by connecting everyone to their world via

our information sharing and distribution platform products and be one of the top revenue

generating Internet companies in the world. (Fox, 2014).

This strategy statement reflects Twitter’s overall objective, which remains “to become an

indispensable daily companion to live human experiences” (Thompson et al., 2020, C-141) while

also becoming the competitive leader in revenue among Internet social networking and real-time

information sharing companies.

According to Twitter’s Q4 2019 Letter to Shareholders (2020), company objectives

specifically for 2020 included (1) increasing development velocity and trust, (2) increasing

healthy public conversation, (3) increasing revenue durability, and (4) enabling anyone,

anywhere to work at Twitter (p. 12). Such objectives were forecasted to be supported by

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strategies such as a headcount growth of 20% specifically in engineering, product, design, and

research departments, and investment in the building of a new data center to support overall

development, audience, and revenue growth (p. 12). However, as so with the majority of the

world, 2020 has brought unprecedented challenges along with ground-breaking opportunities for

Twitter, and as such has affected the company’s original objectives and strategies for 2020. The

company’s Q1 2020 Letter to Shareholders (2020) states, “In light of the current operating and

economic environment, we have shifted resources and priorities to increase focus on our revenue

products…with the goal of accelerating our long-term roadmap” (p. 7). Such a rapid shift in

strategic priority entailed a halt in the original strategic plan to grow headcount by 20%, and

instead focus on long-term revenue growth opportunities amidst the dynamic and uncertain

business environment of 2020 (pp. 7-8).

New Mission Statement

While Twitter’s mission statement has been praised for its interpretation of the company’s

core purpose in a concise single sentence, there is room for improvement through an analysis of

how Twitter’s mission statement addresses the following nine components: (1) customers, (2)

products or services, (3) markets, (4) technology, (5) concern for survival, growth, and

profitability, (6) philosophy, (7) self-concept, (8) concern for public image, and (9) concern for

employees (Fox, 2014).

Customers

According to Pew Research Center, the target customer demographic for Twitter users are

adults younger than 50, primarily ages 25 to 34, who are likely to possess distinct opinions

relative to the public, and have an appeal for real-time public self-expression and conversation

(Thompson et al., 2020, C-142; Wojcik & Hughes, 2019). Additional customers outside of

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Twitter users include advertisers, developers and data partners according to the company’s Fiscal

Year 2019 Annual Report (2019).

Products or Services

According to Twitter’s Fiscal Year 2019 Annual Report (2019), the company defines it

primary service as the Twitter global platform which allows individuals to create, consume,

discover, and distribute content in real time through public self-expression and conversation (p.

6). Additional company products include promotion products which enable advertises to

promote their brand and amplify their visibility, as well as a database platform which provides

developers and data partners access to application programming interfaces which allow the

leveraging of Twitter data for business insights and monetization (Fiscal Year 2019 Annual

Report, 2019, pp. 6-7).

Markets

Geographically, Twitter competes internationally as more than 80% of the company’s

monetizable daily active usage (mDAU) occurs outside the United States (Fiscal Year 2019

Annual Report, 2019, p. 70). However, the United States is the platform’s largest active audience

with 33 million mDAUs (p. 70).

Technology

Twitter consistently remains technologically current, as the company operates a

technology-based social networking platform that is reliant upon the delivery of real-time

information to users. Indeed, according to the company’s Fiscal Year 2019 Annual Report

(2019), Twitter improved its learning-models to provide more relevant content in user’s timelines

by organizing content around topics and events, as well as innovatively delivered better returns

for advertisers by rebuilding its core ad server (p. 6)

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Concern for survival, growth, and profitability

Twitter exhibits a commitment to growth and financial soundness through its continual

evaluation and necessary refinement of strategy directives. This was clearly seen in 2018, when

Twitter CEO Jack Dorsey announced a restructuring of the company in consideration of recent

financial struggles to “help make decision making clearer, allow the company to build a stronger

culture, and prepare the company for increased creativity and innovation.” (Thompson et al.,

2020, C-143).

Philosophy

According to the Twitter Code of Business Conduct & Ethics (2018), the company’s

values include integrity, honesty, transparency, and trust. Through the enactment of these values,

the primary aspiration of Twitter is to for its employees to simply “grow our business in a way

that makes us proud” (Twitter Code of Business Conduct & Ethics, 2018). Ethical priorities of

the company include treating each other with dignity and respect, avoiding conflicts of interests,

compliance with laws and policies, confidentiality, and financial integrity (Twitter Code of

Business Conduct & Ethics, 2018).

Self-Concept

Twitter defines itself as “what’s happening in the world and what people are talking about

right now” (About, 2020). It is this real-time information distribution that provides Twitter a

distinctive competence and differentiation among competitors such as Facebook, which relies

more on social networking and less on information distribution. Indeed, the platform’s real-time

information distribution has led to it becoming one of the most widely utilized online news

platforms, and therein creates a major competitive advantage for the company (Leetaru, 2019).

Concern for Public Image

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Twitter is uniquely responsive to social, community, and environmental concerns as the

company prides itself in providing a platform that allows for the dissemination of real-time

public self-expression and conversation often surrounding such social, community, and

environmental concerns (Fiscal Year 2019 Annual Report, 2019, p. 6). Additionally, the company

promotes a philanthropic mission and vison “to bring [the] company and community together as

a force for good” (Twitter for Good, 2020) through areas of focus such as internet safety and

education, free expression and civil liberty, equality, environmental conservation and

sustainability, and crisis and emergency response.

Concern for Employees

Twitter employees are considered a valuable and essential asset to the company, as highly

skilled employees are crucial to the daily operations and growth of technology-based, high-

growth companies such as Twitter (Fiscal Year 2019 Annual Report, 2019, p. 13). Twitter’s goal

when it comes to personnel is to become “the world’s most diverse and inclusive company”

(Careers, 2020), which to the company is a key component in its service of public conversation.

Analysis of the Firm’s Existing Business Model

Twitter existing business model is comprised of the primary platform which allows users

free access to real-time content, along with two revenue generating platforms – advertising and

data licensing (Thompson et al., 2020, C-142). Twitter’s advertising platform is its main source

of revenue, comprising 86.5% of total revenue in Q3 of 2020 alone (Q3 2020 Letter to

Shareholders, 2020, p. 9). According to the company’s Fiscal Year 2019 Annual Report (2019),

Twitter generates advertising revenue primarily through the sale of its promoted products: (1)

promoted tweets, (2) promoted accounts, and (3) promoted trends (p. 62). Promoted tweets and

accounts are pay-for-performance or on impressions delivered, while promoted trends are offered

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on a fixed fee-per-day basis (p. 62). Twitter also generates advertising revenue from the sale of

promoted tweets to third-party publishers (p. 62). Additionally, the company’s data licensing

arrangements grant customers access to Twitter’s intellectual property for a fixed fee over a

specified period of time (p. 63).

SWOT Analysis

The following is an analysis of Twitter’s strengths, weaknesses, opportunities, and threats

followed by an analysis of the company’s Internal Factor Evaluation (IFE) Matrix and External

Factor Evaluation (EFE) Matrix, and concluding with a SWOT Bivariate Strategy Matrix.

SWOT Analysis (See Appendix A)

Strengths

Twitter’s internal strengths include: (1) highly influential (2) broad product portfolio, and

(3) brand image. Twitter consistently maintains dominance of real-time content distribution, and

has furthered such dominance by creating the highly influential hashtag feature. Additionally, the

company has prioritized the strategic expansion of its product portfolio throughout the years with

acquisitions such as Periscope and MoPub, both of which broaden Twitter’s core capabilities

through live video streaming (Periscope) and mobile advertising (MoPub) (Fiscal Year 2019

Annual Report, 2019, pp. 6-7). Finally, Twitter has successfully built a powerful brand image

through its unique yet simplistic bird logo, which has created worldwide brand recognition for

the company.

Weaknesses

Twitter’s internal weaknesses include: (1) over-reliance on U.S. market, (2) large

operational costs, and (3) unequal distribution of tweets. While Twitter’s monetizable daily

active usage (mDAU) is higher internationally than in the United States (121 million mDAU

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internationally compared to 31 million U.S. as of December 31, 2019), the company derives

close to half of its advertising revenue from the United States (Fiscal Year 2019 Annual Report,

2019, p. 36). This poses a significant weakness to the company, as such an over-reliance could

see future impacts on revenue should mDAUs begin to stagnate in the United States.

