Twitter just tore the roof of its business, letting the public, potential investors and any armchair quarterback on Wall Street take the deepest look to date into its financial dealings and prospects.
By revealing its S-1 documents that were previously filed with the SEC, Twitter set in motion its plans to raise as much as $1 billion selling 472,613,753 shares and becoming a public-traded company under the symbol “TWTR.”
While Twitter’s initial public offering is expected to be among the largest of tech firms this year, its business is but a fraction of the size of the Silicon Valley giants it competes against for eyeballs, timeshare and ad spend. The company’s ad revenue is one-sixteenth that of Facebook’s at the time of its IPO. Total revenue for the first six months of 2013 came in just under $254 million, more than double its revenue on a year-over-year basis.
Worse yet, Twitter has been bleeding red ever since the beginning, having accumulated a total deficit of $418.6 million as of June 30. “We have incurred significant operating losses in the past, and we may not be able to achieve or subsequently maintain profitability,” the company warns in its S-1 filing. “Since our inception, we have incurred significant operating losses.”
The company is not only heavily reliant on advertising, but also primarily dependent on revenue from the U.S. Advertising revenue per timeline view is defined by Twitter as the average amount of ad revenue per 1,000 timeline views. It also records ad revenue based on the billing location of its advertisers, rather than the location of its users. During the most recently closed quarter, average ad revenue per timeline view in the U.S. came in at $2.17, while the rest of the world generated just 30 cents. “We expect this disparity to continue for the foreseeable future,” the company adds.
Twitter ended the second quarter of the year with 218.3 million monthly average users (MAUs), marking a 44% increase from the 151.4 million MAUs it tracked in the same period last year. It also claims more than 100 million users are active on the platform every day, generating around 500 million tweets per day. Since co-founder Jack Dorsey sent the first tweet on March 21, 2006, users have created more than 300 billion tweets, according to the company.
Twitter is laying its growth strategy out on three distinct tracks: users, advertisers and platform partners. To gain more users and increase engagement among those users, Twitter says it plans to expand geographically and continue to develop its product and suite of mobile applications. It hopes to grow its platform partnership business by integrating more content and partnering with traditional media.
For the sake of advertising, its bread and butter, Twitter plans to increase and improve its targeting capabilities while opening its platform to more brands outside of the US. The company also intends to “develop new and unique ad formats for our advertisers.”
Twitter considers its value proposition to advertisers, data partners and users, central to its business. “Twitter is a global platform for public self-expression and conversation in real time. By developing a fundamentally new way for people to create, distribute and discover content, we have democratized content creation and distribution, enabling any voice to echo around the world instantly and unfiltered,” it writes in the SEC filing.
Twitter’s workforce ballooned by 90 percent over the past year to 2,000 full-time employees. Spending on research and development also jumped more than 3 times from 2010 to 2012. As of June 30, the company had $164.5 million in cash or cash equivalents.