On Tuesday night, social media titan Twitter filed an amended
S-1 with the SEC, further setting the stage for what looks like a
hugely successful IPO on the
New York Stock Exchange
) this November.
Let's get right to the important stuff. The big news is that
Twitter's advertising revenue growth accelerated to 123% from 113%
last quarter, as you can see in this chart:
This is good news because the most obvious bear case is slowing
the same kind
) off at the knees ahead of its ill-fated 2012 public offering.
Total revenues grew just a bit slower at 105% (which is still
pretty darn impressive), due to a slowdown in demand for Twitter's
data licensing services, which accounted for just 9% of revenues.
Here's a chart showing the trend in total quarterly revenues:
This compares favorably to the growth rates in publicly traded
social media companies. I took a look at consensus estimates for Q3
revenues at these public companies, and as it stands, Twitter is
the fastest growing name of the bunch, outpacing
(P) by huge margins.
Heck, even if we extend these growth comparisons outside of social
media into the larger tech landscape, it's not easy to find
companies keeping up: Twitter is still blowing the doors off the
likes of mega-growth stories like
Palo Alto Networks
And of course, the big caps like
(QCOM) aren't even in the same neighborhood.
As far as the user base goes, growth is inevitably leveling off. In
Q3, the number of monthly active users grew by 6%
quarter-over-quarter, down a bit from 7% last quarter.
This is in no way good. There is no doubt that Twitter needs to
maximize its user base as much as possible.
However, Twitter has gotten awfully good at monetizing its user
base as its revenue growth rate has dramatically outstripped growth
in the user base.
But Twitter Is Losing Money!
Indeed it is! Year to date, Twitter has posted an operating loss of
$134 million, up from $68 million last year, as it's been pouring
money into research and development as well as sales and marketing.
The company also plainly states in the offering document that it
"may continue to incur significant losses in the future and may not
be able to achieve or maintain profitability."
It's Time to Throw Away the Textbook
Assessing Twitter ahead of its IPO -- especially without an
official price in place -- is difficult, but odds are, this deal is
going be huge.
Think about what happened with Facebook.
Facebook's IPO flopped largely because it was priced too high, and
it came during a period of slowdown for the company. But this year,
Facebook found its footing; it's now 32% above its
too-high-at-the-time $38 IPO price, and 185% above its 2012 low of
And why did Facebook come back so hard? Because it got really,
really good at monetizing its growing mobile user base -- something
I certainly did not see coming.
Twitter's even better at it.
Twitter has 70% of its ad revenues coming from mobile, and it's
growing far faster than Facebook.
Additionally, note that Facebook's lead underwriter was
(MS), and it went public on the
(NDAQ), which experienced glitches on its first day of trading.
Twitter went with
(GS), despite having Cynthia Gaylor, a former heavy-hitting Morgan
Stanley tech banker, as its head of corporate development. And as
mentioned above, Twitter went with the NYSE instead of Nasdaq.
Given that Twitter's taking a polar opposite path to IPO, doesn't
it stand to reason that the Goldman Sachs will price Twitter a bit
low in the same way that Morgan Stanley priced Facebook high?
Technically speaking, Morgan Stanley did its job by getting the
most money possible for Facebook. But I imagine Twitter wants to
avoid the PR mess associated with a stock price flop.
There's no telling the future, but as it stands now, I'm as
optimistic on the Twitter deal as I was pessimistic about Facebook