A highly anticipated, however not particularly surprising, S-1 Form was filed earlier this month by Twitter; the social network is hoping to raise $1 billion in its stock market debut. The S-1 cites that ‘mobile has become the primary driver of our business’, as the company has its origins in SMS-based messaging, and in June 2013, 75% of Twitter’s Monthly Active Users (MAUs) access the platform via mobile.Yet given the bumpy ride which Facebook has undergone since it began trading on the NASDAQ, what risks does Twitter face as it embarks upon this journey, and what have we learnt about the company’s advertising business since the S-1 was filed?First and foremost, mobile advertising will propel Twitter’s revenues. As I mentioned earlier, Twitter was initially built for SMS, and as such has had a focus on mobile since day 1. This is unlike one of its closest competitors, Facebook, who has only recently been able to prove it can make money from mobile advertising. However the S-1 does note that mobile advertising receives a lower ‘revenue per timeline view’ versus desktop advertising, although ‘the substantial majority of our timeline views and advertising revenue is generated from mobile applications.’Indeed, 65% of Twitter’s ad revenue can be attributed to mobile, whereas for Facebook its most recent earnings report put it at 41% (although it should be said in Facebook’s defence, that 0 to 41% in the 18 months since it introduced mobile advertising is not bad going). For both platforms viewing adverts is a smooth process, as the adverts are designed to fit into the user’s feed, something which is known as ‘native advertising’ and is explored in Juniper’s upcoming Mobile Advertising Report. Twitter’s ad revenue, across both desktop and mobile, has grown impressively, at a CAGR of 507%, from $7.32 million in 2010 to $269 million in 2012. One noteworthy risk which is highlighted in the filing is Twitter’s difficulty in monetising its international users. Currently, 77% of Twitter’s user base is located outside the US, a proportion which is growing quickly, however most of their ad revenue comes from within the US: ‘We generate significantly more advertising revenue per timeline view in the United States than internationally, with advertising revenue per timeline view in the three months ended June 30, 2013 of $2.17 in the United States and $0.30 internationally.’ Twitter’s international competition comes from the likes of Kakao and LINE, and advertisers in countries where these services are popular, namely South Korea and Japan, are unlikely to see the benefits of advertising on Twitter yet.There are, naturally, risks as any company begins its debut on the stock market. Twitter has built a strong platform, and its focus on quick, real-time news updates and its strength regarding TV ad targeting mean it will appeal to certain investors; however the difficulties which Facebook has faced, and risks pertinent to Twitter, will mean that the next year will hold many surprises, stresses and rewards for the company.
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