1. Twitter’s
Upcoming IPO
Marta Mattioli 16/09/2013
“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.” — Twitter (@twitter) September 12, 2013
Background
With a brief tweet, last week Twitter made official the worst kept secret in the business: it’s going public.
To date there is not much information as the company filed under the JOBS Act, which made it possible
for the company to file its S-1 statements in secret. In fact, there is only speculation, mainly around the
IPO price (potentially $10 to $15 billion) and the timings (probably the end of 2013/early 2014).
Details
The JOBS Act went into law on April 2012 and it allows the so-called “emerging growth” companies –
startups with less than $1 billion in annual revenue – to file secret S-1 statements with the SEC, which will
have to be made public 21 days prior to the investors and analysts IPO road show. The act allows
startups to test the waters and avoid weeks or months of bad press; e.g., Groupon’s painful questions
over its faulty accounting methods.
Of course the secrecy reveals one major piece of information: Twitter has small enough revenue to fit
under the act. In fact a report from eMarketer earlier in the year predicted that the company’s ad
revenues would grow to about $583 million in 2013. Next year Twitter is predicted to reach over a billion
in revenues, demonstrating its great momentum and future potential in ad revenue growth.
Twitter’s user base growth has also been remarkable if not lower than initially forecast. Last December
Twitter reached 200M monthly users, with a forecasted growth targeting 400M. However, as of today,
the platform has roughly 240M with an additional 20M expected by the end of the year. These numbers,
while substantial, reinforce industry conjecture that Twitter may not reach the mass penetration levels
seen by its much larger and widespread archrival Facebook. Even Twitter’s much mooted position as the
number one social TV destination has been challenged by Facebook, who point to the substantial
number of closed TV related conversations that happen on its platform but don’t get measured.
Nevertheless Twitter continues to build an extraordinarily attractive platform. Recent acquisitions,
(Bluefin, Trendrr, and MoPub) and new advertising tools and formats (TV re-targeting) have arguably
offered many marketers a much simpler, cost-effective, and real-time means to not only advertise but
also to capitalize on the new TV and online love affair.
Twitter has also learned some lessons from Facebook, and in particular the latter’s controversial 2012
IPO. Twitter has taken a very different approach to the timing (sooner), its lead underwriter (Goldman
Sachs), the filing under the JOBS Act, and finally its rumored choice of NYSE rather than NASDAQ.
Implications
For advertisers, an IPO is good news as the influx of cash will allow Twitter to scale and expand faster (a
long-standing complaint about perpetually thin on the ground Facebook), build more functionality and
advertising opportunities into the platform, better promote itself to a wider audience, and finally make
additional acquisitions. A successful Twitter IPO could also embolden other companies potentially weary
of going public due to Facebook’s fiasco, although Zuckerberg’s social network and wealth has seen an
amazing rebound in recent weeks.
Summary
Here we go again, but perhaps this time a bit wiser and without the circus that came with the Facebook
IPO. Twitter has had an amazing year, topped off with two very smart acquisitions. Going public will
enable it to build up the war chest it will need in the coming years to take on Facebook and other giant
regional social networks as it expands around the world.