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Twitter’s stunning IPO success has sparked suggestions that we are in the middle of another tech bubble. With scant few significant tech IPO’s over the last 12 months, there’s no evidence to support this. But the notion also devalues what Twitter just accomplished: a concise, well-executed public offering for a social media company that has more potential than most people realize.
I’ll admit that I am a little biased when it comes to Twitter. Since 2007 I have amassed 30,000 tweets and 60,000 followers. My adoration, though, was hard won. I hated Twitter in the beginning. It seemed silly, lightweight, ephemeral and, worst of all, useless. I’ve never been so wrong. In my defense, it did take a couple of years for Twitter to transform into a major eyewitness news source and gathering place for collective ideas and movements.
See also: Twitter's IPO: Less Volatile Than Facebook's and Less Profitable
I’m no financial expert, but having witnessed previous IPOs, most notably Facebook’s, I thought Twitter made the smart move by pricing its 70 million shares at $26 a piece; like Goldilocks’ porridge, this seemed just right. I was surprised to see it open at the upper end of a reasonable valuation for the company. But that number is likely to level out, perhaps settling into a groove around $40.
No matter what the price, however, the high open has nothing to do with a tech bubble. Twitter is one of the tent poles of social media. Facebook is the other one. There is no third pole. If nothing else, that position ensured there’d be some excitement surrounding Twitter's official IPO launch. There was less enthusiasm than I expected, which had less to do with Twitter than it did with Facebook.
Facebook's notoriously botched IPO launch burned just about everybody. Twitter’s took hours longer to get off the ground, but then flew perfectly.
Twitter's $35 billion valuation definitely has some people worried. The company is now trading at 22 times its sales, twice as much as Facebook, despite being unprofitable, and having just 200 million active users to Facebook’s billion.
But traders didn’t buy in because of a bubble. Twitter has always had an advantage over Facebook because it’s a mobile-first company. Facebook is transitioning in that direction, and its revenue stream has quickly shifted. But Twitter already makes the majority of its money on mobile
Clearly, it's not making enough. Part of that may be because brands are not always choosing to use Twitter’s ad programs to reach consumers. Instead, they simply go it on their own and use branded accounts to engage. The now-legendary Oreo Super Bowl tweet is a perfect example:
Power out? No problem. pic.twitter.com/dnQ7pOgC
— Oreo Cookie (@Oreo) February 4, 2013
The company generated more than 15,000 retweets with a clever tweet and image moments after the lights went out at the 2013 Super Bowl. It was not, however, a promoted Tweet — so Twitter didn’t make any money off of it.
This would be cause for concern if Twitter hadn’t, in recent weeks, proven how fungible its platform can be and what it can do to transform even the basic Twitter mobile and desktop environment into a content and ad showcase.
If you haven’t noticed already, your stream of tweets has undergone a bit of a makeover. There are vertical conversation lines, actionable buttons visible on Tweets and, most importantly, full-width images and click-to-launch videos. The latter two additions transform the Twitter experience and makes the stream look more like Facebook’s news feed.
Obviously, some people hated it. We wrote a story showing people how to turn it off in the mobile app. But I recommend you don’t: it’s a game-changer. I enjoy scrolling through my feed and seeing images and videos I can click on, expand and play. It’s also an easy way for me to ignore some tweets, since I don’t have to waste time clicking on links to view what turns out to be uninspiring media.
Embedded media experiences in Twitter are not new, but previously they were mostly from brands, and the call-to-action images tended to be small. Now tweets with images and Vine videos show up in the stream at full width, albeit cropped height.
We've already seen what a difference a visible photo makes in a tweet, thanks to Instagram. The Facebook-owned photo-sharing platform decided to pull out of Twitter cards in almost a year ago. As a result, Instagrams shared on Twitter appear as links.
Ever since then, I’ve had to decide if I want to share images on Instagram or Twitter, knowing that the Tweet with an Instagram link might be ignored. (Facebook offered no comment when I asked if Instagram would be taking advantage of Twitter’s new media opportunities.)
Twitter’s update has made the difference even starker. During a recent and rather rare solar eclipse, I decided to get a few good pictures for my social feeds. My dilemma: post the best image to Instagram or Twitter? In the end, I posted my first shot to Instagram, mainly because that’s where I put my more artistic photos.
Cloud cover made it nearly impossible to capture this morning's solar eclipse. http://t.co/psQrFl1jnH
— Lance Ulanoff (@LanceUlanoff) November 3, 2013
On Instagram, it did pretty well, with 41 likes. But with no way to “Re-Instagram,” the response felt fairly limited. On Twitter, where the image appeared as a link, it got four retweets and one favorite. An hour later I shared a different eclipse pic on Twitter.
Another look at that elusive #Eclipse pic.twitter.com/QCbFGZ5HQd
— Lance Ulanoff (@LanceUlanoff) November 3, 2013
The new photo preview feature put my shot right in my followers’ tweet streams. It quickly racked up 28 retweets and 19 favorites. In fact, the more I embed images in my tweets, the more response I get.
Now imagine the same story playing out for advertisers, for whom anything native to the platform is gold. Promoted tweets fit the bill, but up until now they’ve been mostly text and pretty uninspiring. When advertisers start using image preview, engagement should go through the roof.
As a newly public company, Twitter will have to operate differently. Whatever goodwill Twitter had prior to the IPO will evaporate in an instant as investors demand performance. They’ll expect innovation, growth and revenue.
I believe Twitter can deliver it all. Its role as a second screen for one of our most popular activities –- watching TV –- presents a huge upside to networks and potential advertisers. Even its position with the critical teen demographic is likely better than Facebook’s. Think about it: teens often leave Facebook because their parents are on the platform. No teen thinks their parents are on Twitter.
Twitter hit a home run with this IPO and I expect big things from them in 2014 — perhaps even profitability.
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