Twitter IPO is schedule on the 15th of November 2013. Twitter Inc. plans to raise up to USD 1.6 billion and value the company at up to USD 10.9 billion.
Twitter intends to sell 70 million shares priced between USD 17 and USD 20. If the company’s underwriters choose to sell an additional allotment of 10.5 million shares, Twitter could raise as much as USD 1.6 billion at the top of the price range.
The valuation is more conservative than the USD 15 billion that some analysts had expected for the social media phenomenon.
Introduction to twitter
Twitter is an online social networking and microblogging services provider with an active user base of 230 million that enables users to send and read “tweets”, which are text messages limited to 140 characters. Registered users can read and post tweets but unregistered users can only read. The service was designed in 2006 by Evan Williams and Biz Stone, each of whom worked at Google.
What is micro blogging?
Micro-blogging allows you to write brief text updates about your life on the go, and send them to friends and interested observers via text messaging, instant messaging, email or the web.
Media companies such as the BBC, The New York Times and others are trying out Twitter as a way to send headlines and links to stories.
Sources of Revenue
The company is generating its revenues from:
Promoted tweets: Advertisers pay to have brief messages show up in users’ stream of Twitter messages.
Promoted trends: Twitter lists the topics are being talked about most on its platform. Advertisers can pay to have a topic of their choice listed too. A promoted trend costs roughly $200,000 for a day of exposure on all US Twitter accounts.
Promoted accounts: If a brand wants more Twitter followers, it can pay to have its account recommended to twitter users.
According to eMarketer more than half of Twitter’s ad revenues will come from mobile advertising this year, up from virtually no ad revenue from mobile in 2011.
In the nine month period ended on September 30, 2013 around 89% of revenue was generated from advertising out of which 70% was from mobile platform whereas the figure for six month period ended on June 30, 2013 was 87% for over all ad revenue and 65% was through mobile platform.
In 2012, Twitter’s revenues increased by 198% to USD 316.9m, but the company made a loss of USD 79.4m for the year, although that was a reduction from a loss of USD 128.3m in 2011.
For the September quarter the company’s accumulated losses grew to USD 483 million, reflecting the USD 64.6 million loss for the period.
eMarketer an independent market research company that provides insights and trends related to digital marketing has predicted that twitter will generate about USD 583 million this year in global ad revenue in 2013 before nearing USD1 billion next year. The valuation of Twitter is around 10x 2014 sales and that is derived largely from the user base rather than the profitability of the company. It remains to be seen if the company becomes profitable to justify valuations.