10 Oct 2013 How might Twitter develop? What we can learn from their IPO filing
Last week, Twitter released the prospectus for their upcoming IPO which prompted a flurry of discussion about their active users (218.3 million per month) and the number of Tweets they send (more than two tweets per active user per day). Perhaps more interesting, however, is Twitter’s own analysis of the risks that they face, as we can learn much from this about how they will need to grow in the future to mitigate them.
Here are four of the main risks, that we believe tell us much about how Twitter may grow and develop post-IPO.
1. The user-base fails to grow
The prospectus reports 218.3 million monthly average users (MAUs) in the three months to 30 June 2013, but they also note that growth in their more mature markets is likely to slow as they reach higher penetration levels. They need to maintain their audiences in these markets (which could be impacted, for example, by a high-profile user publicly switching to another platform) at the same time as driving growth in other markets.
Looking forward, then, Twitter will need to focus on its future growth markets – including Argentina, France, Japan, Russia, Saudi Arabia and South Africa. And we should expect to see product and platform developments that meet the needs of these markets.
2. Users stop contributing
Twitter believe that their competitive advantage lies in the quality and value of the content that its users create. Put simply – if the quality dips, or people are less interested in what others are saying then they fear their success will be diminished. Whilst they cannot quality-control individual Tweets, they can help users to find others they might be interested in following. Finding more ways to connect users to people and content they might be interested in will need to be a focus of Twitter’s growth.
3. Loss of advertising revenue
In the 6 months to 30 June 2013, 87% of Twitter’s revenue came from its Promoted Products: Promoted Tweets, Promoted Accounts and Promoted Trends. As the focus of growth shifts to global markets outside of the US, they will need to ensure that this revenue is maintained and grows. In some markets they will find themselves in a more highly competitive market for advertising spend (eg in South Korea with the short messaging platform Kakao), in others the market for digital advertising spend is much less developed.
This revenue figure needs to keep growing and as expansion increases abroad, Twitter will need to ensure they can continue to serve local advertisers with the products and the service that they need.
Twitter acknowledges that Spam continues to be a potential barrier to growth. Spam accounts, Tweets and DMs negatively impact the customer experience and could lead to a defection from the site to an alternative. Twitter need to continue to develop technologies that detect and filter out spam to maintain a high quality experience for users of the service.