September 13, 2013
After Seven Years Of Service, Twitter Prepares For Initial Public Offering
Michael Harper for redOrbit.com - Your Universe Online
After seven years of providing the public with a 140-character messaging platform, Twitter has decided to go public.
On Thursday the company issued a Tweet claiming it had taken the first steps to file an initial public offering (IPO) with American regulators. The company is filing under a relatively new law which helps companies with less than $1 billion in revenue take their business to Wall Street. Though it has become one of the more popular sites on the Internet, Twitter has long struggled to prove themselves as a long-standing and profitable company. Like most, the social networking company sells ad space on its site. With more than 200 million active users, this business is thriving as advertisers look to capture the captive market.
Many are expecting Twitter’s IPO to earn as much press and attention as Facebook’s 2012 entrance to the stock market.
Goldman Sachs will act as Twitter’s underwriter as it moves forward in the IPO proceedings, according to sources speaking with Reuters. Other banks, including JPMorgan, Credit Suisse Group AG and Morgan Stanley are also reportedly eager to play a role in the impending IPO. These potential underwriters stand to make a good deal of money from Twitter’s public offering, as well. The fees alone could bring in tens of millions of dollars for the banks who help take Twitter to Wall Street. For example, should Twitter sell ten percent of its first shares, underwriters stand to make $40 to $50 million, according to Reuters.
Some of the earliest private investors are already pricing Twitter’s value at over $10 billion. By the end of the year it’s expected the social messaging firm will break even and see a 40 percent growth in revenue at $1 billion.
If Twitter succeeds both in social networking and Wall Street, it will be thanks to its dominance in mobile. As more consumers move portions of their life to their smartphones and tablets, companies which build out mobile offerings are in powerful positions to capture this market. Therefore, there are several investors who believe Twitter will be a powerhouse for years to come.
Advertising can be a four-letter word in social and mobile, yet Twitter has so far treaded a careful line in this business. This could be an even trickier move after an IPO. Though its seeing revenue growth, investors who are keen on large returns may begin to pressure the company to sell more ads, running the risk of annoying users.
"There's a few issues [such as] how many revenue streams can be developed beyond just advertising, the impact of more people accessing the service via smartphones," explained Colin Gillis, a technology specialist with BGC Partners in a statement to the BBC.
The company has spent much of the last year preparing itself not just for an IPO, but to stand out as a successful and profitable business. In the beginning the micro-blogging service was essentially wide open. Third-party clients could create apps and software to post to Twitter, borrow data from Twitter and even build services around the site. The company has since become quite restrictive about these practices in an attempt to both unify its services and purify its brand.
Twitter began shutting off services such as Friend Finders to third parties last year. It also began restricting how many users third-party clients can deliver streams to as well as restrict which third-party clients are allowed access to its data.