Additionally, the company consistently incurs large operational costs due to continual investment

in data center expansion and strategic acquisitions. While the company sees such costs as

necessary to “prioritize innovation and the experience for people on Twitter and advertisers on

our platform” (Fiscal Year 2019 Annual Report, 2019, p. 13), such costs can also be seen as a

weakness due to its adverse effect on short-term trading prices and long-term revenue (p. 13).

Finally, according to research conducted by Pew Research Center (2019), nearly 80% of all

tweets posted in 2018 came from only 10% of users (Wojcik & Hughes, 2019). This unequal

distribution of tweets demonstrates a major weakness for the company through a lack of diversity

in active user participation.

Opportunities

Twitter’s external opportunities include: (1) e-commerce through paid promotions, (2)

further integration with other platforms, and (3) mobile-based advertising. Since most of

Twitter’s revenue stream is comprised of its paid promotion products, the company has the

opportunity to break into e-commerce on its platform wherein a third-party company sells

directly to users on the Twitter platform through its paid promotions. Additionally, based on the

company’s historical acquisition budget, Twitter has the opportunity to further integrate with

other platforms such as music and video streaming services so as to better compete with new

competitors such as TikTok (Fiscal Year 2019 Annual Report, 2019, p. 32). Finally, due to the

recent acquisition of MoPub and expansion of its user base into primarily mobile emerging

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markets, Twitter has the opportunity to build innovative mobile-based advertisements on its

platform and further increase advertisement revenue (“Use of Smartphones and Social Media is

Common Across Most Emerging Economies,” 2019).

Threats

Twitter’s external threats include: (1) increasing competition, (2) regulatory laws, and (3)

breach of confidential user data. While Twitter has consistently faced competition from social

networking platforms such as Facebook and Snapchat, the company is finding new competition

in platforms such as TikTok, which are drawing an increasing number of users away from Twitter

with innovative product features not currently available on the Twitter platform (Fiscal Year

2019 Annual Report, 2019, p. 11). Additionally, Twitter is finding itself increasingly subject to a

variety of laws and regulations both within the United States and internationally pertaining to

issues such as data protection, content regulation, and intellectual property right (p. 18). These

laws and regulations may pose a threat to the company due to the cost of compliance, negative

publicity, and increase in operational costs which “may result in a loss of mDAU or advertisers

and otherwise harm our business, including fines or demands or orders that we modify or cease

existing business practices.” (Fiscal Year 2019 Annual Report, 2019, p. 19). Finally, due to the

company’s storage and transmission of confidential user data, Twitter faces an increased threat of

cyber-attack and data breach which may result in an “adverse effect on [Twitter’s] business,

reputation and operating results” (Fiscal Year 2019 Annual Report, 2019, p. 16).

Internal Factor Evaluation (IFE) Matrix (See Appendix B)

Based upon the company’s internal strengths and weaknesses as identified above,

Twitter’s total IFE score is 2.32. This score indicates that the company’s internal weaknesses

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have a greater impact than its strengths, and as a result Twitter is overall internally weak against

its competitors.

External Factor Evaluation (EFE) Matrix (See Appendix C)

Based upon the company’s external opportunities and threats as identified above,

Twitter’s total EFE score is 2.40. This score indicates that the company is neither effective nor

ineffective in taking advantage of external opportunities or defending against external threats,

and as a result Twitter should reevaluate its strategies in order to effectively operate within its

external environment.

SWOT Bivariate Strategy Matrix (See Appendix D)

The SWOT Bivariate Strategy Matrix takes the traditional SWOT analysis a step further

by matching internal and external factors identified within the SWOT analysis to create relevant

strategies for a company to pursue. These strategies include: (1) SO (Strengths – Opportunities)

strategies, (2) ST (Strengths – Threats) strategies, (3) WO (Weaknesses – Opportunities)

strategies, and (4) WT (Weaknesses – Threats) strategies. The following will analyze such

strategies for Twitter.

SO Strategies

SO strategies utilize a company’s internal strengths to maximize external opportunities.

For Twitter, these strategies include: (1) utilizing the company’s highly influential real-time

content and hashtags to provide innovative e-commerce options for platform users, (2) utilizing

the company’s existing broad product portfolio to further explore and maximize integration of

Twitter’s platform with new platforms, and (3) utilizing the company’s well-known brand to

maximize mobile-based advertising options for the company.

ST Strategies

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ST strategies utilize a company’s internal strengths to minimize external threats. For

Twitter, these strategies include: (1) capitalizing on the company’s highly influential real-time

content and expanding the company’s broad product portfolio to minimize the threat of

increasing competition through differentiation.

WO Strategies

WO strategies minimize a company’s internal weaknesses by capitalizing on external

opportunities. For Twitter, these strategies include: (1) minimizing the company’s over-reliance

on the U.S. market by capitalizing on mobile-based advertising, which has an active audience in

primarily mobile emerging international markets, (2) minimizing the company’s large

operational costs by capitalizing on e-commerce and mobile-based advertising revenue

opportunities, and (3) minimizing the company’s unequal distribution of tweets by further

integrating with other platforms, which has the potential to increase active users.

WT Strategies

WT strategies minimize a company’s internal weaknesses by avoiding external threats.

For Twitter, these strategies include: (1) avoiding threats of lawsuits and fines in relation to non-

compliance with regulatory law and breach of confidential user data to minimize large

operational costs.

BCG Matrix (See Appendix I)

Based on an analysis of Twitter’s current products and strategies, the company’s star

product/strategy is its promotional products, which include promotional tweets, accounts, and

trends. These distinctive products are what differentiate Twitter from its competitors, and

consistently bring in high and stable earnings; therefore, these products should continue to be

strongly and strategically invested in. Next, the company’s question mark product/strategy is its

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e-commerce strategy, which primarily relies upon promotional tweets. This strategy has room for

growth and improvement, but will require the company to extend beyond its core capabilities and

introduce innovative e-commerce strategies to the platform. For this reason, while the strategy

has room for growth it also has significant room for failure, making it a BCG matrix question

mark. Following this, the company’s cash cow product/strategy is its traditional advertising

strategy which primarily relies upon banners and video advertisements. This strategy brings in a

significant amount of revenue for the company, and therefore should continue to be invested in

for growth and innovation of the platform’s advertising services beyond its current traditional

advertisements which will likely only grow the revenue already brought in from the strategy.

Finally, the company’s dog product/strategy is its data licensing, which not only has experienced

a stagnation in revenue growth the past three years (see Appendix E), but also has made the

company more susceptible to data breach in recent years. As indicated by these factors, the

company should begin to divest this revenue product, and begin more heavily investing in its

other revenue products – promotional products and advertisements.

Competitive Forces Analysis

Based on Porter’s five forces framework, Twitter’s competitive forces include: (1) rivalry

among existing competitors, (2) threat of substitute products or services, (3) threat of new

entrants, (4) bargaining power of customers, and (5) bargaining power of suppliers. The

following is an analysis of these competitive forces as each pertains to Twitter.

(1) Rivalry Among Existing Competitors

For Twitter, the rivalry among existing competitors is the strongest competitive force, as

the social media industry within which Twitter resides is highly competitive and inundated with

similar existing competitive platforms such as Facebook and LinkedIn. The rivalry among

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competitors within the social media industry is heightened due to the weak differentiation that

exists among competitors, and the continual technological innovation that exists within the

industry (Kasi, 2017; Thompson et al., 2020, p. 55).

(2) Threat of Substitute Products or Services

For Twitter, the threat of substitute products or services outside the social media industry

is low, as there currently does not exist a comparable substitute to a social media platform such

as Twitter. At one time, traditional newspapers could have been seen as a substitute to the online

information sharing and distribution platform of Twitter, but with Twitter’s platform and feature

advancements it is now clear that traditional print news is no longer an attractive substitute for

Twitter (Thompson et al., 2020, p. 61).

(3) Threat of New Entrants

For Twitter, the threat of new entrants is relatively low, as extensive technological

innovation and development combined with strong brand image/loyalty creates high entry

barriers for the social media industry (Thompson et al., 2020, pp. 58-59).

