Dot boom

Sep 14 2013, 05:16 IST
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SummaryTwitter’s going public. But if other tech IPOs are any guide, the road ahead is rocky

Fittingly, Twitter revealed in a tweet that it had filed documents with the US Securities and Exchange Commission for a planned, eventual initial public offering (IPO). The micro-blogging service, which analysts estimate is worth between $10-15 billion, has only signalled its intention to eventually go public, not announced a date for what would be the most anticipated technology-company IPO since Facebook’s rather disastrous flotation early last year.

The largely enthusiastic response to even the suggestion of a public offering is a sign of how integral Twitter has been to the new media revolution. Facebook debacle apart, recent IPOs in the technology sector have been something of a mixed bag. LinkedIn, the business-oriented social network, has nearly quadrupled in value in the two years since its IPO. On the other hand, market caps of both Zynga, maker of popular online games like Farmville, and daily deals specialist Groupon have declined post-IPO. And although Twitter has some 200 million users worldwide and has helped create a global communications culture that has been credited (or vilified) for everything from toppling dictators to creating millions of ADHD-afflicted adults, it lacks the one thing investors prize above all else: a viable business model.

To be fair, Twitter the company is cognisant of this, and has worked to dispel the notion that it will be unable to leverage its popularity into becoming a sustainable, profit-making enterprise. The company has been experimenting with ad-driven—or “promoted”—tweets, but the effectiveness of this strategy is unclear, though one firm suggests Twitter will take in $583 million in ad revenues this year. Still, Twitter remains more of an experiment for advertisers than a cornerstone of their strategy, and it will have to prove if it can compete with Facebook’s superior numbers and array of advertising options.

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