When Twitter Inc. (NYSE: TWTR) reported its fourth-quarter financials on Wednesday, they pretty much disappointed across the board. User growth remains stagnant, interaction is flat and, while revenues are up quarter over quarter, the company continues to lose money.
Shareholder sentiment is weak to negative, and markets are questioning the ability of CEO Jack Dorsey to turn the ship around. There are suggestions that this may be the beginning of the end for the 140-character platform. Looking at the wider technology sector, or even wider markets in general, which companies sell off on a Twitter disappointment?
It would be easy to say the social media segment in its entirety suffers from weak Twitter results, but Facebook Inc. (NASDAQ: FB) has proven this not to be the case. Facebook is the darling of the technology sector at the moment, and it benefits from a weak Twitter as it presents the company as the safest social media investment. Indeed, while the tech sector is down since Twitter’s release, Facebook is up a couple of percentage points. So who suffers?
A number of smaller companies that work in the social sponsorship arena rely on Twitter users for large portions of their revenues. Take IZEA, for example. It’s an over-the-counter stock that runs social sponsorship campaigns for brands. Essentially, it pays socially influential people to post tweets about a brand’s products. If user interaction with Twitter declines, companies like IZEA suffer from a weakened network reach and their ability to command revenues for sponsored posts declines. The company is down nearly 7% on Twitter’s release, though that is due to a combination of factors, including general volatility.
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