How can a company such as Twitter survive even after such a huge percentage of its workforce has been fired?
In: 1
There is a lot of momentium in big companies. They make money due to deals which were signed maybe a year before even if the deal might not be renewed. Most of their systems are running perfectly fine, the only problem is when things change either due to errors or due to new business requirements and nobody knows how these systems is supposed to work. And even with all the issues the company have there are still lots of users who use their services because that is what they have always done and because they are still the largest provider and therefore provide the most value. There will be some time until the users fail and the income stops flowing.
What is happening at Twitter is close to a theoretical scenario used in the financial world to value companies. A lot of companies, especially startups, do not make any profits and in fact have negative results year after year. But this is because they are growing and expanding. So to value the company you may look at a theoretical scenario where you stop any new development, fire “all” employees, and increase prices so you lose half your paying customer base. Due to the momentum the company will still continue operating but now make a lot of profit. The profit you can make in this scenario until the last paying customer have left is the value of the company. There are of course other ways of valuing companies but these kinds of analysis have been used as part of the evaluation of Twitter at around $10B.
Latest Answers