Hannah Kuchler Closed As it happened: Twitter’s IPO filing

Twitter’s S-1 registration document has landed, dishing out the detail on how much the messaging platform wants to raise in its upcoming offering, its business performance and its plans for the future. Follow our live blog as a team of FT reporters scours the 247-page filing for the most interesting tidbits and we compile reaction from across the web.

Twitter’s founder letter has strayed from tradition in two significant ways. First, it’s not signed by any of the founders, but rather, with the generic @twitter handle.

Second, it’s only three paragraphs long. A tweet-esque letter:

We started with a simple idea: share what you’re doing, 140 characters at a time. People took that idea and strengthened it by using @names to have public conversations, #hashtags to organize movements, and Retweets to spread news around the world. Twitter represents a service shaped by the people, for the people.

The mission we serve as Twitter, Inc. is to give everyone the power to create and share ideas and information instantly without barriers. Our business and revenue will always follow that mission in ways that improve–and do not detract from–a free and global conversation.

Thank you for supporting us through your Tweets, your business, and now, your potential ownership of this service we continue to build with you.

Before the offering, Twitter’s largest shareholder is Evan Williams, one of the three co-founders, who owns 12 per cent of the stock, while the two other co-founders now hold less than 5 per cent of the company. Jack Dorsey, the executive chairman who originally came up with the basic idea, owns 4.9 per cent but Biz Stone is not listed anywhere on the filing as he is no longer an executive officer and owns too few shares to be classed as a principal stockholder.

After Mr Williams, the next largest shareholder is Peter Fenton, a board member who is a partner with Benchmark Capital who holds 6.7 per cent. The Menlo Park-based early stage venture capital firm owns the vast majority of his stake, but he also owns some shares through a family trust.

Dick Costolo, chief executive, owns just 1.6 per cent of the company – a very different situation to many technology companies where a founder/chief executive owns a large shareholding and significant and sometimes controlling voting rights.

The other VC firms who hold 5 per cent of Twitter are early investors Union Square Ventures and Spark Capital, as well as Rizvi Traverse and DST Global, the investment vehicle of Russian billionaire Yuri Milner.

The financials are much as expected: sales ramped up fast in the last couple of years as Twitter began its efforts to sell ads and show you could make money from tweets.
Revenue in 2010 was $28.3m, 2011 was $106.3m and 2012 was $316.9m.

The ramping up continued in the first half of this year, when Twitter’s sales were $254m compared with $122m for the same period the year before.

Various Twitter insiders had some interesting reactions. This one from CEO Dick Costolo:


They are only just beginning to generate revenue outside the US:

In addition, our advertising revenue per timeline view in the United States is substantially higher than our advertising revenue per timeline view in the rest of the world. For example, during the three months ended June 30, 2013, our advertising revenue per timeline view in the United States was $2.17 and our advertising revenue per timeline view in the rest of the world was $0.30

See today’s FT story on how people use Twitter across the world:

It is important to remember Twitter is no Google or Facebook (at least yet). The FT’s Emily Steel sets out how they compare:

Twitter ad revenues were $269.4m in 2012. That compares to $32.7bn at Google and $4.3bn at Facebook, according to eMarketer figures.

She also notes that ad rates are falling:

Average cost per ad engagement decreased 18%, 9%, 19%, 12% and 46% sequentially in the three months ended June 30, 2012, September 30, 2012, December 31, 2012, March 31, 2013 and June 30, 2013, respectively.

There’s been some fretting about whether Twitter’s user numbers could be distorted by spam bots – who advertise aren’t keen on selling products to. Under risk factors in the S-1, Twitter says spam accounts for about 5 per cent of users.

Monthly active user numbers (important because many people sign up but rarely use the service) rose 44 per cent in the year. There were 218.3m monthly active users in the three months ended June 30 2013, compared with 151.4m for the same period the year before.

Twitter says mobile is the primary driver of its business: 75% of active users, and 65% of advertising revenues come from mobile devices.

The Twitter founders were reunited today at an event in the company’s headquarters in San Francisco. None of them work for the company full time any more with Jack Dorsey, executive chairman, the only one with an official title at all.

Based of a valuation of about $15bn, which has been whispered in the Valley, Evan Williams owns a stake worth $1.8bn, while Mr Dorsey hasn’t quite made the billion mark with shares worth $735m. Biz Stone appears to have sold down his stake to less than 5 per cent so the filing doesn’t contain any info on what he owns.

Here they are, from right to left: Evan Williams, Biz Stone and Jack Dorsey.


While advertising still counts for the bulk of Twitter’s revenue, there’s another line item worth noticing: data licensing.

“In the six months ended June 30, 2013, data licensing revenue increased by 53% compared to the six months ended June 30, 2012. The increase in data licensing revenue was attributable to a 25% net increase in licensing fees from existing data partners, as well as an increase in licensing fees from new data partners in the six months ended June 30, 2013 compared to the same period in the prior year.”

Just how much is data worth? Check out our calculator to find out. http://www.ft.com/…-00144feab7de.html

You can also read our news story on the filing here: http://www.ft.com/…-00144feab7de.html

It goes (almost) without saying that Twitter isn’t profitable yet. The S-1 shows it has never made a profit and its accumulated deficit was $419m as of the end of June this year. The company also warns that the stocks it owes to its employees will have a “significant negative impact” on its ability to achieve profitability in 2013 and 2014.

