Twitter: IPO with a future for advertisers

News about an initial public offering (IPO) has seldom made as many waves as Twitter’s IPO last week.


How can a company that doesn’t realize profit, raise its share to over 70% of the initial IPO offering of $26? And why would somebody invest in an internet company, after Facebook’s disastrous crash on the NASDAQ last year? And where’s the advertiser’s part in all this?

Everybody still vividly remembers how the IPO of Facebook turned into a disaster. Back then, the stock exchange NASDAQ was not prepared for the huge amount of orders and the system crashed, followed by a rapid fall of Facebook’s share price on the first day. Facebook also offered a high amount of shares for an unjustified price, not helping them in the long run.

We can only assume that Twitter has learned a lot, thanks to Facebook’s flop. First, the shares are being traded on the traditional NYSE instead of NASDAQ with its electrical trading systems. Second, they were offering comparably few shares. And third, the initial offering of $26 per share was pretty low. To be on the safe side, the NYSE even ran a test on the IPO a few days in advance to keep all the systems from crashing when receiving lots of orders at the same time.

Nevertheless, many people did not think that Twitter’s shares were trustworthy enough to invest in due to the fact that the Silicon Valley based company has never realized profit since it started seven years ago. The ones that did invest though, built their trust on future earnings, generated through advertisers as well as the PR Twitter has already received from launching the IPO. According to Twitter, their estimated turnover next year is supposed to be one billion dollars. If you put that in perspective with the market cap of 1.8 billion dollars, the price to earnings ratio sums up to a very high rate of $125, which is an important financial figure to evaluate a share.

According to a study that Twitter released in August, product sales increase up to 29% if a user sees that product in a promoted tweet or other activity of a brand they already follow.  And there’s the chance for the advertisers. If Twitter really wants to reach its turnover goal, they have to make advertising in the newsfeed as appealing as possible. In May, we already talked about the launch of lead generation cards on PHD ThinkTank, and Twitter is pushing towards creating more and more possibilities within those cards.


They have now launched Product cards containing the possibility of ‘one-click’ purchase, allowing users to immediately purchase the item shown. Through this, users don’t even have to leave the Twitter website in order to shop online. Mobile app cards give the advertiser the chance to integrate a download button right in the card, which instantly takes away barrier to entry, removing obstacles such as remembering the app and later downloading it in the app store. Furthermore, Vine has also been integrated into the cards to give the user added value. Nevertheless, with the money garnered from the IPO, Twitter should focus on mobile advertising, as well as video & direct-response advertising options, if they hope to emulate Facebook’s success. Providing more services and data to advertisers is another thing to consider, offering companies transparency so they can see who is actually interacting with their ads and the option to retarget if advertisers need to switch focus.

Nevertheless, thanks to the IPO, Twitter have increased their financial kudos, earned some positive (and negative) PR and also demonstrated to advertisers that they mean to continue to grow their company and subsequently, their reach. The IPO will help Twitter to continue to introduce new and exciting advertising possibilities, hopefully leading to an increase in revenue and financial stability. It’s going to be interesting to see what Twitter will have in store for their most important investor, as in general, all advertising possibilities aim to create a stronger relationship between Twitter, the user, the brands and advertisers. Overall, that’s the only way for Twitter to have a successful standing on the NYSE and remain at the pinnacle of digital media planning for a long time to come.



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