(4) Bargaining Power of Buyers

For Twitter, the bargaining power of buyers is high as the buyers of Twitter’s products

and services are businesses and marketers who pay to have advertisements and/or promoted

products on Twitter. The majority of Twitter’s competitors – Facebook, Instagram, Snapchat –

also generate revenue through paid promotions on their platform, making the buyer switching

cost to competing platforms low, and their bargaining power with Twitter high (Kasi, 2017;

Thompson et al., 2020, p. 63).

(5) Bargaining Power of Suppliers

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For Twitter, the bargaining power of suppliers is relatively high, as Twitter’s suppliers

consist of technical equipment (e.g. data storage) suppliers which is a concentrated industry

dominated by a few large companies such as IBM (Kasi, 2017). This makes supplier bargaining

power high as companies such as IBM maintain a sizable market share with pricing power,

which in turn increases the switching cost for a platform like Twitter (Thompson et al., 2020, p.

67).

Competitive Profile Matrix (See Appendix J)

Twitter’s main competitors include Facebook, WhatsApp, Snapchat, Instagram, and

LinkedIn (Thompson et al., 2020, C-144-C147). As presented in Appendix J, Twitter’s

competitive profile matrix includes only Facebook and Snapchat, as Twitter’s other competitors

as listed above have been acquired by larger technology companies and are no longer stand-alone

competitors (WhatsApp and Instagram have been acquired by Facebook, and LinkedIn has been

acquired by Microsoft). Based on an analysis of each company’s achievement of critical success

factors for the social media industry, Twitter received an overall score of 2.72 while Facebook

received an overall score of 3.31 and Snapchat received an overall score of 2.2. Based on these

scores, Facebook is the strongest competitor out of the three companies, while Snapchat is the

weakest competitor. Facebook’s competitive strength comes from the achievement of a number

of critical success factors – advertising, market share, R&D, range of products, and financial

profit. Snapchat’s competitive weakness largely comes from the company’s financial instability,

both in terms of financial profit and high costs. For Twitter to increase its competitiveness with

Facebook, the company should focus on improving its range of products and market share, which

will in turn increase the company’s investment in R&D and ultimately allow the company to gain

in competitive advantage against Facebook.

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Competitor’s Ratio Analysis (See Appendix K and L)

Overall, Facebook’s profitability ratios are greater than Twitter’s; however, both of

Facebook’s liquidity and profitability ratios are marginally decreasing year-over-year, indicating

that the company is declining in overall profitability and liquidity. For example, the company’s

operating margin decreased by 10.22 and 23.98 percent between FY 2017/2018 and FY

2018/2019 respectively. In contrast, Twitter’s operating margin increased by an astounding

837.11 percent between FY 2017/2018, only to decrease again by 28.93 percent in FY 2019 (see

Appendix H). Despite this erratic increase in Twitter’s operating margin, Facebook consistently

proves to be more profitable than Twitter, with Facebook boasting a 33.92 operating margin in

FY 2019 versus Twitter’s 10.59 margin for the same year. In contrast, Snapchat’s overall ratios

are significantly less than Twitter’s, even as the company’s profitability ratios increase year-over-

year. For example, Twitter was able to increase its current ratio by 95.10 percent between FY

2018/2019, while Snapchat’s current ratio decreased 7.68% between the same years. While

Twitter was able to achieve positive profitability ratios by FY 2018 after negative profitability in

FY 2017, Snapchat is still operating with negative profitability ratios in FY 2019, indicating that

the company still has a ways to go to achieve both profitability and overall competitive

advantage against both Twitter and Facebook.

Historical Financial Statements Analysis (See Appendix E, F, and G)

Based on an analysis of Twitter’s income statement, balance sheet, and statement of cash

flows for years 2019, 2018, and 2017, total revenue for the company was $3.46 billion in FY

2019, an increase of 14 percent from FY 2018 and 42 percent from FY 2017 (see Appendix E).

This increase was attributable to the steady increase in revenue year-over-year from advertising

and data licensing services (14 percent and 10 percent increase respectively from FY 2018).

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Twitter’s costs and expenses increased year-over-year in FY 2019 from 2018 and 2017 as the

company continues to grow and scale its capacity to enhance capabilities and support the

increased activity on the platform. Twitter’s net income for FY 2019 was $1.47 billion, an

increase of 22 percent from FY 2018 and 107 percent from FY 2017 (see Appendix G). Cash

provided by operating activities was $1.30 billion in FY 2019, which is a decrease in cash inflow

of $36.3 million in comparison to FY 2018. According to the company’s Fiscal Year 2019

Annual Report (2019), this decrease in cash inflow from operating activities can be attributed to

the one-time refund of $147.5 million in prepaid employment taxes applied to Twitter’s FY 2018

cash flows from operating activities (p. 48). Additionally, cash used in financing activities was

$286.2 million in FY 2019 compared to $978.1 million provided by financing activities in FY

2018, which is primarily due to the $935 million repayment of 2019 Notes at maturity in FY

2019. Finally, total stockholder’s equity was $8.7 million in FY 2019, an increase of 28 percent

from FY 2018 and 72 percent from FY 2017 (see Appendix F).

Ratio Analysis (See Appendix H)

Twitter’s liquidity ratios (current, quick, and cash ratio) all increased from FY 2018 to FY

2019, indicating that the company is in a better position to satisfy obligations than it was in FY

2018. Indeed, FY 2019 and FY 2017 liquidity ratios are closer in percentage than FY 2018,

which had the company experiencing a drop in liquidity of 45 percent. In terms of profitability

ratios (gross margin, operating margin, profit margin, and return on equity), Twitter experienced

a slight decrease in every ratio except profit margin for FY 2019, indicating that the company

experienced a slight decline in overall profitability in FY 2019 as compared to FY 2018.

Twitter’s operating margin dropped by 28 percent from FY 2018 to FY 2019, which as

previously discussed can be attributed to the one-time employment taxes refund applied to

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operating cash inflow in FY 2018. However, profitability ratios for both FY 2019 and FY 2018

are exceedingly greater than the company’s FY 2017 profitability ratios, which show a negative

percent profit margin and return on equity due to Twitter’s net income loss of $108,063 (see

Appendix G).

Alternative Strategies

Based on the above analysis of Twitter, the following will detail three alternative

strategies for Twitter. These strategies include: (1) expansion into the news media industry, (2)

subscription-based service for users, and (3) expansion of e-commerce options.

Strategy 1: Expansion into the News Media Industry

According to a survey conducted by Pew Research Center, Twitter has the most news-

focused users out of any social media platform with 71 percent of its users primarily getting

news from the platform (compared to 67 percent of Facebook users) (Shearer & Matsa, 2018).

This prominence combined with the company’s emphasis on healthy public conversation by

reducing abuse, combating misinformation, and protecting the integrity of civic-related

conversations (Q3 2020 letter to shareholders, 2020, p. 7) puts the company in a unique position

to pivot towards a unique market segmentation. This will give advantage to Twitter by

potentially expanding its traditional target market of adults ages 25 60 34 towards an older

demographic.

Strategy 2: Subscription-Based Service for Users

Twitter has attempted forms of subscription-based services in the past based on analytics

and account verification (both in 2009 and 2017), but this time around these services will provide

advanced analytics and tools that model the success Facebook has found with its fan subscription

service, which provides subscribers with exclusive content (Hutchinson, 2020). The advantages

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to this service include the addition of a revenue source, which could subsidize the company’s

current main source of advertisement revenue. This could prove financially beneficial to Twitter,

as the company experienced a 25 percent decrease in advertisement revenue at the end of Q2

2020 due to brand’s pausing advertising during the height of the pandemic (Q3 2020 letter to

shareholders, 2020, p. 9). Additionally, the company could find advantage in the service as a way

to attract and increase mDAU and user retention rate on the platform.

Strategy 3: Expansion of E-Commerce Options

Currently, the extent of Twitter’s e-commerce option is a website click campaign which

entails the imbedding of a website card and call-to-action button inside a tweet, allowing a

business to drive e-commerce traffic directly to their site through a tweet (Creative ad specs,

2020). This singular e-commerce option pales in comparison to the e-commerce options of

competitors such as Facebook and Instagram, which both allow users to shop directly from the

platform through a number of advertisement formats often for a cheaper price than Twitter –

average CPM (cost per impression) of $0.59 on Facebook versus $3.50 on Twitter (Kim, 2020).

