Update: With rumors swirling that the starting price may go up, we have changed our opinion and now believe that you should not buy Twitter in the beginning.
I don’t own stock. I will never own stock. I don’t read the Wall Street Journal and I didn’t take a single business course in college. With that said, you should listen to me when I say that you should buy Twitter if you can.
They are doing two things very right. First, they are pricing themselves low enough to avoid the painful entry that Facebook had before hitting a strong streak. Second, they’re focusing on building a revenue stream that will make them worthy of the $11 billion potential company value that many are anticipating. This combination means that you don’t need to be Gordon Gekko to recognize the upside that this stock will have.
While Facebook shot too high, Twitter is shooting too low. While Facebook is a mammoth operation, Twitter is streamlined. While Facebook has political risks attached to it, Twitter has been relatively clean over the years.
People complain about Facebook. They do so on Twitter.
The numbers themselves are pretty compelling, as can be seen in this article from ReadWrite:
Twitter seeks to raise $1.4 billion by selling 70 million shares for between $17 and $20 per share when the company goes public next month, the company revealed today. At $20 per share, it would be worth just under $11 billion.
As the worlds of Wall Street and Silicon Valley meet we will see many changes to social media. The prize for profitability remains unclear, however, this has not stopped tech companies from aspiring for a future public offering.
In 2012 we witnessed the efforts of Facebook’s IPO and the conversation surrounding stock price. Today, Twitter is prepared to file for its own IPO this November even after some major concern over the company’s future potential to earn a profit. Why is this important? As we continue to use these social media platforms, our experience will change, quarterly, to keep up with Wall Street.
What Does it Mean For Tech?
The tech industry experienced a huge boom in the last decade. Our workforce shifted to ecommerce resulting in a rise of tech start-ups and traditional businesses incorporating social media strategies. These ventures are certainly responsible for a number job creations but now there is a growing concern of sustainability for profit in the tech industry and among social media companies.
These tech companies will compete to further differentiate their offerings, but this must make sense for consumers as well. Currently most tech companies generate a majority of revenues from the sale of ad space or promoted content through various formats like the new tablet pc innovations and the growing popularity of mobile ads.
Twitter is strategizing on how to turn a profit with its own upcoming IPO; while twitter has generated a continuous revenue stream, the company continues to notably lose money each quarter. Social media companies will need to develop new strategies based around the user audience. A better understanding of the primary motivators for consumers is needed rather than the stale focus of selling ad space and gaining revenues.
What Does It Mean For The Consumer?
The average eight year old may be considered a social media expert by some. There are so many platforms and we all use them differently. For social media consumers this changing focus to profit from service is something to be weary of. We will begin to notice ads in our news feeds as we expect commercials on cable.
Be conscious when you click and understand the double edged sword of social media. We are shaping the direction social media. Tech companies are collecting cookies and analyzing our demographics to try news ways of gaining revenue from our efforts. The social media community depends on the people.
These sites are traditionally a place for people to search and share or catch up with distant friends and co-workers. While I don’t believe people will stop using social media, the reasons for which we do may change as a result.
Putting It All Together
One absolute takeaway are the trends and movement of social media and the companies responsible. The issues of ad space and ad revenues will continue to rise and consumer reactions to this are going to shape social media as a business. We once used social media in its simple form, but we are now in the middle of a shifting environment; we will see social media become more of a brand portal and concern for content rather than a place to share pictures of food or your friend’s birthday party.
The world’s number one social media website, Facebook, filed for its initial public offering (IPO) earlier in February 2012. It didn’t come as a surprise for many in the industry, as any private company in the US with more than 10 million US dollars in assets and 500-plus stakeholders is required to file for detailed financials with the Securities and Exchange Commission (SEC).
What makes the whole affair extremely interesting is Facebook’s financial value (somewhere between 75 to 100 billion US dollars), makes it the most anticipated IPO debutant for an internet company since Google’s IPO filing in 2004. And once Facebook’s market shares are out in the stock market, it will be interesting to see how it affects the Facebook culture to develop and ship features without any external interference or security.