Early thoughts on the imminent Twitter IPO

Twitter’s Initial Public Offering will soon become a reality. In the lead up to that much anticipated event, we are sharing a few initial thoughts and takeaways, for Caribbean ICT/tech businesses especially, on this new and exciting development.

Although widely speculated over the past several months, yesterday, 3 October, Twitter released its Initial Public Offering (IPO) filing. The company, which intends to trade under the ticker symbol ‘TWKR’, will be seeking to raise USD 1 billion. Although the IPO date has not yet been announced, the pubic sale of Twitter stock has been long anticipated in some quarters, perhaps even more than Facebook and LinkedIn. Although it is still early days and the filing will be carefully scrutinised and dissected, below are a few initial thoughts and takeaways for Caribbean ICT/tech businesses in particular that continue to look to Silicon valley for inspiration and guidance.

Twitter's tweet about release of IPO filing (Source - Twitter)
Twitter’s tweet about release of IPO filing (Source: Twitter)

1.  It is easy to underestimate the impact of Twitter

As a company that has been around for around seven years and typically one of two companies that is top of mind when most people speak about social networks or social media (the other being Facebook), Twitter has deeply transformed how we communicate and learn :.

  • Twitter allows real-time interaction, where tweets are posted almost instantaneously and so facilitates conversation, or people receiving the very latest updates on on-going or fast changing events.
  • It has been a very democratic network, where once a tweet is sent, almost immediately, it is visible in the news feeds of all of the sender’s followers. On other social networks, such as Facebook, that does not always happen.
  • It has become a news source, where ordinary users post new developments on Twitter first, and recognised news/media firm now use that channel to identify newsworthy events that should be covered.
  • Due to the real-time nature of Twitter, it has become a virtual water cooler for it members, by making television more interactive and social. Hence companies, advertisers, media houses, etc., are actively seeking to exploit this phenomenon.
  • We, as users, are becoming increasingly (and surprisingly) intolerant about reading anything longer than 140 characters.
  • Finally, the word “tweet” is no longer a verb or noun associated only with “the chirp of a small or young bird”. The more widely recognised meanings are those regarding postings made on Twitter.

2.  A well-executed idea can get you far

As part of the IPO filing, Twitter released some of its financials, which revealed that to date, the company – while popular across a wide range of demographics – has yet to turn a profit. However, due to its impact on the society at large, and the potential to continue to be innovative, investors have been queuing, even before the IPO announcement to support Twitter and facilitate its continued growth.

3.  Social networking platforms can easily fall into the Facebook trap

As of the most recently released information, Twitter has an enviable subscriber base: 200 million active users. Although this number is considered paltry by Facebook standards, which has well over a billion subscribers, Twitter’s challenge to be profitable is likely to mirror that of the world’s largest social network.

More importantly, and similar to Facebook, Twitter’s situation is common among social networks and many tech start-ups. Typically, the business model revolves around building a user base, usually by providing a free service, and at a later date trying to figure out how to monetise the business’ popularity. Having said this, it is only in the last year of so that Facebook seems to be on a path towards profitability. Not only has it had to become more aggressive and focussed on generating revenue, it has had to become more innovative in the services it offers and how they are executed.

4.  The honeymoon of no profits may soon be over.

Finally, over the past few years, there appears to be growing intolerance on United States’ stock markets for tech companies that are not profitable or are not providing shareholders with any clear value, such as with regard to share price. As we have seen over the last several months, companies such as Groupon, Nokia, Dell, BlackBerry and even Facebook (which had its IPO less than 18 months ago), have all been roundly and extensively criticised for underperforming in the markets.  Twitter will most likely experience the same the pressure if, within a relatively short period, it unable to parlay its influence and popularity into good returns to its investors.

 

Image credits:  Twitter

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1 Comment

  • I have always reserved ( and continue to do so ) optimism for Facebook’s ability to grow its business ( see my comments on one or two of the Snapshots for Facebook membership trend updates ).

    However, I do not hold the same view in regard to Twitter:

    1. There have been lessons learned from the Facebook Offer. What was promised did not immediately materialise. Short-term speculators heralded doom. Twitter Offer coming immediately after this may engender similar sentiments to prospective investors.

    2. The operating model of Facebook differs a lot in material terms from that Twitter. Facebook has a more repository structure whereas Twitter is that of instant messaging. The latter is more of fad, and fads can seem transient – remember Bebo?

    3. The revenue sources across nationalities and demographics favour more Facebook than Twitter with the former drawing a lot from higher GDP nationalities than the latter. There will have to be conscious business strategy, on the part of Twitter, to redirect this trend.

    The only point, in my view, where Twitter has an edge over Facebook, is that while Facebook has had to build virtually from scratch its revenue from mobile devices ads, Twitter is already doing so.

    But we wait and see….

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