

Twitter Filing Opens Books on High-Flier - patrickaljord
http://dealbook.nytimes.com/2013/10/03/twitter-discloses-its-i-p-o-plans/?smid=tw-bna&bna=3267&_r=0

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martinshen
Any thoughts here?

I think they're picking the near perfect time to do this (and that they
probably didn't have much other choice due their investors). \- FB's Instagram
announced that they will start monetizing \- "Tech" is in again; TSLA, FB
performing esp. with Mobile focus

Valuation is decent and fair in my opinion. The caveats: a huge chunk of the
IPO cash is going to pay out existing shareholders rather than reinvest in the
company. Beyond ads, it isn't super taboo for Twitter to sell data so that
quants can do better trades. This part of their business is very immature
currently.

International worries... I wouldn't look too far into the Asian market. The
only thing protecting these Chinese tech biz in my opinion is the Chinese
gov't frees up (if they ever do) but that's a topic for later.

Big question: how many people are leaving Twitter after the IPO?

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ChuckMcM
The consistently losing money part kinda screams 'bubble' to me, but I agree
that the pressure to go public from having too many investors and/or not
enough runway left.

I get Twitter as a communication feed, sure all the tweets about the Oscar
nominees is much richer than watching the coverage on Good Morning America but
on GMA the model is you pay them $20,000 for 30 seconds of eyeball time when
they break for commercial, that doesn't exactly fly with Twitter, not only are
they "just the messenger" since the tweets are made up by their users, they
have not been able to connect the dots for advertisers like Google or Facebook
can with analytics.

That leaves them in a tough spot in terms of their value proposition.
Contrasted with say, App.net.

I think they run a real risk of having a 'facebook moment' on their IPO day.

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hayksaakian
I disagree, in terms of analytics/targeting twitter is better or as good as
Facebook. Have you used the platform?

You can literally target ads at a specific set of users, their followers, etc.

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ChuckMcM
I don't disagree that they are able to do better targeting, what I don't see
is that the ad revenue is able to pay for their costs.

The golden standard, search advertising, can tie buying intent to demographics
to vendor and track conversions. The old standard, television advertising, can
tie viewers to demographics but struggles with tracking conversions and
understanding buying intent.

To try to get my head around the scope of this I did a bit of searching around
for data on Television advertising. CBS got advertising commitments of $2.7B
[1] for placement on its prime time shows. Prime time is 3 hours a night (7-10
or 8-11 depending on your time zone). Assuming 41 advertisements per hour [2]
that is 123 Adds per day, 7 days a week is 861 ads, 52 weeks is 44,772 ads per
year. If they sold them for $2.7B in commitments that is $60,305 per single
advertising placement, one day, one show, one advertisement. I expect it is
much more complicated than that but order of magnitude it meshes with numbers
people throw around. So if you agree with the reasoning there ...

How does Twitter get to the point where someone will pay even $50,000 to send
out a single 'sponsored tweet' or some other chunk of information to an
equivalent demographic?

That is the challenge I see for them going forward.

[1]
[http://online.wsj.com/article/SB1000142405270230376810457746...](http://online.wsj.com/article/SB10001424052702303768104577462944014974960.html)

[2] [http://www.marketingcharts.com/wp/television/primetime-tv-
ho...](http://www.marketingcharts.com/wp/television/primetime-tv-hour-
includes-41-commercials-9434/)

~~~
hayksaakian
My genuine question: how many people watched the tv ad and didnt ignore it?

If I wanted 5$ CPMs, at 60k per ad, I'd expect 12,000,000 people to see it --
not unreasonable by prime time TV standards

From there, I'd argue that for brand advertising TV is more powerful because
TV watchers will prefer to continue doing the same thing (stare at TV) vs
ignoring the commercial or pressing mute.

Arguably the big difference is the entry requirements, you can't do anything
on TV for less than 4 figures, whereas you can get started on twitter for
single digit ad spends

~~~
ChuckMcM
Its a good question on impact, but my point was to the pricing authority that
Television has, which it got through a historical and perhaps no longer
relevant understanding. My point is if Twitter is competing with web search
which is both cheaper and more effective than TV. When people follow Ashton or
Miley they care what _they_ say, not some random ad that comes through from
them following them.

Anyway, the feeling of "its really big" but not a lot of specificity about the
bigness was, for me, one of the hallmarks of the dot com bubble. I remember
Eric Schmidt (which I was at Sun) remarking that if anything he felt the
Internet was under hyped. And while he was ultimately correct, the people who
were hyping were actually quite mistaken about "how" it was under hyped. (That
is so to illustrate my comment about a 'sense' of bigness without
specificity).

As I watch Twitter's evolution I am on the look out for either new value they
create or captured value they take from other sources. One candidate for
losing value is 'nightly news' which already took a huge hit to 24hr news
channels. It may not survive another :-). But the 21st century newscast is a
very different thing. Exciting times.

