Ahead of the largest Silicon Valley IPO since Facebook’s filing in 2012, Twitter hopes to charm investors with fast-paced revenue growth despite having admitted to considerable losses over the past three years.
Last week saw the revelation that Twitter has suffered considerably over the past few financial years, after its 164-page Form S-1 registration statement gave potential investors an insight into the micro-blogging service’s finances.
The statement revealed that the firm is on track for a record loss this year, with minus $69.3 million (£42.9 million) already on its books. However, Twitter also reported that revenue had almost tripled to $326.9 million in 2012 and despite being on pace for a record loss, the next few months should also see its biggest revenue ever. Having already hauled in $253.6 million (£156.8 million) in six months, the company is earning more than just a little pocket change.
The service’s value as a tool for real-time communication is undeniable, but now Twitter most prove to Wall Street that it can continue to make money – a fact complicated by worrying finances and the simple fact that the wave of explosive growth is beginning to subside.
Analysts, however, seem to be nonplussed by the losses, with the Pivotal Research Group’s Brian Wieser going so far as to tell Reuters that they were a “non-issue”. Indeed, he claimed “It would have been a surprise if they had a profit.”
Twitter only began to fervently sell advertising in 2010, a substantial factor in slow profit when we consider that more than 87 per cent of the company’s revenue has come from advertising in the first half of 2013 alone.
Indeed, Twitter has been rapidly expanding its available advertising space and changing its algorithms to distribute ads more frequently throughout each day. Its innovation of incorporating adverts in the message streams of users has been wildly successful for both computers and mobile devices, and is now copied by Twitter’s social media rival, Facebook.
Twitter aims to raise $1 billion (£622.5 million) through the IPO filing, and its debut onto the stock market is expected to revive interest in consumer Internet companies as valuable investments in a global market.