With IPO looming, Twitter takes on losses, wary investors
In wake of Facebook's tumultuous IPO, Twitter needs to come out strong
Computerworld - As Twitter plans to launch its initial public offering amid financial losses and in the wake of Facebook's tumultuous IPO, the company needs to reassure potentially nervous investors.
"These numbers are going to make investors at least a bit skeptical to be sure," said Dan Olds, an analyst with The Gabriel Consulting Group. "They're going to want to see Twitter's plans for generating a bunch more revenue without driving up costs."
In an S-1 filing with the U.S. Securities and Exchange Commission, Twitter gave users and potential investors their first look under the hood, noting business specifics like user growth, revenue and losses.
While the company said that it's worth about $9.7 billion, according to an internal valuation, what was most noticeable was Twitter's losses.
The micro-blogging site has been steadily losing money, reporting a net loss of $79 million in 2012 and a $69 million loss for the first half of this year. On the positive side, the losses were less than the $128 million it lost in 2011.
Also on the positive side, Twitter generated $317 million in revenue last year, almost three times what it made in 2011, according to its IPO documents.
The company is also on an upward trend regarding its number of users. In the second quarter of this year, the company had 218.3 million active average monthly users, a 44% jump from the same quarter in 2012.
The company will need to get Wall Street and potential individual investors to focus on its growth potential rather than its financial losses. That is even more true since many potential investors may still feel the sting after Facebook's highly anticipated IPO didn't go as planned, leaving investors and financial analysts wary of another high-profile social networking company coming up on deck.
"I really do believe that investors give each company a proper evaluation and will make their decisions based on Twitter performance, not what happened to Facebook," said Brian Blau, an analyst with Gartner. "That said, they will be watching as I think the troubles on IPO day for Facebook were unexpected, and no one wants to see that happen again."
Despite its financial losses, Twitter has positioned itself well. With its user base growing, the company also has become a household name far beyond technology circles.
Many television shows put related hashtags on the screen, encouraging fans to tweet about an episode. During this year's Super Bowl , for instance, viewers cracked jokes, supported their teams and ranted about bad plays or call on Twitter and they watched the game.
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