Would you invest in Twitter shares?

campaignlive.co.uk, Thursday, 24 October 2013 08:00AM

Does news of the loss-making platform's planned IPO make you reach for your broker's number, Mark Banham asks.

 

NO Carl Read, head of digital, OMD UK

"Twitter has a great ad platform, with a pipeline for some interesting products, including synchronised TV ads, more mobile investment and the like. But it doesn’t have Facebook’s numbers and its IPO is a challenge for investors."
 

YES Tim Hipperson, chief executive, ZenithOptimedia

"Much will be made about how it is yet to turn a profit, but Twitter has raised over a billion in investments, is an integral part of society and has great organic growth potential. Its valuation could appear paltry in the next couple of years."
 

YES Mark Creighton, chief executive, Mindshare

"There will be more pressure to substantiate the ROI if advertisers are asked to up spend, which is an inevitable consequence of an IPO. But there is a long-term future for Twitter as it continues to sit at the heart of the zeitgeist."
 

YES Ann McCreary, digital strategy director, Carat

"There are enormous opportunities as social matures. It’s an attractive investment for its second-screen presence, the hashtag that has become the glue between content types, and the fact one person can send out a message."

Next week, Twitter is expected to start promoting its anticipated $12.8 billion initial public offering to Wall Street. With the flotation handled through the New York Stock Exchange, rather than Nasdaq – which arguably dropped the ball during Facebook’s IPO – Twitter is believed to be seeking out the more traditional investor (old money for new tech) as well as wealthy hipsters.

So, what does one of the world’s most-talked-about web services have to offer? It currently has more than 550 million users worldwide (with 135,000 new ones signing up every day) and 190 million unique visitors a month, while  an average of 58 million Tweets are sent every day. However, Twitter is still to make a profit.

In the UK, where the eight-year-old service has more than 15 million users, Twitter employs about 70 staff – half of them working in direct sales – led by the managing director, Bruce Daisley (the former YouTube director).

Last week, Twitter split out financial figures for the first time, revealing the UK to be the largest market for sales outside the US with £27 million in ad revenues for the first nine months of 2013. International (non-US) revenues also grew significantly, quadrupling to $106.7 million as new targeting options for Promoted Tweets paid off. Meanwhile, US revenues rose 78 per cent to $315.5 million.

Despite the growth, pre-tax losses nearly doubled to $132.4 million as Twitter counted the cost of heavy investment. Critics also continue to question how easy it is going to be to "monetise" the site to satisfy investors’ demands. Some, including WPP’s Sir Martin Sorrell, have called it "primarily a PR medium", an effective word-of-mouth channel that lacks depth and which brands interrupt at their own risk.

Meanwhile, questions around return on investment for advertisers continue to be asked.    

Twitter’s future, then, will be about trying to find how much advertising users will tolerate in their timelines (and, as Twitter is a predominantly mobile experience, sensitivity to interruptions is particularly acute).

So, ahead of the IPO, and amid all the hype, would you buy shares in Twitter?

This article was first published on campaignlive.co.uk

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