8th November 2013 – Twitter IPO Revisited

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With the Twitter IPO taking place this week, I thought I would recycle this article from January about implications of this move by this important network:

The Twitter IPO rumour mill is in full swing as we approach the end of January. The general feeling is that Q1 or Q2 2014 will see Twitter float on the Dow Jones.

The story has been gaining momentum for some months in tech circles and with good reason. Monetising is nothing new to Twitter – promoted posts / tweets / accounts are seen by Twitter users on a regular basis. So, I am going to put forward my thoughts on two key questions – will it be successful and what will the impact be on users of Twitter.

Will the IPO be successful?

Twitter has the advantage of not being the first social network to go public. Facebook’s partial floatation last year was not received well on Wall Street, but Twitter can learn from Facebook’s mistakes:

Realistic valuation – Twitter is likely to choose a much more realistic valuation than Facebook which should avoid an opening day collapse in share price and an ongoing confidence problem

Future growth levels – Facebook saw a lot of its dramatic growth in members and revenue before the floatation, but Twitter is in the middle of its financial growth boom. Its revenue is expected to triple year on year when it publishes its 2012 results, so there should still be some growth to be enjoyed by shareholders

Audience – Twitter is more of a public network than Facebook, so audience figures will be huge – but how they can segment this audience from information held in biographies, hash-tags used, etc. Get this right, and marketers will be banging the door down

Mobile – being limited to 140 characters per message means that Twitter is ideally suited to mobile, one of the key growth areas for the next decade

What will the impact be on the user?

This is probably the most important area for Twitter – if users are turned off, they will stop using it or leave, which will see revenue disappear. What could change for the user as a result of the IPO :

Advertising – the most obvious way to generate revenue for Twitter would be to place banner ads on Twitter pages. But will this be seen as invasive by the critical Twittersphere?

Paid For Service – will Twitter offer a paid for service which will allow a user to see Twitter without ads?

Obvious Marketing – At the moment, it is quite simple to avoid promoted tweets / accounts / hashtags. I would expect this to change and the promoted items will be far more prominent to drive up click through rates – I guess CTRs are very low right now, but marketers will expect more

API not free – Lots of developers around the world use Twitter to support their business. If Twitter was to charge developers for access to their API, this will see a lot of Twitter tools either become paid-for services or disappear altogether

Sell Content – Twitter may be tempted to sell user content which appears on their network. However, Instagram tried this in 2012 and the user backlash forced them to change their mind…

I think that the floatation will take place at some point in Q2 2014 – but before then, Twitter needs to get the delicate balance right between shareholder and user satisfaction.

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