Twitter is in a prime position to gain advantage against competitors such as Facebook through a

simple expansion of its e-commerce options, as despite the company’s current limited e-

commerce options Twitter already boasts advertisement engagement rates of 3 percent, much

higher than Facebook’s average engagement rate of 0.119 percent (Forsey, 2020). Should Twitter

capitalize on the opportunity, the company could quickly gain sustainable competitive advantage

simply through the expansion and innovation of its e-commerce options.

Pro-Forma Financial Statements (See Appendix M, N, and O)

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Shearer, E., & Matsa, K. E. (2018, September 10). News use across social media platforms 2018.

Pew Research Center. https://www.journalism.org/2018/09/10/news-use-across-social-

media-platforms-2018/.

SNAP Financials. (2020). Nasdaq. https://www.nasdaq.com/market-

activity/stocks/snap/financials.

Thompson, A. A., Peteraf, M. A., Gamble, J. E., & Strickland, A. J. (2020). Crafting and

executing strategy: The quest for competitive advantage. (22nd ed.). McGraw-Hill

Education.

Twitter code of business conduct & ethics. (2018, September). Twitter.

https://legal.twitter.com/en/code-of-business-conduct.html - chapter1.

Twitter for good. (2020). Twitter. https://about.twitter.com/en_us/company/twitter-for-good.html.

Twitter, Inc. Financial Statements. (2020). Securities and Exchange Commission.

https://www.sec.gov/.

INDIVIDUAL CASE STUDY PART 1

TWTR Financials. (2020). Nasdaq. https://www.nasdaq.com/market-

activity/stocks/twtr/financials.

Use of smartphones and social media is common across most emerging economies. (2019, March

5). Pew Research Center. https://www.pewresearch.org/internet/2019/03/07/use-of-

smartphones-and-social-media-is-common-across-most-emerging-economies/pi_2019-

03-07_global-mobile_-1-01/.

Wojcik, S., & Hughes, A. (2019, April 24). Sizing up Twitter users. Pew Research Center.

https://www.pewresearch.org/internet/2019/04/24/sizing-up-twitter-users/.

Appendix A

Twitter SWOT Analysis

STRENGTHS

WEAKNESSES

(1) Highly influential

(2) Broad product portfolio

(3) Brand image

(1) Over-reliance on U.S. market

(2) Large operational costs

(3) Unequal distribution of tweets

OPPORTUNITIES

THREATS

(1) E-commerce through paid promotions

(1) Increasing competition

INDIVIDUAL CASE STUDY PART 1

(2) Further integration with other platforms

(3) Mobile-based advertising

(2) Regulatory law

(3) Breach of confidential user data

Appendix B

Twitter Internal Factor Evaluation (IFE) Matrix

Strengths

Weight

Rating

Weighted Score

(1) Highly influential with capitalization of real-

time content

0.20

0.80

(2) Broad product portfolio

0.18

0.54

(3) Brand image

0.12

0.36

Weaknesses

Weight

Rating

Weighted Score

(1) Over-reliance on U.S. market

0.14

(2) Large operational costs

0.24

(3) Unequal distribution of tweets

0.12

0.24

Total IFE Score

1.00

2.32

Appendix C

Twitter External Factor Evaluation (EFE) Matrix

Opportunities

Weight

Rating

Weighted Score

(1) E-commerce through paid promotions

0.22

(2) Further integration with other platforms

0.10

0.30

(3) Mobile-based advertising

0.26

1.04

Threats

Weight

Rating

Weighted Score

(1) Increasing competition

0.15

0.30

(2) Regulatory law

0.14

0.28

(3) Breach of confidential user data

0.13

0.26

Total EFE Score

1.00

2.40

Appendix D

Twitter SWOT Bivariate Strategy Matrix

SO Strategies

(1) utilize the company’s highly influential real-time content and hashtags to provide

innovative e-commerce options for platform users

(2) utilize the company’s existing broad product portfolio to further explore and maximize

INDIVIDUAL CASE STUDY PART 1

integration of Twitter’s platform with new platforms

(3) utilize the company’s well-known brand to maximize mobile-based advertising options for

the company

ST Strategies

(1) capitalize on the company’s highly influential real-time content and expanding the

company’s broad product portfolio to minimize the threat of increasing competition through

differentiation

WO Strategies

(1) minimize the company’s over-reliance on the U.S. market by capitalizing on mobile-based

advertising, which has an active audience in primarily mobile emerging international markets

(2) minimize the company’s large operational costs by capitalizing on e-commerce and

mobile-based advertising revenue opportunities

(3) minimize the company’s unequal distribution of tweets by further integrating with other

platforms, which has the potential to increase active users

WT Strategies

(1) avoiding threat of lawsuits and fines in relation to non-compliance with regulatory law and

breach of confidential user data to minimize large operational costs

Appendix E

Twitter Income Statement (Statement of Operations) With Horizontal and Vertical Analysis

CONSOLIDATED STATEMENTS OF

OPERATIONS - USD ($) shares in Thousands, $

in Thousands

12 Months Ended

Dec. 31,

2019

Dec. 31,

2018

Dec. 31,

2017

Revenue

Advertising services

$ 2,993,392

2,617,397

2,109,987

Data licensing and other

465,937

424,962

333,312

Total revenue

3,459,329

$ 3,042,359

$ 2,443,299

Costs and expenses

Cost of revenue

1,137,041

964,997

861,242

Research and development

682,281

553,858

542,010

Sales and marketing

913,813

771,361

717,419

General and administrative

359,821

298,818

283,888

Total costs and expenses

3,092,956

2,589,034

2,404,559

Income from operations

366,373

453,325

38,740

Interest expense

(138,180)

(132,606)

(105,237)

Interest income

157,703

111,221

44,383

Other income (expense), net

4,243

(8,396)

(73,304)

Income (loss) before income taxes

390,139

423,544

(95,418)

Provision (benefit) for income taxes

(1,075,520)

(782,052)

12,645

INDIVIDUAL CASE STUDY PART 1

Net income (loss)

$ 1,465,659

$ 1,205,596

$ (108,063)

Net income (loss) per share attributable to

common stockholders:

Basic (in dollars per share)

$ 1.90

$ 1.60

$ (0.15)

Diluted (in dollars per share)

$ 1.87

$ 1.56

$ (0.15)

Weighted-average shares used to compute net

income (loss) per share attributable to common

stockholders:

Basic (in shares)

770,729

754,326

732,702

Diluted (in shares)

785,531

772,686

732,702

Note. From Twitter, Inc. Financial Statements. (2020). Securities and Exchange Commission.

https://www.sec.gov/.

Horizontal Analysis

CONSOLIDATED

STATEMENTS OF

OPERATIONS - USD ($)

shares in Thousands, $ in

Thousands

12 Months Ended

Dec. 31,

2019

% Change

from 2018 to

2019

Dec. 31,

2018

% Change

from 2017

to 2018

Dec. 31,

2017

Revenue

Advertising services

$ 2,993,392

14.37%

2,617,397

24.05%

2,109,987

Data licensing and other

465,937

9.64%

424,962

27.50%

333,312

Total revenue

3,459,329

13.71%

$ 3,042,359

24.52%

$ 2,443,299

Costs and expenses

Cost of revenue

1,137,041

17.83%

964,997

12.05%

861,242

Research and development

682,281

23.19%

553,858

2.19%

542,010

Sales and marketing

913,813

18.47%

771,361

7.52%

717,419

General and administrative

359,821

20.41%

298,818

5.26%

283,888

Total costs and expenses

3,092,956

19.46%

2,589,034

7.67%

2,404,559

Income from operations

366,373

-19.18%

453,325

1070.17%

38,740

Interest expense

(138,180)

4.20%

(132,606)

26.01%

(105,237)

Interest income

157,703

41.79%

111,221

150.59%

44,383

Other income (expense), net

4,243

-150.54%

(8,396)

-88.55%

(73,304)

Income (loss) before income

taxes

390,139

-7.89%

423,544

-543.88%

(95,418)

Provision (benefit) for income

taxes

(1,075,520)

37.53%

(782,052)

-6284.67%

12,645

Net income (loss)

$ 1,465,659

21.57%

$ 1,205,596

-1215.64%

$ (108,063)

