Twitter reveals rip-roaring growth
The online messaging service hopes to woo investors despite having posted big losses.
SAN FRANCISCO - Twitter Inc, racing toward the largest Silicon Valley initial public offering (IPO) since Facebook Inc's 2012 coming-out party, hopes to woo investors with rip-roaring revenue growth despite having posted big losses over the past three years.
The eight-year-old online messaging service gave potential investors their first glance at its financials on Thursday when it publicly filed its IPO documents, setting the stage for one of the most-anticipated debuts in over a year.
Twitter's debut will be the culmination of its journey from a side-project to a sociocultural phenomenon, one that has become a communications channel for everyone from the Pope to President Barack Obama. Last month, Iranian President Hassan Rouhani used Twitter to disclose a "historic" phone conversation with the US President.
The service's emphasis on real-time communication - whether it be about breaking news or chatting with friends about a TV show on air - sets it apart from rivals such as Facebook.
Now, though, the company must prove to Wall Street it can continue to make money, even as growth slows after a period of explosive expansion around the world.
In Thursday's filing, the first public disclosure of financial figures, Twitter reported that revenue almost tripled to $316.9 million in 2012. In the first half of 2013, it posted revenue of $253.6 million but had a loss of $69.3 million.
The numbers were mostly in line with the estimates of outside analysts. The company began selling advertising in earnest only in 2010, devising a means for ads to appear in the message streams of users that has proven effective for both desktop computers and mobile devices.
The losses are "a non-issue", said Brian Wieser, analyst at Pivotal Research Group. "It would have been a surprise if they had a profit."
Twitter warned it was heavily reliant on advertising revenue. It said more than 87 percent of its revenue came from advertising in the first half of 2013.
The prices Twitter can command for ads has actually fallen over the past five quarters. But the company said that decline was the result of a conscious effort to rapidly expand its available inventory and change its algorithms to distribute ads more frequently throughout each day.
Revenue has risen because the strategy attracted more advertisers, especially small- and medium-sized businesses and international clients, it said.
Still, the company acknowledged the uncertainty of the volatile and highly competitive online advertising market.
Twitter's target is to raise $1 billion, a figure devised mainly for registration purposes and that will change as the company embarks on a roadshow to sell its IPO to investors.
Assuming everything goes smoothly, it could begin trading in November, though it has not revealed which US exchange it has chosen.
Some analysts estimate Twitter could be worth as much as $15 billion. On Thursday it announced an advertising initiative for its Instagram unit, which competes most directly with Twitter.
Since Twitter was spun out of a struggling San Francisco startup in 2006, it has grown to approximately 2,000 employees based in 15 offices around the world.
More importantly, it has helped redefine the nature of global communications, linking once lofty and unreachable politicians, celebrities and journalists with millions around the world.
Its staunch advocacy of free speech around the world has helped it become an important avenue through which news and viewpoints are shared, from the first inklings of the US military assault on Osama bin Laden's compound to Obama's tweeting "Four more years" when he won re-election.
The service had 218.3 million monthly active users, on average, in the three months ended June 30. Three-quarters of its monthly active users are considered mobile users, it said in the filing.
Co-founder and former CEO Evan Williams is Twitter's largest shareholder, with 12 percent of the shares, while co-founder and chairman Jack Dorsey owns 4.9 percent. Biz Williams, another co-founder, does not appear on the list of top shareholders. Current CEO Costolo owns 1.6 percent.
Among institutions, Benchmark and affiliated entities own 6.7 percent of shares, while Rizvi Traverse Management, Spark Capital, Union Square Ventures and DST Global are each shareholders of 5 percent or more.
Twitter intends to list common stock under the symbol "TWTR" Goldman Sachs, Morgan Stanley, JPMorgan, BofA Merrill Lynch, Allen & Co, Deutsche Bank Securities and Code Advisors are managing Twitter's IPO.