Twitter is an online networking service, microblogging service and a hugely popular social media company that enables its users to send and read text-based messages of up to 140 characters known as “tweets“.
Whether or not you’re on the Twitter ride, you probably know this much.
If you dream in tweets, organize your awesome too-late comebacks, fame catapulting strategies and pop culture observations and everyday life rants into 140 words, then you probably know a little more.
The company has gone from strength to strength since it’s creation by Jack Dorsey in 2006 thanks to tweetaholics such as you, marking over 200 million monthly active users last December.
Now, Twitter is set to go public. On September 12th this year, the company tweeted; ” We’ve confidentially submitted an S-1 to the SEC for a planned IPO”
Cool. Now can you tell me what that means in 140 characters please iPhone Antidote?
Well…. no. As much as we love Twitter, we’re not very good at doing that 140 character thing. We talk a lot if you haven’t noticed. BUT we’re kinda ok at explaining things, so here’s what Twitter going public means, and how it might affect you, dear tweeters.
First things first. IPO stands for Initial Public Offering. It is basically a stock market launch where members of the public (that’s you, if you gots the cash) can buy shares in the company (that’s Twitter) on a securities exchange ( think of Wall Street).
Members of the general everyday public will make up some of the people who buy shares, but Twitter will also be looking for big time BIG TIME investors to buy shares. Lots of them. For lots of money. Cos, monies.
With monies, you can build. and they will come. Not really, sorry, we just watched Field of Dreams. But with money, otherwise known as capital, twitter can grow and build and become a better company and provide more for your trusty shareholders and the 200 million + users.
So, basically, Twitter is now a private company, and they are planning on becoming a public company. Simple, really, except it’s pretty huge, as the beginning of the process is and has been for a while a hugely anticipated moment in the tech, financial and tweety world.
But… why are they doing it?
The advantages of becoming a public company are many, and they’re mostly to do with money, but also reputation and growth. With new investors, the company will be able to access a large amount of capital to catalyze growth. It’s a way of monetizing parts of the company. It will make acquisitions easier and increase the company’s (already huge admittedly) public image .
People who invested in Twitter in the beginning and employees will be able to assign a value to their shares, making their association to the company increasingly valuable (hopefully). Shares in the company can also be used as an extra attraction for potential employees, as long as the value is set to open and stay high.
There are also potential disadvantages. The company, once public, will have to disclose business and financial information, which is of course useful to shareholders, but can be risky as they also expose the business to it’s competitors. The stocks could dive. There’s risk associated with Twitter’s reputation and there will be pressure for them to fulfill their promised potential.
Now, Twitter has filed their ‘S1’ confidentially, which means that they make less than $1 Billion dollars annually. If a company earns more, that is when they have to file the S1 out in the wide open plains of the tech and financial world.
Twitter will have to make their IPO documents public, but not until 21 days before they start pitching themselves to investors on Wall Street.
One way to attract investors before and during the official pitch is to convince them that Twitter, like Facebook before them, can advertise in this new social media world better, more subtly and more effectively than any other social media company out there.
They’ve only quite recently started to gain revenue from placing ads in the stream of tweets users see, but it’s already significant. According to eMarketer, they’ll haul in $583 million in advertising revenue for 2013 and hit $1 billion in 2014.
They are said to be creating a type of advertising that will work better than any other social media advertising.They have just purchased MoPub, the world’s largest mobile ad server,which is indicative of the direction they’re going in making huge advertising profits and attracting investors.
Speaking of Facebook, their IPO famously did not go very well. After they initially started selling their shares at $38, the company’s share prices dropped by more than half over the following 3 months. Investors lost billions and blamed Facebook and the investment banks involved in the IPO, claiming they had deceived them on Facebook’s revenue estimates. Facebook has however recently recovered, currently sitting at $44.75 as we write this.
Twitter will be super keen to show potential investors that their revenue is and will be exponentially increasing. In the near future, expect to see more ads on twitter, and advertising used in different ways within the platform. You’ll probably start hearing a whole bunch about Twitter going public.
As for when Twitter will take the jump to being a public company? Well, that depends on how attractive they’re looking, and how the stock market is performing. They will want the best conditions to get the best price.
For now, Twitter is going ‘back to work’.
Good luck Twitter, we love you! Now for the rest of you kids, happy tweeting and dreaming about how to explain to the world in 140 characters that you just bought a stake in your favorite company! #awesome
Image courtesy of Independent.ie, Forbes, Rapgenius, Wired.co.uk and Cheezburger.com