Net income (loss) per share

attributable to common

stockholders:

Basic (in dollars per share)

$ 1.90

18.75%

$ 1.60

-1166.67%

$ (0.15)

Diluted (in dollars per share)

$ 1.87

19.87%

$ 1.56

-1140.00%

$ (0.15)

Weighted-average shares used

to compute net income (loss)

INDIVIDUAL CASE STUDY PART 1

per share attributable to

common stockholders:

Basic (in shares)

770,729

2.17%

754,326

2.95%

732,702

Diluted (in shares)

785,531

1.66%

772,686

5.46%

732,702

Vertical Analysis

CONSOLIDATED

STATEMENTS OF

OPERATIONS - USD ($)

shares in Thousands, $ in

Thousands

12 Months Ended

Dec. 31,

2019

% of

Total

Revenue

Dec. 31,

2018

% of

Total

Revenue

Dec. 31, 2017

% of

Total

Revenue

Advertising services

$ 2,993,392

86.53%

2,617,397

86.03%

2,109,987

86.36%

Data licensing and other

465,937

13.47%

424,962

13.97%

333,312

13.64%

Total revenue

3,459,329

100.00%

$ 3,042,359

100.00%

$ 2,443,299

100.00%

Costs and expenses

Cost of revenue

1,137,041

32.87%

964,997

31.72%

861,242

35.25%

Research and development

682,281

19.72%

553,858

18.20%

542,010

22.18%

Sales and marketing

913,813

26.42%

771,361

25.35%

717,419

29.36%

General and administrative

359,821

10.40%

298,818

9.82%

283,888

11.62%

Total costs and expenses

3,092,956

89.41%

2,589,034

85.10%

2,404,559

98.41%

Income from operations

366,373

10.59%

453,325

14.90%

38,740

1.59%

Interest expense

(138,180)

-3.99%

(132,606)

-4.36%

(105,237)

-4.31%

Interest income

157,703

4.56%

111,221

3.66%

44,383

1.82%

Other income (expense), net

4,243

0.12%

(8,396)

-0.28%

(73,304)

-3.00%

Income (loss) before

income taxes

390,139

11.28%

423,544

13.92%

(95,418)

-3.91%

Provision (benefit) for

income taxes

(1,075,520)

37.53%

(782,052)

-25.71%

12,645

0.52%

Net income (loss)

$ 1,465,659

42.37%

$ 1,205,596

39.63%

$ (108,063)

-4.42%

Net income (loss) per

share attributable to

common stockholders:

Basic (in dollars per share)

$ 1.90

0.00%

$ 1.60

0.00%

$ (0.15)

0.00%

Diluted (in dollars per

share)

$ 1.87

0.00%

$ 1.56

0.00%

$ (0.15)

0.00%

Weighted-average shares

used to compute net

income (loss) per share

attributable to common

stockholders:

Basic (in shares)

770,729

22.28%

754,326

24.79%

732,702

29.99%

Diluted (in shares)

785,531

22.71%

772,686

25.40%

732,702

29.99%

INDIVIDUAL CASE STUDY PART 1

Appendix F

Twitter Balance Sheet With Horizontal and Vertical Analysis

CONSOLIDATED BALANCE SHEETS -

USD ($) $ in Thousands

Dec. 31,

2019

Dec. 31,

2018

Dec. 31,

2017

Current assets:

Cash and Cash Equivalents

$ 1,799,082

$ 1,894,444

$ 1,638,413

Short-term investments

4,839,970

4,314,957

2,764,689

Accounts receivable, net of allowance for

doubtful accounts of $2,401 and $3,559

850,184

788,700

664,268

Prepaid expenses and other current assets

130,839

112,935

254,514

Total current assets

7,620,075

7,111,036

5,321,884

Property and equipment, net

1,031,781

885,078

773,715

Operating lease right-of-use assets

697,095

Intangible assets, net

55,106

45,025

49,654

Goodwill

1,256,699

1,227,269

1,188,935

Deferred tax assets, net

1,908,086

808,459

10,455

Other assets

134,547

85,705

67,834

Total assets

12,703,389

10,162,572

7,412,477

Current liabilities:

Accounts payable

161,148

145,186

170,969

Accrued and other current liabilities

500,893

405,751

327,333

Convertible notes, short-term

897,328

Operating lease liabilities, short-term

146,959

Finance lease liabilities, short-term

23,476

Finance lease liabilities, short-term

68,046

84,976

Total current liabilities

832,476

1,516,311

583,278

Convertible notes, long-term

1,816,833

1,730,922

1,627,460

Senior notes, long-term

691,967

Operating lease liabilities, long-term

609,245

Finance lease liabilities, long-term

205

24,394

81,308

Deferred and other long-term tax liabilities, net

24,170

17,849

13,240

Other long-term liabilities

24,107

67,502

59,973

Total liabilities

3,999,003

3,356,978

2,365,250

Commitments and contingencies (Note 16)

Stockholders' equity:

Preferred stock, $0.000005 par value-- 200,000

shares authorized; none issued and outstanding

Common stock, $0.000005 par value--

INDIVIDUAL CASE STUDY PART 1

5,000,000 shares authorized; 779,619 and

764,257 shares issued and outstanding

Additional paid-in capital

8,763,330

8,324,974

7,750,522

Accumulated other comprehensive loss

(70,534)

(65,311)

(31,579)

Retained earnings (accumulated deficit)

11,586

(1,454,073)

(2,671,729)

Total stockholders' equity

8,704,386

6,805,594

5,047,218

Total liabilities and stockholders' equity

$ 12,703,389

$ 10,162,572

$ 7,412,477

Note. From Twitter, Inc. Financial Statements. (2020). Securities and Exchange Commission.

https://www.sec.gov/.

Horizontal Analysis

CONSOLIDATED BALANCE

SHEETS - USD ($) $ in

Thousands

Dec. 31,

2019

% Change

from 2018

to 2019

Dec. 31,

2018

% Change

from 2017

to 2018

Dec. 31,

2017

Current assets:

Cash and Cash Equivalents

$ 1,799,082

-5.03%

$ 1,894,444

15.63%

$ 1,638,413

Short-term investments

4,839,970

12.17%

4,314,957

56.07%

2,764,689

Accounts receivable, net of

allowance for doubtful accounts of

$2,401 and $3,559

850,184

7.80%

788,700

18.73%

664,268

Prepaid expenses and other current

assets

130,839

15.85%

112,935

-55.63%

254,514

Total current assets

7,620,075

7.16%

7,111,036

33.62%

5,321,884

Property and equipment, net

1,031,781

16.58%

885,078

14.39%

773,715

Operating lease right-of-use assets

697,095

100.00%

0.00%

Intangible assets, net

55,106

22.39%

45,025

-9.32%

49,654

Goodwill

1,256,699

2.40%

1,227,269

3.22%

1,188,935

Deferred tax assets, net

1,908,086

136.02%

808,459

7632.75%

10,455

Other assets

134,547

56.99%

85,705

26.35%

67,834

Total assets

12,703,389

25.00%

10,162,572

37.10%

7,412,477

Current liabilities:

Accounts payable

161,148

10.99%

145,186

-15.08%

170,969

Accrued and other current

liabilities

500,893

23.45%

405,751

23.96%

327,333

Convertible notes, short-term

-100.00%

897,328

100.00%

Operating lease liabilities, short-

term

146,959

100.00%

0.00%

Finance lease liabilities, short-term

23,476

100.00%

0.00%

Finance lease liabilities, short-term

-100.00%

68,046

-19.92%

84,976

Total current liabilities

832,476

-45.10%

1,516,311

159.96%

583,278

Convertible notes, long-term

1,816,833

4.96%

1,730,922

6.36%

1,627,460

Senior notes, long-term

691,967

100.00%

0.00%

Operating lease liabilities, long-

term

609,245

100.00%

0.00%

INDIVIDUAL CASE STUDY PART 1

Finance lease liabilities, long-term

205

-99.16%

24,394

-70.00%

81,308

Deferred and other long-term tax

liabilities, net

24,170

35.41%

17,849

34.81%

13,240

Other long-term liabilities

24,107

-64.29%

67,502

12.55%

59,973

Total liabilities

3,999,003

19.13%

3,356,978

41.93%

2,365,250

Commitments and contingencies

(Note 16)

