Twitter S-1 Shows It's Growing Fast, but Still Losing Money

Twitter's long awaited S-1 reveals that the company is growing rapidly, derives most of its revenue from mobile and is used in nearly every country in the world. On the flip side, the company—which has 215 million monthly active users and 100 million daily active users—is losing money, and is not nearly as big as rival Facebook. The company has filed with the Securities and Exchange Commission for a planned $1 billion IPO. Its S-1 contained some other interesting details: Twitter pulled in $316.9 million in 2012, up 198 percent from 2011. The company is losing money, though its losses have declined. From 2011 to 2012 its net loss decreased by 38 percent to $79.4 million. But in the first half of this year, Twitter's net losses surged by 41 percent to $69.3 million. Twitter users send out 500 million Tweets every day. Last quarter, 75 percent of Twitter's monthly user base accessed the platform via mobile devices—and mobile is where 65 percent of the company's revenue comes from (putting it far ahead of the average Web publisher). "Mobile has become the primary driver of our business," the filing said. "Our mobile products are critical to the value we create for our users, and they enable our users to create, distribute and discover content in the moment and on-the-go." For comparison purposes, when Facebook filed its S-1 in early 2012 for a planned $5 billion IPO, it had a much larger user base, was profitable and was growing rapidly. The company expressed bold plans to reach 2 billion Web users across the globe. After stumbling out of the gate, Facebook has accelerated its mobile ad business and its stock has steadily risen. How many ads is Twitter showing? The company says it defines ad revenue based on dollars per 1,000 timeline views—seemingly its version of a CPM. "We believe that advertising revenue per timeline view is a measure of our ability to monetize our platform," the filing said. During the most recent quarter, Twitter's advertising revenue per timeline view was $0.80, a 26 percent jump from the same quarter last year. In the U.S., that number is much higher: $2.17 during the most recent quarter. The wind is seemingly blowing in Twitter's direction. Per eMarketer, ad spending on social networks is expected to hit $9.52 billion globally this year, up 30.5 percent from last year. But the company knows that growing its user base and making sure its ads build on their value is mission critical, as evidences by the S-1's risk factors listing. "If we fail to grow our user base, or if user engagement or ad engagement on our platform decline, our revenue, business and operating results may be harmed," it said. One particular risk: "[If] we fail to introduce new and improved products or services or if we introduce new products or services that are not favorably received." Those new products could be ads. And more are coming, says Twitter. For example, the company is planning to open up its self-serve ad platform to other countries (25 percent of its ad billings were from outside the U.S. during the most recent quarter). "We intend to develop new and unique ad formats for our advertisers. For example, we recently introduced our lead generation and application download Twitter Cards, and Twitter Amplify, which allows advertisers to embed ads into real-time video content." Twitter also touched on its recent MoPub acquisition. Once the deal is done, the plan is to expand the mobile exchange across the industry, while also bringing real-time-bidding ads to Twitter "so that our advertisers can more easily automate and scale their advertising purchases." The company also wants to deepen its ties to traditional media, and hinted that it wants to become a bigger distributor of video (maybe long form?) "We plan to continue to build and acquire new technologies to enable our platform partners to distribute content of all forms," it said. Twitter also touted the importance of real time marketing, a growing strength. Privacy is also crucial to Twitter's future. On page 30 of the S-1, the company talks about "a number of recent legislative proposals in the U.S., at both the federal and state level, that would impose new obligations in areas such as privacy and liability for copyright infringement by third parties. The U.S. government, including the Federal Trade Commission, or the FTC, and the Department of Commerce, has announced that it is reviewing the need for greater regulation for the collection of information concerning user behavior on the Internet, including regulation aimed at restricting certain online tracking and targeted advertising practices." Thus, in other words, even though company tripled revenue and halved its losses 2012 compared to 2011, it needs advertising to close the gap and regulatory concerns could make it tougher. Twitter included the following letter in its S-1, a sort of mission statement. "We started with a simple idea: share what you’re doing, 140 characters at a time. People took that idea and strengthened it by using @names to have public conversations, #hashtags to organize movements, and retweets to spread news around the world. Twitter represents a service shaped by the people, for the people. "The mission we serve at Twitter, Inc. is to give everyone the power to create and share ideas and information instantly without barriers. Our business and revenue will always follow that mission in ways that improve–and do not detract from–a free and global conversation. "Thank you for supporting us through your Tweets, your business, and now, your potential ownership of this service we continue to build with you. Yours, @twitter" just setting up my twttr — Jack Dorsey (@jack) March 21, 2006

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Twitter S-1 Shows It's Growing Fast, but Still Losing Money

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