The world’s watercooler is going public.
Twitter, the wildly popular microblogging service that has come to define the mobile computing generation, took the first steps on Thursday to file for an initial public offering. Twitter’s filing could see it start trading as early as this year at a valuation of $10-billion (U.S.) or more.
The company’s move comes as investors are finally warming to social media such as Facebook and LinkedIn.
After a bumpy first year, Facebook’s shares are up more than 100 per cent in 2013, hitting an all-time high.
But Twitter makes as much as 83 per cent of its revenue from the U.S. market, according to the research firm eMarketer, and as they did with Facebook, investors are likely to put a lot of pressure on the company to diversify globally.
Launched seven years ago, Twitter has become one of pop culture’s dominant communication platforms – a chat room for TV show discussion, the bullhorn for Arab Spring revolutionaries, and the most immediate source of breaking news.
“When it started, Twitter was very much, ‘Tell us how you’re doing and what’s happening.’ But in its short life it has transformed into an information network,” said Alfred Hermida, associate professor at the University of British Columbia’s graduate school of journalism. “You can almost think of Twitter today as the pulse of the planet.”
With about 200 million users, Twitter is less than a fifth the size of Facebook, the world’s largest social network. But unlike Facebook, which was initially designed for desktop computers, Twitter was built as a platform for mobile phones – something that has proven especially advantageous as more and more people switch from desktops to smartphones and tablets.
“It makes all the difference in the world that Twitter was architected on mobile devices,” independent technology analyst Carmi Levy said. “Technically, Twitter is ahead of Facebook. But more important than that, culturally, it is a mobile company.”
According to eMarketer, more than half of Twitter’s estimated $582-million in revenue this year will come from mobile advertising. The company’s success or failure as a public entity in the coming years will almost certainly depend on how much it takes advantage of a unique discrepancy in the advertising world: Increasing numbers of users are turning to the Internet for their content, but the bulk of advertising dollars are still spent on traditional media such as TV and print. As that gap closes, sites such as Twitter could be in line to make billions of dollars.
“Twitter is becoming a starting point,” said Kunal Gupta, founder and CEO of Toronto-based native advertising platform provider Polar Mobile. “The first thing I’m doing in the morning is opening Twitter and consuming, consuming, consuming.”
In recent years, Twitter has tried to expand into the content-creation business, buying the mini-video site Vine for $30-million to allow users to post short videos with their tweets. It has also hired myriad “partnership managers” to build relationships with musicians, directors and entertainment executives to integrate Twitter’s services with their content.
Because it is still a private company, Twitter is not required to reveal detailed information about its finances. Limited sales of private shares in the company indicate that it is worth somewhere between $9-billion and $10-billion – or almost twice as much as BlackBerry.
Analysts say this means investors will be lining up to buy the shares when they go on the market.
“At that valuation, demand will be huge and performance will have to live up to expectations. But conditions in the social media [industry] have never been better,” Mr. Levy said.
“What Twitter wants to be is a small, light, low-overhead means of communication, like e-mail is – except a branded version, that they can then monetize.”