Sunday, 6 October 2013

Twitter

Twitter has announced details for its upcoming public listing. It is being compared to Facebook already but what makes it different is its focus on public real time news. Twitter is a broadcast system anyone can follow anyone, Twitter has become the way to find out what is happening here and now. To me it sits in between Facebook which is personal news and Linkedin which is business news. Twitter is general news and I think advertising is seen as more acceptable if it relates to news you are following versus advertisements next to personal pictures on Facebook.

There are no concerns over mobile as 75% of Twitter users accessed the service from a mobile device in the second quarter with 65% of advertising revenue generated from mobile. That's more than the 71 percent and the 41 percent, respectively, for Facebook in the same period. Twitter is a more mobile friendly product as both companies began displaying mobile advertisements last year but Twitter has seen more mobile penetration.

Key stats
Twitter Facebook
Employees 2000 5300
Risk pages in S1 32 22
Stock structure One class  Two class super voting
Monthly users 218 million 1.15 billion
International revenue 25% 55%
Mobile usage 75% 71%





In a refreshing change there will only be one class of stock unlike most technology companies a founder does not have absolute control over the company. This is more shareholder friendly as it gives everyone a say in how the company can be run and gives other investors the opportunity to take it over. Twitter has also disclosed more risks than Facebook running at 32 pages versus Facebook's 22.

Risks
Twitter is not making money. As can be seen above Twitters revenue per user is much smaller.
Another key risk is the fact that a lot of Twitter content is accessed elsewhere. This is a risk as if Twitters news is accessed elsewhere they will not receive advertising revenue. Twitter has not disclosed the number of users who access their content through other applications that do not contain their ads.

News
One of Twitters key attractions is the ability to follow well known personalities. It is a broadcast platform to find out directly what key people are saying. A number of corporates like Tim Cook and Carl Icahn have just come on board but most surprising to me is Warren Buffet joined a few months ago. Buffet signing up is fascinating considering his aversion to technology. Apparently he resisted his friend Bill Gates (founder of Microsofts) attempts to set up a computer in his home. As more celebrities join the service Twitter should get more and more popular.

There has not been much talk about Vine which is a 6 second looping video. The service was launched by Twitter at the start of the year and their most recent announcement suggested they had 40 million users in August. They are facing more competition from Instagram which has released a 15 second video system but it was interesting that Vine was not mentioned more in the S1.

Revenue
Twitter only began advertising and focusing on revenue in 2010. They recently launched self serve advertising in the US with intentions to launch in a platform in international markets. Self serving advertising is key for most businesses as it allows advertisers to purchase on Twitter through an online platform (much like Google adwords) rather than than through their direct sales force or resellers.

There is no news on the valuation yet but whatever you do please don't buy TWTRQ. Twitter has not listed yet. The TWTRQ ticker is for Tweeter Home Entertainment! Investors seemed to have a case of mistaken identity they are a retailer of home entertainment systems. Shares jumped from 2 cents to 12 cents before trading was halted unfortunately for those investors the company is bankrupt!

Luckily for Twitter there has been no movie made about the founding of the company like Facebook which had a movie (the social network) released ahead of listing. But Twitter has received some attention on Saturday Night Live, see below. # Hashtag!



Jason
Disclosure: Decisive has no long position in Twitter (TWTR) stock 

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