t’s the little blue bird
that has become ubiquitous across the internet – stationed at the bottom of
every news story, blog post and video, there is Twitter’s inescapable
invitation to share your thoughts with the world, in 140 characters or less.
Every month, more than 220m users do just that, and almost two-thirds of them
use the site via their mobile phones. On Thursday night, Twitter announced it
was to go public at a valuation of $10bn, raising $1bn in funding and making at
least one of its founders a billionaire in the process. And all this while
making a loss.
Indeed, Twitter is the
pin-up bird for what used to be called web 2.0 – it’s a service that is about
users interacting with each other and passing around links to other websites.
And because it’s primarily now mobile, it’s increasingly merging the digital
with the physical: many claim the Arab spring, Barack Obama’s election and
thousands of less significant events owe their success to social media. Founded
in 2006, the ‘microblogging’ service has become the preferred channel of
communication for countless celebrities, train companies and politicians, and
many millions of users who have rather fewer than Lady Gaga’s more than 40m
followers.
Conceived as a way of
broadcasting text-message style thoughts to small groups, it’s widely believed
that Twitter came of age at the South by Southwest Interactive technology
festival in 2007, where it placed screens showing tweets around the conference
centre. The idea was to both generate buzz and also to demonstrate the
usefulness of being able to see what friends or colleagues were up to. Traffic
tripled in three days, and today those 60,000 tweets a day are dwarfed by an
average of 400m. Where analysts at the time thought Twitter would only ever be
a geekish hobby, today it’s indisputably in the mainstream.
And while Twitter has
evolved as a service, adding ‘verified’ accounts for individuals, incorporating
news and inventing the hashtag to easily identify specific themes,
fundamentally it is the same clean, largely advertising-free service that was
popular in 2007. The logo may have changed, but only slightly.
Where there has been a
revolution, however, is in Twitter’s effect, even leading to an infamous
‘Twitter joke trial’, in which British prosecutors brought an unsuccessful case
against a frustrated traveller who threatened to blow up an airport. Even worse,
it was used for death threats against leading journalists after one campaigner
sought increased female representation on banknotes. Before Twitter – with its
anonymous users and global reach – none of these ‘offences’ was possible at
such scale and speed.
The question now, of
course, is what will going public mean for the site? How will a new influx of
shareholder interests change it? Just 10pc of the company is being sold off,
leaving its founders still owning far more than the market, but concerns
remain.
Gary Buchan, director of
digital marketing agency Render Positive, argues “Social networks are best when
the big bucks are kept out. Because the moment the money’s on the table, they
always struggle to stay social.” Facebook, some argue, has itself struggled to
draw the line between allowing users to communicate and interrupting them with
disruptive advertising. Rapid Ratings, the first ratings agency to have rated
Twitter, scored the company at 18 out of 100, which is considered “very
high-risk” according to RR’s scale, although the agency noted that such risk
was typical of many similar companies.
On the grey market
however, according to IG, Twitter is levelling off at a valuation of around
$17.5bn. The firm has run a number of popular grey markets over the years but
based on current activity, it envisages Twitter eclipsing the interest seen for
the likes of both Facebook and the Royal Mail.”
And that comparison with
Facebook is a conspicuous one for Twitter – its $10bn valuation seems in part
aimed to counter some of the hype that saw Facebook float at a huge price and
then sink back immediately. Only now, some 18 months later, have values crept
back up to top the flotation price.
Joshua Raymond, Chief
Marketing Strategist of Cityindex.co.uk, sees the comparison as slightly
unfair. “The Twitter IPO will inevitably draw comparisons with Facebook and it
has certainly captured the market in much of the same way Facebook did due to
its celeb status. Yet it is a much cleaner, transparent and perhaps more
comfortable investment than Facebook was.” Gartner’s Brian Blau says that, once
public, “Twitter will need to be more transparent about their business
performance and that in turn will help them better compete against the
Facebooks and LinkedIns, but it will also give them the respect and trust of
businesses who must now rely on the social network as one of their key their
customer communications channels”
And indeed, that sense
that campaigners, businesses, celebrities and politicians all rely on Twitter
is perhaps the most important aspect of this unique flotation: at the moment
it’s a loss making business based on precious little advertising. Users see it
as a platform rather than an advertising-funded company like Google or
Facebook. It’s challenge is to preserve that. As Rupert Staines, of RadiumOne,
put it, “If Twitter is going to be a financial success, it has to monetise its
biggest asset, its audience, and fast.” He points out that “its particular
environment is not particularly advertiser friendly” – that, unfortunately for
Twitter, could prove to be the secret of its success.
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