Twitter enters the fray
It was a tough lesson for other social media companies that were considering going public. If the world's largest social network — a globally recognized name — could stumble on its IPO, what would go wrong for them?
Then Twitter stepped onto the stage.
This fall, the microblogging company — which had grown so popular that astronauts were tweeting from space, President Obama was tweeting from the White House and people around the world were tweeting to inspire political change — announced that it planned to go public.
Other companies — startups and social media players — snapped to attention and watched. Would Twitter's IPO suffer because of the increased scrutiny that Facebook's trouble brought?
The company known for its 140-character messages turned investors' attention away from the fact that it had yet to make a profit and instead focused on how it's changing the way that ordinary people, along with celebrities and heads of state, communicate.
Company executives, wearing business suits to meet with businesspeople, stressed that while Twitter hasn't generated a profit, it is looking toward advertising and its mobile base to clear that hurdle. Twitter sells ads that appear as tweets in users' tweet streams. The company needs to increase that advertising, while smoothly tying it with its mobile base — and it must do so without angering users.
There are other revenue options for Twitter, such as selling data to other companies. Many businesses would probably pay good money to get statistics on the things people are tweeting about them and their products.
Twitter also started with a low initial price range of $17-$20 a share, but increased the price range twice in the week leading up to its IPO. Its initial offering price was $26, which jumped to $45 a share soon after trading started.
And with that, the landscape changed and social media companies started feeling more confident about attracting investors.
Last week, Zulily, a hot daily deal e-commerce site for moms and kids, rode its own investor enthusiasm and rose more than 70% in its market debut on Nov. 15.
It's a good time for Twitter's success to send ripples across the financial pond. Renaissance Capital, an investment bank, reported that there have been more than 200 IPO launches in the U.S. this year — 41 of them from the tech sector. In fact, the technology industry has had the third highest number of IPOs in 2013, coming in behind healthcare, with 50, and financial services, with 43.
The year's overall IPO count is the third highest annual count since 2000, according to Renaissance Capital.
Other social media companies are expected to line up to launch their own IPOs.
They include Dropbox, which offers a cloud-based service for sharing and storing photos, videos and documents; music-streaming service Spotify; and Pinterest, a pinboard-style photo-sharing site. Others include Snapchat, a photo messaging startup that reportedly turned down a multibillion-dollar offer to be acquired by Facebook; Flipboard, a social networking aggregator; and Scribd, whose goal is to be the world's largest digital library.
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