The valuation chatter has begun in earnest. The FT’s Richard Waters has spoken to Kevin Landis from Firsthand Funds, which owns around a million Twitter shares. Mr Landis said:

“$12bn is conservative, I don’t know if $15bn is the right number. They’re clearly trying to get this out the door and traded before people over themselves to get higher still”

Twitter’s $1bn IPO did not happen overnight, writes web editor Jason Abbruzzese. So how did the microblogging servce evolve to create such a macro impact? Some of the FT’s most recent coverage here:

Twitter’s got the whole world in its hands: http://on.ft.com/156rSGd

Five things to look for in Twitter’s IPO filing: http://on.ft.com/172r6aM

Black Americans find their voice on Twitter forums: http://on.ft.com/17yeBXJ

Sociable Indonesia taps buzz marketing power of Twitter: http://on.ft.com/19YHLOv

Twitter ad strategy aims to be on target as it looks beyond US: http://on.ft.com/18t8vaF

Middle East uprisings take more than 140 Twitter characters: http://on.ft.com/19XTRq2

And a fun tidbit from the archives of FT.com. Here’s one of the first mentions of Twitter, buried in a 2007 editorial on social interaction and technology:

“It won’t stop there. The current buzz in tech circles is all about ways of broadcasting yourself over the internet in real time. Users of Twitter, a service for transmitting short text messages, send frequent updates about what they are doing to groups of people. One of the hottest ideas in Silicon Valley is “lifecasting”, broadcasting live video about your life over the internet.”


The Letter from Twitter might have been short but sweet but the S-1 certainly isn’t. As @DKThomp points out:


Twitter (the platform, not the company though probably that as well) may be alive with excitement about the IPO but there are a few trying to get some perspective:


The filing doesn’t let on which exchange Twitter will choose to list on. Traditionally tech companies have opted for the Nasdaq, but that is beginning to change. The FT’s Arash Massoudi writes:

People close to the situation have said the company is leaning towards listing with the New York Stock Exchange. One person familiar with the situation said Nasdaq executives, including chief executive Robert Greifeld, were in San Francisco and attempting to sway the company to list on its exchange. Nasdaq and NYSE declined to comment.

Twitter’s IPO has inevitably drawn comparisons to the other social network giant, Facebook. A few tweets that put the competition in perspective:

Quartz notes that Twitter used its IPO to take a couple shots at its bigger rival: https://twitter.co…385885930738827264

CNBC technology correspondent Jon Fortt notes that Facebook maybe the leader, but Twitter is working hard to catch up: https://twitter.co…385886748779098113

While Felix Salmon of Reuters has an interesting take on the Twitter/Facebook rivalry in pop culture: http://twitter.com…385892222492610561

(And if you haven’t seen it yet, take a moment to indulge in Twitter – The Musical: http://www.youtube…eature=youtu.be&a)

The FT’s Richard Waters has been speaking to investors about the potential valuation. Based on today’s filing, “I would say north of $12bn, I don’t know if it will reach $15bn,” said Ryan Jacob, chairman of Jacob Asset Management, a tech investment firm which doesn’t own any of the stock. “It won’t be cheap.”

Like other potential investors, he was encouraged by the straightforward nature of the filing. “There really weren’t a whole lot of surprises. There was nothing that stood out as being weak.”

Aside from how much stock they own in total, it is interesting to look at how much the head honchos got paid last year.

Chief executive Dick Costolo pocketed $11.5m in 2012, the vast majority in stock awards and options, while Christopher Fry, senior vice president of engineering, wasn’t that far behind on $10.3m, again mostly in stock. Adam Bain, the president of global revenue, recieved $6.7m. Non-employee directors do not receive any cash salary and last year only Peter Chernin received a stock award – of $3.7m.

With 87% of Twitter’s revenue coming from advertising, Zachary Reiss-Davis, analyst with Forrester, says the company needs to think beyond the promoted tweet.

The company needs to start thinking more about how to foster deeper interactions between advertisers and users, “rather than just ‘I read this and clicked on that link’,” he said. “Building a more robust set of ad units and more robust offerings for marketers is a clear next step for them.”

While the small print matters – and we’ve been picking over it here – it is important to remember the S-1 is also designed as a tool to win over investors, many of whom may not be quite as familiar with the platform as journalists are. So it is interesting to see which tweets the site highlights at the start – from the American Red Cross tweeting during Hurricane Sandy to the famous “four more years” tweet from Barack Obama, the tweets appear to be more about changing the world than helping advertisers. No superbowl promoted tweets here!



Who does Twitter compete against? It warns potential investors that competition is “intense” and lists its rivals as:
- Facebook – including Instagram: which it warns has “significantly more users” and is introducing similar features.
- Google: which it said may use its “strong position in one or more markets to gain a competitive advantage” by integrating more features.
- LinkedIn
- Microsoft
- Yahoo!
And in Asia, it warns that as it expands it will face competition from Sina Weibo, the incredibly popular Chinese microblog, LINE and Kakao.

We’re going to leave it there for today but if you want to read more, the S-1 itself is here: http://www.sec.gov…1.htm#toc564001_17

And we’ll be bringing you more news and analysis on Twitter on FT.com as we countdown to an offering expected in the coming weeks.