Who’s Really the King of Mobile Advertising?
At the end of last week, Twitter announced that it had submitted an S-1 to the Securities and Exchange Commission, confirming long-standing speculation that the social media platform would file for an initial public offering sometime this year. Because Twitter currently earns less than $1 billion in revenue, it was able to file confidentially, meaning that it does not have to reveal the details of its prospectus until shortly before the IPO date. As it stands, no details have been given on the time frame of the offering, or on the company’s underlying financials.
But just because Twitter hasn’t pulled back the curtain yet doesn’t mean that the conversation surrounding the IPO is uninformed. Interested investors have a battery of publicly available data and estimates at their disposal, as well as lessons learned from the Facebook (NASDAQ:FB) IPO. It seems clear that much like Facebook, Twitter’s business model will be built on a platform designed to serve advertisers.
This model as applied to social media is relatively new, but by this point has been thoroughly explored and investors generally know what to look for. Twitter’s valuation will depend not just on how many users it has and how active they are, but on how well it can deliver advertisements to those users, and on how well it can manage its relationships with those advertisers.