Friday, October 4, 2013

Twitter is not as big and healthy as we thought…



For the first time, Twitter’s financial accounts became public after it filed the S-1 form with the US Securities and Exchange Commission (SEC) in preparation for its initial public offering (IPO).

Twitter is looking to raise $1 billion at the IPO. It is taking a precautionary step considering how Facebook shares fell by more than 50% after its highly anticipated IPO in 2012. Twitter’s is perhaps the most anticipated since Facebook.
Twitter is not as big and sound as we thought...

That however, is not the most surprising things from the filing. Contrary to believes that Twitter is a company that has been making profits and will continue to after its IPO, you’re right but half-right.
Twitter has increased its revenues from 2010 but has not made a profit from then too. It has increased annual revenue of $28 million in 2010 to $317 million at the end of 2012. It has also made $253.6 million in the first half of this year which is more than double of revenue for the same period last year.
Last year it had a loss of $79 million despite its $317 million revenue and has already racked up it’s a loss of $69 million from $253.6 million revenue for the first six months this year. Although, considering that Twitter purchased BlueFin Labs, a social television analytics service, for $67.3 million in February, it could have accounted for most of its loss.
Twitter has a monthly user base of 218.3 million and boast of 500 million tweets per day. This is still a very long way to go to catch Facebook when you consider that Facebook has an audience of over a billion. Twitter is more of a competitor with Instagram which has a monthly user base of 150 million and Twitter rightly noted Instagram.
One other fact is that Twitter makes about 75% of its revenues from users in the US despite their population being 23% of the social networks. Twitter uses the amount of revenue per thousand timeline view (ARPTV) which is different from the amount of revenue per user (ARPU) which Facebook employs.
It claims its ARPTV for users in the US is $2.17 while that of the remaining places in the world is 30 cents. This makes the worldwide average 80 cents.
One place twitter may have an advantage is that it has been able to sell its mobile version to users. It claimed that in the second quarter ended in June, 75% of Twitter users accessed the social network from a mobile and about 65% of its revenue was made from mobile device.
This was Facebook’s Achilles’ heel in 2012 after investors thought Facebook won’t be able to sell its mobile site to users. This is very important as users are now moving to mobile devices from PC.
Twitter co-founders Evan Williams and Jack Dorsey owns 12% and 4.9% respectively of the company. It is expected that the company will be going public this year if the US government shutdown doesn’t extend more than necessary. In the case of that, Twitter’s IPO could be next year.
Twitter is worth $9.7 billion based on internal valuation of its shares from August 5. Goldman Sachs has won the bid to lead the company to its IPO and will be supported by other financial houses like Morgan Stanley and JP Morgan Chase.

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