Twitter’s Future for Its IPO

[DreamTheater]

Any company, when filing for an IPO, has to detail potential pitfalls in its future as a warning for investors. Twitter is no exception, so it told its users where the company is heading.

 

 

According to the company’s revenue figures, Twitter primarily makes its revenue via advertising. Within the first 6 months of 2013, Twitter took $221 million in advertising revenue, while revenue from data licensing (Twitter’s other major income stream) was far behind at $32 million.

 

As a result, anything that harms the company’s ability to compete for advertisers also harms its revenue, and Twitter is afraid that another partner might choose the way of Instagram and pull its integration with the website. Indeed, after Facebook acquired Instagram, it disabled its photo integration with Twitter, so Instagram photos can’t any longer be viewed within tweets. Instead, users are re-directed to Instagram to view the photos via a link within a tweet.

 

In other words, the company believes that the future lies in more integration. In its turn, Instagram also realized this and added integration with local social services – Russian Vkontakte (InTouch), Chinese Weibo and Japanese Mixi. As for Twitter, it continues its push to get companies to implement Twitter Cards, which are the chunks of code allowing Twitter to show short previews of websites being linked to.

 

Aside from integration, the company warned its potential investors that providing services to its users was costly, especially as they create and introduce new features, products and services which need more infrastructure. This is a common thing for a tech company to promise in its IPO, but Twitter differs from the others.

 

Twitter rose to success on a ruthlessly simple product: 140 characters of text delivered to user’s followers. It made some improvements with time – official support for mentions, new-style retweets, Twitter Cards, photo filters for its app, and even acquisition of Vine – a video sharing company.

 

However, the company still can’t offer all features itself and therefore needs to stay at the top of the pile to encourage others to build things for its website. In addition, the company generates revenue from licensing its historical and real-time information to 3rd parties. Although it’s just 14% of Twitter’s revenue, that’s still not money which the company can afford to lose. Hopefully, the company will have a successful initial public offering. Good luck, Twitter!