Twitter – the handsome young lad on the stock market

Twitter’s debut on the stock market has been extremely successful. When shares closed on $44.90, it sent the company’s value to a little over $31bn. Now, I know how fond some of us are of Twitter, but bear in mind, this is a company which has never made a profit. So what’s the logic behind this valuation and can Twitter make it last?

By Charlie Stroe

Social media strategy
Twitter wearing PJs and
being handsome
Let’s do a quick compare and contrast exercise. Twitter stocks have been estimated at twice the value of Facebook’s, after its IPO. But Twitter is unprofitable. And has “only” 200 million users, compared to Facebook’s billion. Compared to Facebook at the time of its IPO, Twitter’s revenue is only a tenth of the size, and its workforce is five times smaller.

Despite its impressive performance, Twitter’s stock market value at the offering price is only one sixth of Facebook’s. But that was all part of the plan.

Trying to learn from Facebook’s mistake, Twitter priced its IPO at $26, a relatively low figure, leaving room for a larger first day pop. It refused to follow in Facebook’s footsteps, which initially priced its shares at $38 and saw a huge fall in the following months. It took over a year for the stock price to recover.

Twitter chose the New York Stock Market, as opposed to Facebook's decision to go with NASDAQ, historically the place where techy companies list. So far, Twitter’s conservative strategy seems to have worked.

Leaving finance aside, let’s look at the actual social media platforms.

Twitter’s users mostly access it using their trusty mobile phones, whereas Facebook is only just starting to make headway with mobile phone usage. On the other hand, Facebook is highly dependent on adverts, whereas Twitter is more a platform for brands to actually engage customers on their own, rather than use the ad programmes available.

Facebook is sometimes painfully complex in what it offers its users. Or am I the only one that’s completely baffled at times by the continuous changes in policy and functions? Twitter is much easier – 140 characters to say what you have to say. Or is it?

I’ve noticed recently that the tweet stream has changed. It’s not the same Twitter it was when we met. It now has actionable buttons visible on tweets, full-width images and click-to-launch videos. Now what does that remind me of…? It would have to be Facebook news feed. You know, the one everybody hated when it was introduced.

Twitter is changing. Some of these changes are justified by the need to stay ahead of the game. Others are definitely motivated by the social media platform’s new public company status. 

So now comes the hard part – the stock market’s handsome lad must prove his worth. Twitter must show its investors that it really is worth their money.

Part of the problem is that three quarters of Twitter users are outside the US, yet only 26% of revenue comes from this segment. The challenge for Twitter is to find a way of generating more revenue outside the US. Maybe then it might even make a profit, who knows?

What’s your take on this story? Feel free to use the comments section to rant and troll. Or even discuss.

Image courtesy of stockimages on FreeDigitalPhotos.net

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Charlie Stroe

Stone Junction is a cool technical PR agency based in Stafford. We work for all sorts of businesses, with a particular focus on technology, technical and engineering companies. We like being sent cake and biscuits by clients, journalists and prospects.

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