Twitter ready to spread its wings as a profitable business

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December 27, 2013 11:01 am

By Hannah Kuchler in San Francisco

Twitter has undergone a makeover in the weeks since it went public, primping and preening the messaging platform in an attempt to lure millions more users and help to win its first billion in advertising dollars.

The home of the 140-character message, which listed in New York in November, has been busy revamping as it attempts to grow from a globally known website into a large, profitable business.

Shares in the social network, which tried to keep a cap on the price in the run-up to the initial public offering, have since soared to more than double the flotation price of $26. They fell by 13 per cent to $63.75, however, by the close in New York on Friday.

With revenues for the full year forecast to be about $600m, many analysts have said the valuation gives the company a lot to live up to. Some who are optimistic about Twitter’s long-term prospects have still downgraded the stock based on the hefty price tag.

Brian Wieser, an analyst at Pivotal Research, praised the work the company has been doing, from simplifying the user experience to giving advertisers more tools to target specific interest groups.

“Everything they are doing is great,” he said. “But they are still such an early stage company in so many ways it is difficult to assess . . . it is anyone’s guess whether they will have 100 per cent growth, 150 per cent growth or only 75 per cent growth.”

Mr Wieser, who has a “sell” rating on the stock, says he likes the company but feels it is overvalued, puzzling over a recent 40 per cent rise in the shares since the start of December.

Twitter has been taking steps to reverse a slowdown in user growth and reach far beyond the 230m monthly active users: from trying to win over the chat app-obsessed by allowing users to privately send each other photos, to signing deals to help emerging market users without smartphones to participate in the discussions via text message.

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A mobile app redesign launched this month makes it easier to discover more content, as Twitter tries to make it easier for new users to find news and entertainment without getting lost in a maze of hashtags and @ signs.

Twitter has also been rapidly expanding how advertisers can use the platform, as despite being more than seven years old, it only started showing ads – in the form of promoted tweets in users’ timelines – in 2010. Recent changes allow advertisers to target users based on their preferences on other sites and making it easier to advertise based on synonyms of keywords.

After stressing what a powerful partner it could be to TV advertising during the IPO roadshow, the company has signed a flurry of deals with more networks. The “See it” button which allows users to tune in to a TV show, record an episode or set a reminder for when a programme starts, can now be used on ABC, AMC and Fox.

The company has also been working to integrate MoPub, the mobile advertising exchange, which was its largest ever acquisition and it is hoped that this will enable Twitter to use the data it knows about people’s interests and connections to serve adverts on other sites.

Since joining Twitter around the time of the IPO, MoPub has created an advertising product that provides a template to ensure mobile adverts fit an app’s look and feel. Twitter will use its experience at the forefront of so-called “native advertising”, which its promoted tweets are a prime example of, to sell similar products to thousands of mobile-app publishers.