Fly­ing

Twit­ter is go­ing pub­lic. What is the value of the com­pany and can it learn from Face­book and LinkedIn?

Finweek English Edition - - TECHNOLOGY - Si­mon Din­gle

The fact that any­one read­ing this will not need an ex­pla­na­tion of what Twit­ter is bears tes­ta­ment to it s ubiq­uit y. Even Marc Ash­ton and Bruce Whit­field are fre­quent tweet­ers – so lit­er­ally ev­ery­one is do­ing it. Now Twit­ter has an­nounced its in­ten­tion to pub­licly list the com­pany, mak­ing it pos­si­bly the most in­cred­i­ble IPO to date.

Imag­ine if you had told some­one 10 years ago that a ser­vice that al­lows peo­ple to post SMS-length mes­sages to each other would one day be a pub­lic com­pany. Oh, by the way, it’s mak­ing some money but still f ig­ur­ing out ex­actly what the rev­enue model should look like.

You would’ve been laughed out of the milk­shake queue.

If you then ex­plained how Twit­ter had dis­in­ter­me­di­ated pro­fes­sional news re­porters overnight and was now the pri­mary place where many peo­ple went for in­for­ma­tion you may be taken semis­e­ri­ously.

And as you sipped on your dou­blethick choco­late milk­shake you could then tell peo­ple about an­other two so­cial net­work­ing IPOs.

Face­book, where peo­ple put pic­tures of cats and small chil­dren for other peo­ple to look at, would one day be worth $100bn. LinkedIn, where you find out what some­one did for a liv­ing be­fore their cur­rent job, would quadru­ple its share price on the first day of list­ing.

Crazy stuff, and yet here we are. GSV Cap­i­tal Corp – a VC firm with a stake in Twit­ter – has val­ued it at $10bn. The big- gest val­u­a­tion I’ve seen was $15bn. The com­pany will gen­er­ate $600m in rev­enue this year, we’re told, but it’s not clear how prof­itable the com­pany is.

Twit­ter has sev­eral chal­lenges to con­sider, be­yond how to push rev­enue to the next level. It also needs to think about weary in­vestors who burned their fin­gers on Face­book or, even worse, Zynga and Groupon. LinkedIn has been a suc­cess, how­ever, with a ‘freemium’ rev­enue model. Per­haps Twit­ter should be think­ing more about pre­mium ser­vices and less about ad­ver­tis­ing.

We cer­tainly won’t be pick­ing up Twit­ter shares at launch, un­less some­thing ex­tra­or­di­nary hap­pens be­tween now and then. But we will be watch­ing in fas­ci­na­tion as an­other so­cial net­work takes f light.

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