On Its First Day As Public Company, TWTR Parties Like It's 1999. Should It?
Or something like that, as, even on yesterday’s cloudy, rainy Manhattan afternoon, Twitter’s stock took flight, closing at almost $45/share, 42% more than what it was priced at earlier in the day, in its first day of its life as a public company.
The mood -- at least if you’re Ev Williams, Jack Dorsey, Dick Costolo, et. al. -- was made even more buoyant because, unlike Facebook, Twitter’s first day trading in the public markets was more than a little reminiscent of 1999. (Ah, the irony of me actually having lunch yesterday with someone from another San Francisco-based social platform, as the thumping beat of Prince’s “Party Like It’s 1999” permeated the restaurant.)
But, here’s the question: Is all this reasonable, or is what we saw today irrational exuberance, 10’s style?
The exuberance isn’t entirely misplaced, but I’d caution that even though Twitter has Facebook to thank in launching its IPO successfully (more on that in a second), the two platforms are extraordinarily different considering they are the two biggest social platforms, have attracted lots of advertiser interest, and have user bases heavily invested in mobile.
So, I read a post yesterday somewhere that said Twitter had Facebook to thank for its IPO success. The reason? According to the post, Twitter execs learned a ton from the poor initial reception to Facebook shares.
That may well be true, but the major reason that Twitter has Facebook to thank is Facebook’s recent performance. Its stock, currently trading in the high 40s, is riding well above the high teens and low 20s, where it languished for more than a year after going public. Facebook has since proven it’s possible to make money from social mobile. Not only is Facebook profitable -- of its Q3 earnings, 49% of revenue came from mobile. Twitter is not profitable, but 65% of its revenue in the second quarter came from mobile. With Facebook as its role model, it would seem Twitter is on the road to profitability.
Twitter also differs from Facebook in one extremely powerful way: sts real-timey-ness, particularly when it comes to TV. To the extent I’m bullish on Twitter, it’s because it’s not overstating the case to say that TV looks to Twitter as a potential savior, and where TV is, the ad dollars follow. It’s pretty simple.
But then there’s the issue of Twitter’s relatively fickle user base. Sorry to sound like a broken MP3, but Twitter doesn’t just have to grow its user base beyond its 215 million monthly active users, it has to activate many of those who have abandoned their accounts. About a month ago, I referenced the fact that many, many Twitter account holders, never go on it – but how many? I didn’t know at the time. Two weeks ago, I finally found a cold, hard figure that was even more dramatic than I thought: according to a Reuters/IPSOS poll, some 36% of Twitter account holders have abandoned it. Do the math: that means there are potentially more than 100 million Twitter users who don’t actually use Twitter. Do all online services suffer from this problem? Yes. But not to this extent.
Why did those account holders sign on? And why did they leave? For all of the tech upgrades, ad model rollouts and new apps Twitter is no doubt working on, the case of the missing account holders will need to be addressed.