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Everything you want to know about the Twitter IPO

October 10th, 2013

This past week, Twitter Inc., an online social networking and microblogging service founded in 2007 and headquartered in San Francisco, has been in headlines for its recently released plan to raise $1 billion through a public offering.

Last Thursday, Twitter released its S-1, or initial public offering (IPO), that it filed with the Securities and Exchange Commission (SEC), according to an article in The Wall Street Journal. In the S-1, Twitter released information about its history and the core business and financial statements of the company. This information answered questions about Twitter’s profits, sources of revenue and future.

Twitter intends to list the common stock of the company under the stock symbol TWTR. Twitter released information in its public offering filing that it has over 200 million monthly active users, and 100 million daily active users.  Also, 500 million tweets are sent daily, mostly from mobile devices. Twitter reported that 75 percent of its monthly average users access the service from mobile devices.

Mobile devices are also where most of Twitter’s advertisement sales come from. Sixty-five percent of Twitter’s advertisement sales were generated from mobile devices. Twitter reported that 85 percent of its $317 million in sales, or $270 million, is from advertising.

Even with this sales figure, Twitter’s net loss grew 40 percent to $74.9 million this past year, as its expenses have ballooned. Twitter, therefore, is not making any money. Its user growth is also slowing and prices for advertisements, which make up the bulk of the company’s revenue, are falling.

Brian Solis, an analyst at the Altimeter Group, stated, “They certainly have a lot of work ahead of them to get mainstream America to understand how Twitter works,” according to The Wall Street Journal.

The S-1 filing showed that Twitter has far fewer users and generates less revenue per user than Facebook. This implies that Twitter is still an immature business in comparison with its top social media competitor.

Twitter’s growth is also a question. Seventy-five percent of Twitter’s revenue is from the U.S., even though three-quarters of monthly users are outside the U.S. Furthermore, in the second quarter this year, Twitter’s growth in monthly active users slowed to seven percent from three months earlier, compared with 10 percent to 11 percent growth in the prior three quarters.

Some advertisers say Twitter makes up in quality what it lacks in quantity, citing how influential the many celebrities and media pundits who use the service can be towards creating awareness and spreading messages. Lisa Cochrane, senior vice president of marketing at Allstate Corp., stated, “It is an important audience and I want our brand to be part of the conversation that is happening there.”

Twitter’s official public offering on the market is highly anticipated. Twitter will continue to face the challenge of proving to investors and advertisers that they have a consistent audience to tap into.

 

Information from The Wall Street Journal and sec.gov was used in this article.