Twitter – the morning after the IPO
The morning after the night before is never a pretty sight. But for three men waking up in Manhattan this morning it couldn’t be sweeter.
Was it for real or did they dream that seconds after the bell rang on the New York Stock Exchange an online messaging service they founded just 7 years ago was – with a ring of a bell – suddenly worth $31 billion?
As Twitter’s shares took off, almost doubling in seconds, I was transported back to the heady days of 1999/2000. I was living in New York and working as a technology reporter for Reuters as one by one, the then internet giants of the day – Netscape, Commerce One, Ariba – all made their debuts on the Nasdaq.
There were similar scenes of chest pumping and back-slapping back then too of course, as CEOs watched the share price of their start-ups soar past the valuations of long-established media titans like AOL and Time Warner. No one really paid attention to the fact that the nation’s new technology upstarts weren’t posting any profits at all. They talked the talk about “monetizing their online marketplaces” and investors lapped it up. They believed the normal rules of business simply didn’t apply to this particular breed. If it ran on the Web and everyone loved it, it was bound to turn into a successful business. How wrong they were.
And so it was yesterday with Twitter, the darling of the “new” internet that’s brought about the next online revolution called “social media”. The world where we all interact and tell each other what we’re thinking and feeling and drinking and doing and somewhere whizkids in California capture all the data and find a way of turning it into hard cash.
First there was Google, then Facebook, then LinkedIn, Groupon (although best not to mention Groupon) and the last of the great social media hopefuls, Twitter.
As the company’s shares whizzed past their opening price of $26 to hit $45 within seconds, the volume on the trading floor rose. As did the excitement of the television anchors anchored around them. Investors hit the phone, shouting orders for more, more more! At one point the stock hit $50. There’s an argument Twitter’s advisers (Wall Street’s finest) massively underpriced the stock, but that’s for another day.
The point is, all this euphoria was for a company that is yet to turn a profit (it actually made a $65 million loss in the third quarter) and has an unproven business model – if it has a business model at all.
Because no one really knows yet how Twitter intends to turn 230 million users, even more Tweets and lots of online love into a serious business. Revenues are growing – to $534 million in the year ended September – but user growth is also slowing.
It’s true people asked the same questions of Facebook. But you can argue that there are more opportunities to create revenue on Facebook. Lots of personal data, photos, videos, messages between friends. Real depth about who you are, who your friends are, your family, birthday, worklife. All things that can be mined and targeted and potentially, to use that dreadful phrase again, “monetized” if the right advertiser gets its hands on it.
But is the same true for Twitter? The crucial difference is that Twitter is real-time and people only tend to impart gobbets of information – not much of that data, I would argue, is as personal as the personal stuff we divulge on Facebook. True, add all those gobbets together and you can paint a picture of a person but I’m not convinced.
It’s already hard enough to keep up with the non-stop stream of Tweets on your timeline. Now imagine that being bombarded by more and more advertising, sponsored photos and videos. Wouldn’t that become very annoying, very quickly? I already hate the fact people pay to promote their profiles and their tweets. But now Twitter’s gone down the public markets route, the inevitable consequence is there will have to be loads more of it.
The gamble for Twitter’s founders, Evan Williams, Jack Dorsey and Biz Stone, is that by stuffing the service with more features they stand to alienate the very followers who have made Twitter the huge success that it is. The question is has Twitter reached that critical mass where its followers need Twitter as much as Twitter needs them?
As I write, Twitter’s shares on day 2 of trading are down 5.4 per cent, or more than $2. Perhaps the reality is starting to set in.
Follow @siobhankennedy4 on Twitter.