At 2:00pm on September 12th, Twitter announced to the world that it had submitted a proposal to go to public to the SEC. The tweet, which read “We’ve confidentially submitted an S-1 to the SEC for a planned IPO. This Tweet does not constitute an offer of any securities for sale,” sent the business world a buzz. Since the announcement, Twitter has not made any more statements, but that hasn’t stop the analysts from dissecting every part of this move. So let’s follow suit.
Harry McCracken, a tech writer for TIME magazine, wrote a briefing in their September 16th issue saying that today’s tech giants are finding more ways to go mobile and interact more with their users. The way they are doing this? Acquisitions. They aren’t acquiring huge company’s like Microsoft’s buy up of Nokia, it’s much smaller than that. McCracken writes, “They involve low profile start-ups and purchase prices in the mere tens of millions of dollars.” McCracken goes further and writes that though the companies play it off as a small acquisition, “In fact they can tell you an awful lot about where the industry’s best known names are headed.” His report on Twitter, just from the last year, highlights four small companies that Twitter has bought up; they include Bluefin Labs, Lucky Sort, Spindle, and Trendrr. All of those companies have a focus in tracking social media; trends, discussions, conversations, hashtags, mainly dealing with TV and other media chatter. He ends his briefing with a prediction, “Twitter wants to monetize all those tweets” and their prediction is certainly backed up with data.
Twitter has been trying to cash in on mobile ads from the beginning, and last year they came up on top. Just in mobile ads, Twitter made $309 million, more than half of their revenue, beating out Google and the previous leader, Facebook. The predictions for 2014 are estimated at $551 million, ever widening their lead. With all of that together and tied with a neat bow, estimates of the company value are around $10 billion to $15 billion, valued at more than 17 times their sales. Not only is Twitter cashing in on mobile ads, it is also cashing in on just being mobile. Twitter, from its beginning was meant for a mobile platform, and has led the charge to go mobile. Contrarily, Facebook and others like Google and Yahoo had to catch up to the mobile rush. Twitter had managed to do all of this in its early period of growth, which has led to increasing interest by the market.
Yet, with all of the future outlooks looking very positive, there’s always something to counter-act that, whether it is negative reaction or just questionable tactics. Investor are fearing that Twitter could follow the plunge that Facebook took when first releasing their IPO along with fears of which exchange to trade on, NYSE or the NASDAQ. Twitter is also strictly a social media company, not necessarily a technology company and gets most of its revenue from ads on its mobile platform, which makes some investors wary to invest. Along with those worries, Twitter’s S-1 for a planned IPO is confidential. This has seen mixed reviews from investors, some saying that it’s just how Twitter does business and you should just trust the company. Others say that without knowing how the company is planning to grow and shape into an investor worthy stock, some don’t want to buy-in. Also being questioned is the impact of Twitter’s IPO intent. Does this make it harder for start-ups to grow and mature or get eaten up like McCracken had written about? Does the IPO inhibit more social media platforms to emerge?
Either way you look at it, Twitter’s IPO intent is a huge step for the social media world. In the weeks to come, we will definitely see how this mega move makes its impact.