Video: Twitter Going Public: Inside Their Revenue Business
After seven years of being a successful private company, twitter is finally planning on going public. Twitter valued itself for $12.8 billion back in August based on $20.62 a share and with 620 million shares, and it wishes to raise 1 billion for its initial public offering.
Twitter has been bringing in 85% of its revenue by doing advertisement on their site. The marketers of different companies buy ‘promoted tweeds’ from twitter, and these tweeds will pop up on users’ twitter feed. When users retweet, or follow a company on twitter, twitter gets paid further more.
Many investors are wondering if buying twitter shares would be a good return on investment. In my opinion, it is risky to invest in twitter as in the past the stock price of other popular social media company (Facebook, Groupon, and Zynga) had plunged after their IPO. Although Facebook’s stock price has bounced back, it is due to their excellent performance. In the most recent full year, Facebook has revenue of $3.7 billion and net income of $1 billion, whereas twitter only has revenue of $317 million and net income of $-74 million. Although the revenue for twitter had been continually rising, the company itself is still not profitable. So for those reasons, it may not be wise buy twitter’s share at IPO price because it has a potential for price drop.
Sources
http://www.economist.com/blogs/schumpeter/2013/10/twitters-ipo
http://techcrunch.com/2013/10/04/twitter-vs-facebook-ipo-in-one-chart/