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  (Source: Mashable)
Experts are undeterred by slowing revenue growth, say IPO could hit $15B USD in the wake of Facebook successes

In H1 2013, recently disclosed numbers show that Twitter lost $69M USD, while pulling in a revenue of $253.6M USD. After tripling its revenue in 2012, Twitter is poised to potentially double it in once more in 2013.

I. The Next Big IPO -- TWTR

Thus it's perhaps not surprising that Twitter chose Q3 2013 for the announcement of its initial public offering (IPO) via paperwork filed on Thursday with the U.S. Securities and Exchange Commission (SEC) this week.

The long-awaited IPO is the biggest internet IPO since Facebook, Inc. (FB) -- itself a competitor with Twitter for the U.S. micro-blogging market -- went public.  Twitter is expected to pull in at least $1B USD -- the amount it initially filed for with U.S. government regulators.  

Twitter
Twitter's IPO is poised to be the biggest of 2013. [Image Source: Mashable]

But some experts, according to Reuters, say that the IPO could reach $15B USD.  Twitter still has plenty of time to change its open target for share prices and how many shares it wants to make available.  It will do so after it visits large institutional investors -- pensions, hedge funds, and their ilk -- and gauges interest.

It is not yet known what ticker symbol Twitter will occupy, although TWIT and BIRD are two leading suggestions.  Twitter's filing listed "TWTR" as the initial planned ticker symbol.

Trading is expected to begin as early as November, but it's unclear which stock exchange Twitter (TWTR) will be traded on -- NASDAQ or the New York Stock Exchange (NYSE).

NYSE
It's unknown whether Twitter will trade on the NYSE or NASDAQ. [Image Source: How Stuff Works]

Like many top online property with explosive growth and large user bases, balancing ads with the risk of alienating users is a tricky game for Twitter.  Like those before it, the road to profitability isn't clearly defined.  But sites like Facebook and YouTube have shown that profitability is possible, given a massive user base and a patient approach to monetizing that base.

II. Twitter's Origins, Growth Bear Some Resemblance to Facebook's

Twitter's origin sounds a lot like Facebook's it was spawned by a good idea from an East Coast undergraduate student.  In March 2006 New York University undergrad Jack Dorsey brought the concept to Odeo, a Silicon Valley (San Francisco, Calif.) internet podcast company.  At Odeo he found a supportive mind in Biz Stone, an executive at Odeo, and over the summer they worked to produce an internal prototype of the Twitter platform in just months.

Jack DorseyJack Dorsey is Twitter's Zuckerberg-esque figure. [Image Source: Wired]

Initially Noah Glass, Odeo's co-founder was onboard with the idea, and supposedly he was the one who first proposed the name "twtr" -- a five character SMS shorthand code that later was expanded to the site's full name -- Twitter.  But in Zuckerberg-esque move, when Biz Stone, Odeo's Evan Williams, and Mr. Dorsey spun off to form "Obvious Corp.", they fired Mr. Glass, who at the time had no idea the opportunity he lost.
After an appearance at the 2007 South by Southwest Interactive (SXSWi) conference Twitter went from a relatively unknown site to a hot commodity.  Suddenly celebrities, politician, and other public figures began to flock to the platform.  And the attention brought lots of venture capital dollars -- so much money that Twitter's founders had no need for a hasty IPO as they patiently expanded their staff to the 2,000 plus employees that Twitter today has.

Twitter 2007
At the 2007 SXSWi Twitter's billboards drew buzz. [Image Source: Jeremiah Owyang]

Today, still based in San Francisco, Twitter can claim some of the world's most influential figures -- including U.S. President Barack Hussein Obama and The Pope -- as its users.  The company has 15 offices around the globe and its "promoted post" model of in-stream advertising has been much praised, having been copied by Facebook and others.

III. Risk is Moderate, but Experts Hopeful Twitter Can Be Profitable

In Q2 2013, Twitter had 218.3 million active users.  Three-quarters of those users primarily access the service from mobile devices.  That mobile user base has made Twitter's path to profit harder, but the company is slowly figuring out ways to make it work via ideas like sponsored in-feed posts.

Twitter's prospectus does warn of this risk, writing:

Advertisers will not continue to do business with us, or they will reduce the prices they are willing to pay to advertise with us, if we do not deliver ads in an effective manner, or if they do not believe that their investment in advertising with us will generate a competitive return relative to alternatives, including online, mobile.

Facebook's May 2012 IPO snagged a $100B+ USD valuation as shares opened at $38 USD/share.  At the time Facebook had over 900 million users, of which 500 million logged on daily.  That's over two times the active user base of Twitter, but Twitter's IPO is expected to be smaller.  

Facebook;'s IPO
Facebook's success has investors optimistic about Twitter's IPO. [Image Source: Technorati]

Twitter will surely look to avoid the problems that Facebook faced during its IPO, though; Facebook's IPO was fraught with accusations by large institutional investors who claimed that the company intentionally misled them with flawed revenue estimates.  To be fair to Facebook, the post-mortem of that mess also illustrated the value of patience -- Facebook shares are today worth 50+ USD, well above the IPO price, so those who lost money perhaps lost sight of the forest for the trees.

Facebook's revenue in 2008 looked a lot like Twitter's 2012 numbers -- it made $272M USD with a $55M loss.  In 2009, it tripled its revenue, achieving profitability.  It appears Twitter isn't quite there yet, but if it continues to grow the revenue, profitability seems a likely conclusion.

Most believe losses in 2013, to quote Brian Wieser, analyst at Pivotal Research Group, are a "non-issue".  Mr. Wiesner told Reuters, "It would have been a surprise if [Twitter] had a profit [for 2013]."

Twitter Building
Twitter's new office building in SF, Calif. [Image Source: Smart Planet]

The Twitter IPO could produce one or more "Twitter billionaires", much like Facebook's.  Twitter's former CEO Evan Williams holds 12 percent of shares; Jack Dorsey holds 4.9 percent; and Dick Costolo's  -- current CEO and former COO -- holds 1.6 percent.  Benchmark Capital Holdings Comp., LLC (and its affiliates) own 6.7 percent of shares; Rizvi Traverse Management, Spark Capital, Union Square Ventures and DST Global Solutions Ltd. each hold 5 percent or less of shares.

Sources: Twitter via SEC, Reuters



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