Twitter unveiled a net loss of $69.3-million (U.S.) for the first half of 2013 in the first public disclosure of the social media giant’s financials as development and marketing costs run ahead of revenues.
Twitter’s Securities and Exchange Commission filing – posted three weeks after the company disclosed its plan to sell up to $1-billion in shares in an initial public offering – reveals a company undergoing meteoric growth, but still facing many challenges and deep uncertainty about when the company will see its first profit.
The company’s first-half net loss rose 41 per cent against the year earlier period, while revenue more than doubled to $254-million, according to the regulatory filing. Twitter spent $112-million on research and development as well as $77.7-million on sales and marketing in this year’s first half. As of June 30 of this year, Twitter had an accumulated deficit of $418.6-million.
Since its founding seven years ago, Twitter has become one of the most culturally influential technology companies. Its arrival coincided with a broad consumer shift from desktops and laptops to smartphones and tablets – a perfect fit for a company that essentially started as a text-messaging service.
By limiting users to just 140 characters a post, Twitter has become a kind of one-stop shop for breaking news, and virtually all major news outlets now regularly report real-time news on the service – sometimes before posting the same news on their own web sites. Indeed, on the same day Twitter posted its regulatory filing, the service was ground zero for breaking news on a shooting in Washington D.C.
“Although we do not generate revenue directly from users or platform partners, we benefit from network effects where more activity on Twitter results in the creation and distribution of more content, which attracts more users, platform partners and advertisers, resulting in a virtuous cycle of value creation,” the company said.
The company’s dependence on revenue from advertisers presents a challenge even in the face of overall growth. Average cost per ad engagement decreased 46 per cent in the three months ended June 30, 2013, the company said in today’s filing.
Twitter has some 200-million active monthly users. The majority of them access the site using mobile devices such as smartphones and tablets. On average, the site generates some 500-million Tweets every day. But as the user base has grown, so have costs. According to the SEC filing, Twitter’s workforce has grown from just 200 at the beginning of 2010 to 2000 today.
The company plans to list on the public market under the stock symbol TWTR, but did not say which stock market it intends to join. It listed its fundraising target as $1-billion.
Like rivals such as Facebook, Twitter listed a host of potential challenges in its SEC filing. These include its uncertain growth trajectory and the difficulties of expanding beyond its U.S. base to overseas markets – something that has hounded Facebook as it attempts to gain a foothold against local competitors in massive foreign markets, most notably China.
Unlike Facebook and Google, Twitter appears to have a much stronger position in the world of mobile technology. Not only do most of its active users access the service using smartphones and tablets, most of the company’s revenue comes from the same platforms. According to the regulatory filing, almost two-thirds of Twitter’s advertising revenue comes from mobile devices.