Twitter, the popular microbloging service with 200 million
users, recently announced its new IPO and all around cries of “here we go
again” rose from the crowd. Internet IPOs are nothing new and over the years
have had varying degrees of success. How will Twitter do in this market? Twitter
has consistently not turned a profit in years, has a substantial amount of
debt, slowing growth, and has been slow to monetize… Maybe they can learn a
thing or two from Facebook.
You may remember last year when
Facebook had its stock immediately enter free fall after its IPO. Analysts have
pointed to all kinds of reasons that this happened but the biggest seemed to be
the pre IPO hype surrounding the company. Facebook had a billion users at the
time of its IPO and billions of dollars in profits but the stock price still
fell sharply from its $38 IPO price to just $17. More recently however,
Facebook’s share price is approaching $50. Why the turnaround? Facebook has
been recently been deploying new and exciting ways to sell the personal data of
their users. Of course there are the traditional advertisements we see on any
website, but beyond that Facebook makes a lot of money tracking your normal
online activity.
Cookies (small programs used by
store user information on the user’s device) are used by many websites for
various reasons from storing personal settings to passwords but are often used
for the more nefarious purpose of tracking user activity. While Facebook is
quiet about the issue, many observers have noted that Facebook is now capable
of tracking your internet activity anywhere you go. Facebook knows that most
users forget to log out when they’re done with Facebook which makes the job of
tracking their activity frightfully easy. Facebooks cookies should in theory be disabled by logging out of Facebook,
however more recent tests show that that might not exactly be true. Any site
with a Facebook “like” button (all of them) will allow that cookie to
communicate with Facebook whether the user clicks the button or not. So it is
possible for Facebook to track your web activity and sell that information to
advertisers. Is it spying? Nah they call it targeting and it makes them a lot
of money.
It may be harder for Twitter to use
these same tactics. Facebook has people’s
entire lives for sale while Twitter has… What, followers? In Twitters IPO
filing the company said that its failure to attract more profits may have been
due to the fact that advertisers are wary of their new and untested technology.
Not exactly a ringing endorsement from the company about the company… So clearly Twitter is facing an uphill battle
when it comes to ad revenue.
If they fail to come up with any
other reasonable method of monetizing, Twitter could always attempt to make
money on its own IPO hype. Even though the IPO hasn’t happened yet, Twitter is
still affecting the stock market in interesting ways. Just last Thursday, a
company called TW Telecom saw its stock value jump from $30 to $300 in just a
minute. The sales pushed TW Telecom’s market capitalization from 4.4 billion to
40 billion even though the company had done nothing. Analysts speculate that
the confusion stemmed from someone or something mistaking TW’s stock symbol of
TWTC for Twitters planned stock symbol of TWTR. Nasdaq has since reversed the
trades and TW’s stock price has returned to normal. This isn’t even the first
time this happed to Twitter. Last Friday, bankrupt electronics dealer Tweeter
Home Entertainment (TWTRQ) saw its shares jump 700% as confused investors
pumped money into the failing stock. Many penny stock investors made healthy
profits before financial regulators halted trading and had Tweeter change its
symbol to (THEGQ). Therefore best financial
move for Twitter? Invest in companies that aren’t Twitter.
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