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Twitter's IPO

Social micro-blogging giant Twitter’s IPO value has been estimated between a staggering $15 – 20 billion. In this next round of funding, Twitter hopes to raise upwards of $1 billion in working capital. Andrew Marcus, a Relationship Manager in our San Francisco, questioned whether the additional cash infusion will finally tip the company’s balance sheet into the black. He speculated that unless a concerted effort is placed on increasing revenue through their data service, there will simply not be enough money from advertising to make them profitable. While revenue has increased since Dick Costolo stepped into leadership in late 2010 and the company does have cash reserves, they still have not turned a profit.

Even before hitting the market, Twitter has been disrupting the trading floor. Just yesterday shares of telecommunications company TW Telecom (TWTC) skyrocketed from $30 – $300 in less than a minute after traders mistakenly took the symbol for Twitter stock. A similar incident days before had shares of defunct electronic retailer Tweeter Home Entertainment (TWTRQ) skyrocketing to 1,500% above the previous day’s closing price.

In the most recent G round of funding, Twitter held an impressively high valuation of roughly $10 billion despite millions in losses year after year. This speculative valuation was based on the possibility of harnessing the big data associated with the company’s 218,000,000 monthly users. Past net losses are not a good forecaster of future success or failure, as the company has clearly chose to spend heavily from the start in order to fuel their future growth.

While historically ad sales represented the bulk on Twitter’s revenue, many expect the data services to expand and become more profitable. Twitter has already expressed a serious, vested interest in its social connection to TV watchers, but they will have to find a clear way to monetize. The platform already provides a unique angle on viewer metrics; giving insight into both viewership and, more specifically, how watchers are engaging with programs. Other companies have been jumping in to take advantage of some of Twitter’s public big data as well. Recently Nielsen officially launched their Twitter TV Ratings system which systematically ranks the numbers of tweets about particular TV episodes, the number of people posting about it, and the number of times those tweets were seen and by how many accounts.

Only time will tell how the IPO will affect the network itself. Will our news feeds be bloated with even more promoted tweets and accounts? Will other more significant user interface changes go into effect?

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