Stockholders' equity:

Preferred stock, $0.000005 par

value-- 200,000 shares authorized;

none issued and outstanding

0.00%

Common stock, $0.000005 par

value-- 5,000,000 shares

authorized; 779,619 and 764,257

shares issued and outstanding

0.00%

Additional paid-in capital

8,763,330

5.27%

8,324,974

7.41%

7,750,522

Accumulated other comprehensive

loss

(70,534)

8.00%

(65,311)

106.82%

(31,579)

Retained earnings (accumulated

deficit)

11,586

-100.80%

(1,454,073)

-45.58%

(2,671,729)

Total stockholders' equity

8,704,386

27.90%

6,805,594

34.84%

5,047,218

Total liabilities and stockholders'

equity

12,703,389

25.00%

10,162,572

37.10%

$ 7,412,477

Vertical Analysis

CONSOLIDATED

BALANCE SHEETS -

USD ($) $ in

Thousands

Dec. 31,

2019

% of

Total

Dec. 31, 2018

% of

Total

Dec. 31, 2017

% of

Total

Current assets:

Cash and Cash

Equivalents

$ 1,799,082

14.16%

$ 1,894,444

18.64%

$ 1,638,413

22.10%

Short-term investments

4,839,970

38.10%

4,314,957

42.46%

2,764,689

37.30%

Accounts receivable, net

of allowance for

doubtful accounts of

$2,401 and $3,559

850,184

6.69%

788,700

7.76%

664,268

8.96%

Prepaid expenses and

other current assets

130,839

1.03%

112,935

1.11%

254,514

3.43%

Total current assets

7,620,075

59.98%

7,111,036

69.97%

5,321,884

71.80%

Property and equipment,

net

1,031,781

8.12%

885,078

8.71%

773,715

10.44%

Operating lease right-of-

use assets

697,095

5.49%

0.00%

Intangible assets, net

55,106

0.43%

45,025

0.44%

49,654

0.67%

Goodwill

1,256,699

9.89%

1,227,269

12.08%

1,188,935

16.04%

Deferred tax assets, net

1,908,086

15.02%

808,459

7.96%

10,455

0.14%

Other assets

134,547

1.06%

85,705

0.84%

67,834

0.92%

INDIVIDUAL CASE STUDY PART 1

Total assets

12,703,389

100.00%

10,162,572

100.00%

7,412,477

100.00%

Current liabilities:

Accounts payable

161,148

4.03%

145,186

4.32%

170,969

7.23%

Accrued and other

current liabilities

500,893

12.53%

405,751

12.09%

327,333

13.84%

Convertible notes,

short-term

0.00%

897,328

26.73%

0.00%

Operating lease

liabilities, short-term

146,959

3.67%

0.00%

Finance lease liabilities,

short-term

23,476

0.59%

0.00%

Finance lease liabilities,

short-term

0.00%

68,046

2.03%

84,976

3.59%

Total current liabilities

832,476

20.82%

1,516,311

45.17%

583,278

24.66%

Convertible notes, long-

term

1,816,833

45.43%

1,730,922

51.56%

1,627,460

68.81%

Senior notes, long-term

691,967

17.30%

0.00%

Operating lease

liabilities, long-term

609,245

15.23%

0.00%

Finance lease liabilities,

long-term

205

0.01%

24,394

0.73%

81,308

3.44%

Deferred and other

long-term tax liabilities,

net

24,170

0.60%

17,849

0.53%

13,240

0.56%

Other long-term

liabilities

24,107

0.60%

67,502

2.01%

59,973

2.54%

Total liabilities

3,999,003

100.00%

3,356,978

100.00%

2,365,250

100.00%

Commitments and

contingencies (Note 16)

Stockholders' equity:

Preferred stock,

$0.000005 par value--

200,000 shares

authorized; none issued

and outstanding

0.00%

Common stock,

$0.000005 par value--

5,000,000 shares

authorized; 779,619 and

764,257 shares issued

and outstanding

0.00%

Additional paid-in

capital

8,763,330

68.98%

8,324,974

81.92%

7,750,522

104.56%

Accumulated other

comprehensive loss

(70,534)

-0.56%

(65,311)

-0.64%

(31,579)

-0.43%

Retained earnings

(accumulated deficit)

11,586

0.09%

(1,454,073)

-14.31%

(2,671,729)

-36.04%

Total stockholders'

equity

8,704,386

68.52%

6,805,594

66.97%

5,047,218

68.09%

Total liabilities and

stockholders' equity

$ 12,703,389

100.00%

$ 10,162,572

100.00%

$ 7,412,477

100.00%

INDIVIDUAL CASE STUDY PART 1

Appendix G

Twitter Statement of Cash Flows With Horizontal and Vertical Analysis

CONSOLIDATED STATEMENTS OF CASH

FLOWS - USD ($) $ in Thousands

12 Months Ended

Dec. 31,

2019

Dec. 31,

2018

Dec. 31,

2017

Cash flows from operating activities

Net income (loss)

$ 1,465,659

$ 1,205,596

$ (108,063)

Adjustments to reconcile net income (loss) to

net cash provided by operating activities:

Depreciation and amortization expense

465,549

425,498

395,867

Stock-based compensation expense

378,025

326,228

433,806

Amortization of discount on convertible notes

113,298

105,926

80,061

Deferred income taxes

84,369

43,409

(6,415)

Deferred tax assets valuation allowance release

(845,129)

Deferred tax assets establishment related to intra-

entity transfers of intangible assets

(1,206,880)

Impairment of investments in privately-held

companies

1,550

3,000

62,439

Other adjustments

(16,906)

(14,139)

5,753

Changes in assets and liabilities, net of assets

acquired and liabilities assumed from

acquisitions:

Accounts receivable

(67,000)

(130,871)

2,668

Prepaid expenses and other assets

(29,602)

126,470

(13,974)

Operating lease right-of-use assets

149,880

Accounts payable

2,946

(1,533)

8,371

Accrued and other liabilities

92,681

95,256

(29,304)

Operating lease liabilities

(130,205)

Net cash provided by operating activities

1,303,364

1,339,711

831,209

Cash flows from investing activities

Purchases of property and equipment

(540,688)

(483,934)

(160,742)

Proceeds from sales of property and equipment

6,158

13,070

2,783

Purchases of marketable securities

(5,798,111)

(5,334,396)

(2,687,214)

Proceeds from maturities of marketable

securities

4,928,097

3,732,973

2,579,747

Proceeds from sales of marketable securities

367,116

58,721

124,826

Purchases of investments in privately-held

companies

(51,163)

(3,375)

(825)

Proceeds from sales of long-lived assets

11,781

35,000

Business combinations, net of cash acquired

(29,664)

(33,572)

Other investing activities

(9,500)

(5,000)

(10,101)

Net cash used in investing activities

(1,115,974)

(2,055,513)

(116,526)

INDIVIDUAL CASE STUDY PART 1

Cash flows from financing activities

Proceeds from issuance of senior notes

700,000

Proceeds from issuance of convertible notes

1,150,000

Purchases of convertible note hedges

(267,950)

Proceeds from issuance of warrants concurrent

with note hedges

186,760

Debt issuance costs

(8,070)

(13,783)

Repayment of convertible notes

(935,000)

Taxes paid related to net share settlement of

equity awards

(19,594)

(19,263)

(8,962)

Payments of finance lease obligations

(66,677)

(90,351)

(102,775)

Proceeds from exercise of stock options

788

3,415

9,444

Proceeds from issuances of common stock under

employee stock purchase plan

42,378

29,288

23,920

Net cash provided by (used in) financing

activities

(286,175)

978,116

(78,373)

Net increase (decrease) in cash, cash equivalents

and restricted cash

(98,785)

262,314

636,310

Foreign exchange effect on cash, cash

equivalents and restricted cash

4,576

(14,296)

9,914

Cash, cash equivalents and restricted cash at

beginning of period

1,921,875

1,673,857

1,027,633

Cash, cash equivalents and restricted cash at end

of period

1,827,666

1,921,875

1,673,857

Supplemental cash flow data

Interest paid in cash

12,236

14,547

13,990

Income taxes paid in cash

20,144

33,065

16,216

Supplemental disclosures of non-cash

investing and financing activities

Common stock issued in connection with

acquisitions

19,165

Right-of-Use Asset Obtained in Exchange for

Finance Lease Liability

Equipment purchases under finance leases

16,086

123,235

Changes in accrued property and equipment

purchases

14,985

(23,469)

16,387

Reconciliation of cash, cash equivalents and

restricted cash as shown in the consolidated

statements of cash flows

Cash and cash equivalents

1,799,082

1,894,444

1,638,413

Total cash, cash equivalents and restricted cash

$ 1,921,875

$ 1,673,857

Note. From Twitter, Inc. Financial Statements. (2020). Securities and Exchange Commission.

https://www.sec.gov/.

