Twitter, the online social networking and micro blogging
service, had an initial public offering (IPO) on November 7, 2013. The company launched
in 2006 and generates around $140 million in revenue per year and boasts around
200 million users worldwide. Prior to the IPO, private venture capital
investors valued the company at more than $1.2 billion. Only a dozen private
companies are valued over $1 billion and many of them have already had informal
talks with bankers in regards to going public. Credit Suisse, Morgan Stanley
and JP Morgan led the Twitter IPO and raised nearly $2 billion. A major concern
around this IPO, is the lack of profits that Twitter has generated, but the
current share price of $41 proves that it is no obstacle. The success of this
IPO, paves the way for other private tech companies to rationalize their
valuations, such as the company Square and Airbnb, which are exploring the
possibility of going public in the near future.
Other companies such as Dropbox, Pinterest and Snapchat have
raised valuations in the billions in a short period of time. Venture Capital
investors are recognizing that social media services have huge potential to
turn their mass users into reliable sources of revenue, even before posting a
profit. When a company such as Twitter, is able to touch that many people,
there is always a way to make money out of it. Every company is beginning to
implement marketing strategies around facebook, twitter, tumblr, youtube, as
they are becoming crucial elements in the success of these organizations. A
Google ventures partner claimed that this Twitter IPO shows there is a strong
demand for consumer web and tech companies which have not yet fully developed
their business fundamentals.
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