Twitter will increase the money it derives from sponsored tweets as part of its business objectives
In the future Twitter will rely on a lot more than squeezing money from sponsored tweets, its main source of revenue at this time.
The company has already selected the New York Stock Exchange to host the TWTR account for its initial public offering of stock on 15 November, and has been in business since 21 March, 2006. Despite this, Twitter has yet to make a profit.
The San Francisco-based social network is planning to raise about $1 billion (£618m) in the stock sale. The price at the IPO opening has been estimated by Bloomberg analyst Adam Johnson to be around $21 (£12.98). Others believe it will open in the $15-$20 (£9.27-£12.37) range.
In the prospectus it released 3 October, Twitter reported a net loss of $79 million (£49m) last year and $69 million (£43m) for the first half of 2013. Even after adjustments for stock option compensation, depreciation and other items, the company still has suffered steady losses during its years as a private company.
Nonetheless, due to its growing worldwide influence, a steadily increasing list of users and an effective advertising reach, Twitter’s upside is huge and the IPO still is the most anticipated stock sale of 2013. Goldman Sachs will be the lead underwriter.
Its seven-year track record not withstanding, the company is confident that it can take its current lineup of three income-producing products and, with a little creativity, build them into a full-fledged web service that can expose highly targeted advertising to its millions of users.
Its trajectory is decidedly up and to the right. In its second quarter this year, Twitter reported 218.3 million average monthly active users, up a whopping 44 percent from a year ago. It estimated that users tweet between 200 million and 250 million times per day, so there’s no question they are engaged with the network at all hours. Revenue for the first half of this year was $253.6 million (£157m), more than double the first half of 2012, the filing reported.
eMarketer.com reported that it believes the company will bring in $582 million (£360m) this year from advertising. Twitter also makes money by licensing use of its aggregated data to other companies.
Securities analyst Michael Pachter of Wedbush Securities said his firm has evaluated Twitter’s current worth to be “between $15 billion (£9.3bn) and $16 billion (£9.9bn), and that’s up from $9 billion (£5.6bn) to $10 billion (£6.2bn) a year ago.”
How exactly will Twitter build its business in the future? One can assume that it will entail a lot more than sponsored tweets – although those are the main source of revenue at this time.
“Anything that happens in the world plays out on Twitter,” Twitter Director of Products for Revenue Kevin Weill told an Advertising Age-sponsored conference here at the Ritz-Carlton on 15 October. “It’s a series of ‘now’ moments. Some of those moments you can’t plan for, but a lot of them you can, and we’re increasingly seeing brands and marketers plan for the moment.”
A prime example of this: The birth of the royal baby.
“This, of course, spawned an immense amount of conversation,” Weill said. “Claridge House (where the Duke and Duchess of Cambridge awaited the birth of little George) live-tweeted the birth; we were seeing 25,000 tweets per minute, 15,000 retweets of some messages, 3,000 retweets of others, and so on — all about the royal baby.”
Marketers have an opportunity to enter the conversation in an authentic way, Weill said.
Disposable nappy company Pampers, for example, wrote in a promoted tweet: “Every little baby is a Prince or Princess.” Coca-Cola paid to tweet: “Time for a Royal Celebration,” with a photo of two bottles of the soft drink – one for William and one for Kate. Oreo spent ad dollars on “Prepare the royal bottle service (milk, of course). Long live the cream.”
Famously, Oreo also used the Super Bowl’s momentary power outage last 3 February to its tweeting advantage: “Power out? No problem. You can always dunk in the dark.” That one got some 16,000 retweets and 6,000 favourites.