Twitter’s plan to go public has already become the most anticipated stock-market debut this year, and the release Thursday evening of its IPO filing draws back the financial curtain on the social-media stalwart built on innumerable 140-character updates.
The long-rumored designs on an IPO became news last month with a single tweet—brevity, of course, was a requirement of the medium. The S-1 prospectus, on the other hand, runs well past 140 pages of dense and detailed disclosures required before Twitter attempts to raise $1 billion in its initial sale to investors. Bloomberg Businessweek‘s technology reporters Brad Stone and Joshua Brustein will be mining the document to take a closer look at how the microblogging service makes its money and engineers the sort of growth that will be essential to its future as a public company. Here’s their early take on the document, with updates in real time.
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Twitter’s Value Statement Keeps It Brief: While the world absorbs all of Twitter’s financial information, perhaps the more meaningful element of any technology company filing is its statement of values, or any personal letter from the company founder to investors. Twitter didn’t add much in the way of missionary zeal to its S-1, but there was a brief letter to prospective investors on page 91 of the filing, attributed to somewhat impersonally to “@twitter.” It reads:
We started with a simple idea: share what you’re doing, 140 characters at a time. “People took that idea and strengthened it by using @names to have public conversations, #hashtags to organize movements, and Retweets to spread news around the world. Twitter represents a service shaped by the people, for the people.
The mission we serve as Twitter, Inc. is to give everyone the power to create and share ideas and information instantly without barriers. Our business and revenue will always follow that mission in ways that improve–and do not detract from–a free and global conversation.
Thank you for supporting us through your Tweets, your business, and now, your potential ownership of this service we continue to build with you.
Yours,
Such statements of values have become quite common in the tech world. Inspired by Warren Buffet, Google (GOOG) co-founder Larry Page wrote back in 2004 that “Google is not a conventional company,” and said that “Sergey and I founded Google because we believed we could provide an important service to the world-instantly delivering relevant information on virtually any topic. Serving our end users is at the heart of what we do and remains our number one priority.” Page’s letter ran over 4,000 words. Facebook’s (FB) Mark Zuckerberg followed in that mold with his own letter, shorter than the Google opus at 2,100 words but demonstrating equal amounts of conviction. “Facebook exists to make the world more open and connected, and not just to build a company,” he wrote. “We believe that we have an opportunity to have an important impact on the world and build a lasting company in the process.” Twitter’s brief, impersonal missive may be a victim of the unusual circumstance of its founding. None of the original founders retain an operational role in the business.
Such letters may be the least or most important part of the S-1, depending on how you look at it. The principles laid out by the founders are relevant far after the numbers are outdated and “are enormously important for people who are real investors as opposed to traders,” says Laura Rittenhouse, CEO of Rittenhouse Rankings, a financial and investor communications firm. “The culture is where the future profits are going to be coming from and show that the people running the business are either aligned or misaligned.” -BS
User Numbers Coming Up Short…and Global? Twitter now says it has 215 million monthly active users, with 100 million of those deemed “daily active users” by the company. Late last year Twitter had claimed 200 million active users, and AllThingsD recently cited sources placing total users at about 240 million. So these numbers are likely going to be seen as a disappointment in some quarters.
Of Twitters users, 75 percent used mobile devices to access the service, and the company said it brings in about 65 percent of its revenue through mobile ads.
Interestingly, over three-quarters of Twitter users are outside the U.S. This could be a problem for the company, at least in the short term, since it reports that international advertisers only make up 25 percent of its revenue. Twitter mentions problems competing internationally and being able to monetize their international user base as potential risks in the filing. The inability to convert international users into additional revenue is particularly concerning in markets like India, where people access the service using feature phones that cut down on options for advertising. - JS