INDIVIDUAL CASE STUDY PART 1

Horizontal Analysis

CONSOLIDATED

STATEMENTS OF

CASH FLOWS - USD

($) $ in Thousands

12 Months Ended

Dec. 31,

2019

% Change

from 2018

to 2019

Dec. 31,

2018

% Change

from 2017

to 2018

Dec. 31,

2017

Cash flows from

operating activities

Net income (loss)

$ 1,465,659

21.57%

$ 1,205,596

-1215.64%

$ (108,063)

Adjustments to

reconcile net income

(loss) to net cash

provided by operating

activities:

Depreciation and

amortization expense

465,549

9.41%

425,498

7.49%

395,867

Stock-based

compensation expense

378,025

15.88%

326,228

-24.80%

433,806

Amortization of discount

on convertible notes

113,298

6.96%

105,926

32.31%

80,061

Deferred income taxes

84,369

94.36%

43,409

-776.68%

(6,415)

Deferred tax assets

valuation allowance

release

-100.00%

(845,129)

100.00%

Deferred tax assets

establishment related to

intra-entity transfers of

intangible assets

(1,206,880)

100.00%

Impairment of

investments in privately-

held companies

1,550

-48.33%

3,000

-95.20%

62,439

Other adjustments

(16,906)

19.57%

(14,139)

-345.77%

5,753

Changes in assets and

liabilities, net of assets

acquired and liabilities

assumed from

acquisitions:

Accounts receivable

(67,000)

-48.80%

(130,871)

-5005.21%

2,668

Prepaid expenses and

other assets

(29,602)

-123.41%

126,470

-1005.04%

(13,974)

Operating lease right-of-

use assets

149,880

100.00%

Accounts payable

2,946

-292.17%

(1,533)

-118.31%

8,371

Accrued and other

liabilities

92,681

-2.70%

95,256

-425.06%

(29,304)

INDIVIDUAL CASE STUDY PART 1

Operating lease

liabilities

(130,205)

100.00%

Net cash provided by

operating activities

1,303,364

-2.71%

1,339,711

61.18%

831,209

Cash flows from

investing activities

Purchases of property

and equipment

(540,688)

11.73%

(483,934)

201.06%

(160,742)

Proceeds from sales of

property and equipment

6,158

-52.88%

13,070

369.64%

2,783

Purchases of marketable

securities

(5,798,111)

8.69%

(5,334,396)

98.51%

(2,687,214)

Proceeds from maturities

of marketable securities

4,928,097

32.02%

3,732,973

44.70%

2,579,747

Proceeds from sales of

marketable securities

367,116

525.19%

58,721

-52.96%

124,826

Purchases of investments

in privately-held

companies

(51,163)

1415.94%

(3,375)

309.09%

(825)

Proceeds from sales of

long-lived assets

11,781

100.00%

-100.00%

35,000

Business combinations,

net of cash acquired

(29,664)

-11.64%

(33,572)

100.00%

Other investing activities

(9,500)

90.00%

(5,000)

-50.50%

(10,101)

Net cash used in

investing activities

(1,115,974)

-45.71%

(2,055,513)

1664.00%

(116,526)

Cash flows from

financing activities

Proceeds from issuance

of senior notes

700,000

100.00%

Proceeds from issuance

of convertible notes

-100.00%

1,150,000

100.00%

Purchases of convertible

note hedges

-100.00%

(267,950)

100.00%

Proceeds from issuance

of warrants concurrent

with note hedges

-100.00%

186,760

100.00%

Debt issuance costs

(8,070)

-41.45%

(13,783)

100.00%

Repayment of

convertible notes

(935,000)

100.00%

Taxes paid related to net

share settlement of

equity awards

(19,594)

1.72%

(19,263)

114.94%

(8,962)

Payments of finance

lease obligations

(66,677)

-26.20%

(90,351)

-12.09%

(102,775)

INDIVIDUAL CASE STUDY PART 1

Proceeds from exercise

of stock options

788

-76.93%

3,415

-63.84%

9,444

Proceeds from issuances

of common stock under

employee stock purchase

plan

42,378

44.69%

29,288

22.44%

23,920

Net cash provided by

(used in) financing

activities

(286,175)

-129.26%

978,116

-1348.03%

(78,373)

Net increase (decrease)

in cash, cash equivalents

and restricted cash

(98,785)

-137.66%

262,314

-58.78%

636,310

Foreign exchange effect

on cash, cash equivalents

and restricted cash

4,576

-132.01%

(14,296)

-244.20%

9,914

Cash, cash equivalents

and restricted cash at

beginning of period

1,921,875

14.82%

1,673,857

62.88%

1,027,633

Cash, cash equivalents

and restricted cash at end

of period

1,827,666

-4.90%

1,921,875

14.82%

1,673,857

Supplemental cash flow

data

Interest paid in cash

12,236

-15.89%

14,547

3.98%

13,990

Income taxes paid in

cash

20,144

-39.08%

33,065

103.90%

16,216

Supplemental

disclosures of non-cash

investing and financing

activities

Common stock issued in

connection with

acquisitions

-100.00%

19,165

100.00%

Right-of-Use Asset

Obtained in Exchange

for Finance Lease

Liability

Equipment purchases

under finance leases

-100.00%

16,086

-86.95%

123,235

Changes in accrued

property and equipment

purchases

14,985

-163.85%

(23,469)

-243.22%

16,387

Reconciliation of cash,

cash equivalents and

restricted cash as

shown in the

INDIVIDUAL CASE STUDY PART 1

consolidated statements

of cash flows

Cash and cash

equivalents

1,799,082

-5.03%

1,894,444

15.63%

1,638,413

Total cash, cash

equivalents and

restricted cash

$ 1,921,875

14.82%

$ 1,673,857

0.00%

$ 1,673,857

Vertical Analysis

CONSOLIDATED

STATEMENTS OF

CASH FLOWS - USD

($) $ in Thousands

12 Months Ended

Dec. 31,

2019

% of Net

Income

Dec. 31,

2018

% of Net

Income

Dec. 31,

2017

% of Net

Income

Cash flows from

operating activities

Net income (loss)

$ 1,465,659

100.00%

$ 1,205,596

100.00%

$ (108,063)

100.00%

Adjustments to reconcile

net income (loss) to net

cash provided by

operating activities:

Depreciation and

amortization expense

465,549

31.76%

425,498

35.29%

395,867

-366.33%

Stock-based compensation

expense

378,025

25.79%

326,228

27.06%

433,806

-401.44%

Amortization of discount

on convertible notes

113,298

7.73%

105,926

8.79%

80,061

-74.09%

Deferred income taxes

84,369

5.76%

43,409

3.60%

(6,415)

5.94%

Deferred tax assets

valuation allowance

release

0.00%

(845,129)

-70.10%

0.00%

Deferred tax assets

establishment related to

intra-entity transfers of

intangible assets

(1,206,880)

-82.34%

0.00%

Impairment of investments

in privately-held

companies

1,550

0.11%

3,000

0.25%

62,439

-57.78%

Other adjustments

(16,906)

-1.15%

(14,139)

-1.17%

5,753

-5.32%

Changes in assets and

liabilities, net of assets

acquired and liabilities

assumed from

acquisitions:

Accounts receivable

(67,000)

-4.57%

(130,871)

-10.86%

2,668

-2.47%

Prepaid expenses and

other assets

(29,602)

-2.02%

126,470

10.49%

(13,974)

12.93%

Operating lease right-of-

use assets

149,880

10.23%

0.00%

Accounts payable

2,946

0.20%

(1,533)

-0.13%

8,371

-7.75%

Accrued and other

92,681

6.32%

95,256

7.90%

(29,304)

27.12%

INDIVIDUAL CASE STUDY PART 1

liabilities

Operating lease liabilities

(130,205)

