Why Twitter’s Research and Development Costs Could Rise


Feb. 21 2019, Updated 2:35 p.m. ET

Priority areas may call for more spending on product development

The four priority areas that Twitter (TWTR) wants to focus on going forward could lead to the company spending more on product R&D (research and development). Twitter wants to focus on promoting healthy conversations, which will involve making product changes aimed at removing friction for people who want to report abuse on the platform. By making its platforms more conversational, the platform is better for advertisers. It aims to improve its technology platform by making more use of AI and machine learning technologies.

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Twitter spent ~16% of its revenue on R&D

Twitter spent $141.2 million on R&D in the fourth quarter, or 15.5% of its total revenue. R&D spending represented 18.3% of Twitter’s total revenue in the December quarter of 2017. In last year’s December quarter, Google parent Alphabet (GOOGL), Facebook (FB), Yelp (YELP), and Snap (SNAP) spent 15.5%, 17.2%, 22%, and 68.4% of their revenue on R&D, respectively.

Tackling market opposition

Twitter faces strong opposition from the likes of Facebook and Snap for social media advertising dollars. As a result, the company is keen to invest in creating products to make its platform stand apart. Snap owns photo-sharing app Snapchat.


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