-8.88%

0.00%

Net cash provided by

operating activities

1,303,364

88.93%

1,339,711

111.12%

831,209

-769.19%

Cash flows from

investing activities

Purchases of property and

equipment

(540,688)

-36.89%

(483,934)

-40.14%

(160,742)

148.75%

Proceeds from sales of

property and equipment

6,158

0.42%

13,070

1.08%

2,783

-2.58%

Purchases of marketable

securities

(5,798,111)

395.60%

(5,334,396)

442.47%

(2,687,214)

2486.71%

Proceeds from maturities

of marketable securities

4,928,097

336.24%

3,732,973

309.64%

2,579,747

-2387.26%

Proceeds from sales of

marketable securities

367,116

25.05%

58,721

4.87%

124,826

-115.51%

Purchases of investments

in privately-held

companies

(51,163)

-3.49%

(3,375)

-0.28%

(825)

0.76%

Proceeds from sales of

long-lived assets

11,781

0.80%

0.00%

35,000

-32.39%

Business combinations,

net of cash acquired

(29,664)

-2.02%

(33,572)

-2.78%

0.00%

Other investing activities

(9,500)

-0.65%

(5,000)

-0.41%

(10,101)

9.35%

Net cash used in investing

activities

(1,115,974)

-76.14%

(2,055,513)

170.50%

(116,526)

107.83%

Cash flows from

financing activities

Proceeds from issuance of

senior notes

700,000

47.76%

0.00%

Proceeds from issuance of

convertible notes

0.00%

1,150,000

95.39%

0.00%

Purchases of convertible

note hedges

0.00%

(267,950)

-22.23%

0.00%

Proceeds from issuance of

warrants concurrent with

note hedges

0.00%

186,760

15.49%

0.00%

Debt issuance costs

(8,070)

-0.55%

(13,783)

-1.14%

0.00%

Repayment of convertible

notes

(935,000)

-63.79%

0.00%

Taxes paid related to net

share settlement of equity

awards

(19,594)

-1.34%

(19,263)

-1.60%

(8,962)

8.29%

Payments of finance lease

obligations

(66,677)

-4.55%

(90,351)

-7.49%

(102,775)

95.11%

Proceeds from exercise of

stock options

788

0.05%

3,415

0.28%

9,444

-8.74%

Proceeds from issuances

of common stock under

employee stock purchase

plan

42,378

2.89%

29,288

2.43%

23,920

-22.14%

Net cash provided by

(used in) financing

activities

(286,175)

-19.53%

978,116

81.13%

(78,373)

72.53%

INDIVIDUAL CASE STUDY PART 1

Net increase (decrease) in

cash, cash equivalents and

restricted cash

(98,785)

-6.74%

262,314

21.76%

636,310

-588.83%

Foreign exchange effect

on cash, cash equivalents

and restricted cash

4,576

0.31%

(14,296)

-1.19%

9,914

-9.17%

Cash, cash equivalents and

restricted cash at

beginning of period

1,921,875

131.13%

1,673,857

138.84%

1,027,633

-950.96%

Cash, cash equivalents and

restricted cash at end of

period

1,827,666

124.70%

1,921,875

159.41%

1,673,857

-1548.96%

Supplemental cash flow

data

Interest paid in cash

12,236

0.83%

14,547

1.21%

13,990

-12.95%

Income taxes paid in cash

20,144

1.37%

33,065

2.74%

16,216

-15.01%

Supplemental disclosures

of non-cash investing

and financing activities

Common stock issued in

connection with

acquisitions

0.00%

19,165

1.59%

0.00%

Right-of-Use Asset

Obtained in Exchange for

Finance Lease Liability

0.00%

Equipment purchases

under finance leases

16,086

1.33%

123,235

-114.04%

Changes in accrued

property and equipment

purchases

14,985

1.02%

(23,469)

-1.95%

16,387

-15.16%

Reconciliation of cash,

cash equivalents and

restricted cash as shown

in the consolidated

statements of cash flows

Cash and cash equivalents

1,799,082

122.75%

1,894,444

157.14%

1,638,413

-1516.16%

Total cash, cash

equivalents and restricted

cash

$ 1,921,875

131.13%

$ 1,673,857

138.84%

$ 1,673,857

-1548.96%

Appendix H

INDIVIDUAL CASE STUDY PART 1

Twitter Financial Ratios

Period Ending:

December 31,

2019

% Change

from 2018

to 2019

December 31,

2018

% Change

from 2017

to 2018

December 31,

2017

Liquidity

Ratios

Current Ratio

9.15

95.10%

4.69

-48.57%

9.12

Quick Ratio

9.15

95.10%

4.69

-48.57%

9.12

Cash Ratio

7.98

94.63%

4.10

-45.70%

7.55

Profitability

Ratios

Gross Margin

67.13

-1.68%

68.28

5.45%

64.75

Operating

Margin

10.59

-28.93%

14.90

837.11%

1.59

Profit Margin

42.37

6.91%

39.63

-996.61%

-4.42

After Tax ROE

16.84

-4.91%

17.71

-927.57%

-2.14

Note. From TWTR Financials. (2020). Nasdaq. https://www.nasdaq.com/market-

activity/stocks/twtr/financials.

Appendix I

INDIVIDUAL CASE STUDY PART 1

Twitter BCG Matrix

Industry Sales Growth Rate

Relative Market Share Position

Star

Question Mark

Promotional Products

E-Commerce

Cash Cow

Dog

Traditional Advertisements

Data Licensing

Appendix J

Twitter Competitive Profile Matrix (CPM)

Twitter

Facebook

Snapchat

Critical Success Factors

Weight

Rating

Score

Rating

Score

Rating

Score

Advertising

0.12

0.48

0.36

Market Share

0.12

0.24

0.48

0.24

Brand Reputation

0.1

0.4

0.3

Product Integration

0.01

0.03

0.02

R&D

0.07

0.21

0.28

0.21

Range of Products

0.05

0.1

0.2

0.1

Financial Profit

0.13

0.39

0.52

0.13

Customer Retention

0.12

0.24

0.36

Superior IT Capabilities

0.05

0.1

0.15

0.1

Product Quality

0.1

0.3

0.2

Low Cost Structure

0.08

0.16

0.08

Price Competitiveness

0.05

0.15

0.1

Totals

2.72

3.31

2.2

Appendix K

Facebook Financial Ratios

Period Ending:

December 31,

2019

% Change

from 2018

to 2019

December 31,

2018

% Change

from 2017

to 2018

December 31,

2017

Liquidity

Ratios

Current Ratio

4.40

-38.80%

7.19

-44.35%

12.92

Quick Ratio

4.40

-38.80%

7.19

-44.35%

12.92

Cash Ratio

3.64

-37.88%

5.86

-47.16%

11.09

INDIVIDUAL CASE STUDY PART 1

Profitability

Ratios

Gross Margin

81.93

-1.59%

83.25

-3.85%

86.58

Operating

Margin

33.92

-23.98%

44.62

-10.22%

49.70

Profit Margin

26.15

-33.96%

39.60

1.12%

39.16

After Tax ROE

18.29

-30.40%

26.28

22.63%

21.43

Note. From FB Financials. (2020). Nasdaq. https://www.nasdaq.com/market-

activity/stocks/fb/financials.

. Appendix L

Snapchat Financial Ratios

Period Ending:

December 31,

2019

% Change

from 2018

to 2019

December 31,

2018

% Change

from 2017

to 2018

December 31,

2017

Liquidity

Ratios

Current Ratio

5.29

-7.68%

5.73

-16.23%

6.84

Quick Ratio

5.29

-7.68%

5.73

-16.23%

6.84

Cash Ratio

4.23

-3.20%

4.37

-25.93%

5.90

Profitability

Ratios

Gross Margin

47.78

47.79%

32.33

148.12%

13.03

Operating

Margin

-64.31

-40.15%

-107.46

-74.57%

-422.52

Profit Margin

-60.25

-43.37%

-106.39

-74.52%

-417.61

After Tax ROE

-45.74

-15.84%

-54.35

-52.79%

-115.13

Note. From SNAP Financials. (2020). Nasdaq. https://www.nasdaq.com/market-

activity/stocks/snap/financials.

Appendix M

Appendix N

Appendix O

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