Let’s all discuss the Twitter IPO and Twitter’s real value

A ton of bandwith will be taken up on the Interwebs today breathlessly discussing Twitter, its IPO, and what that means for the future of technology, society, your sex life, and much more. I cannot make any claims to be a tech analyst or a business analyst, although I have (mostly unsuccessfully) dabbled in both fields. I can tell you there’s a NYT live blog on the topic, Reuters believes the opening will be ‘volatile,‘ The San Francisco Chronicle sees it as a ‘massive payday for investors,’ USA Today believes this could create an IPO wave, we’re already looking at the seven most important moments in the company’s history, and everyone wants to talk about Facebook’s ‘troubled IPO’ of May 2012 (the Twitter IPO is the largest tech one since then). 

Here are the basic facts: the share price is set around $26, which is maybe $3 more than analysts had predicted (the $23-$25 range was oft-discussed). They raised $1.82 billion in the process. Mark Mahaney has said it’s worth $33 a share and could be the ‘next Internet utility.’ The IPO was apparently 30 times oversubscribed. This is a pretty good read on the background of the IPO process.

Now let’s think about this: by some estimates, there are 1.1 billion world users of Facebook; roughly over half the U.S. is on there. By contrast, there’s something like 220 million Twitter users — and 78 percent might be from outside the U.S. (These numbers have been disputed.) Anyway you slice it, though, Twitter has significantly less users than Facebook — and because of the imposed, and defining characteristic, of 140-character tweets, it’s much harder for college-aged kids (marketers’ dreams) to ruminate wildly about their lives on Twitter. So what’s the business plan for Twitter? From whence does it derive value?

Some analysts derided Twitter as ‘the stupidest thing they’d ever seen’ when it launched (link above); now most people view it as a real-time, global discussion. You can make a legit argument that it revolutionized the U.S. in the 2008 elections, and one of my college roommates wrote a paper for Harvard about how the microblogging site ‘killed the boys on the bus.’ (Sorry, shameless plug.) In short, it’s valuable because it’s real-time, it’s immediate, and it can connect big-names to average people in an instant (don’t tell me you wouldn’t get excited if Lady Gaga re-tweeted you). The connection to TV — making Twitter ‘the second screen’ — is the next natural step.

You can argue that there might not be enough actual people on Twitter to make it this valuable — the Facebook vetting process, while sometimes a mess, is a lot easier — but the arguments about Twitter having ‘too much noise/screaming about issues’ is irrelevant. Facebook has that too. Give people an open box of text in which to vent (“What’s on your mind today?”) and you’re going to get some inane shit. Twitter fits the feel of the world right now a bit more directly: keep it quick, get in, get the link or info you need, and get out. I typically turn to Twitter for more on breaking news, but apparently I’m not part of the norm.

This could be an ’emotional event’ (as opposed to a ‘fundamental event’), since Twitter has no profits and has spent the better part of the last 18 months buying up companies that will make it easier to run ads. (Side question: what happens when the ads get too annoying? Isn’t that kind of happening to Facebook right now?) There’s also a potential patent threat from IBM, although that might take a while to develop. If you’re actually considering buying some shares, read this and this.

Fact is, we live in a much different society today than we did even 20-30 years ago. Time is changing faster than ever, and Twitter is a current ‘big thing.’ In 10-15 years, it’s likely that someone will have produced a TV that fully integrates Facebook, Twitter, and more … so that you can literally drag clips directly over, post about them, etc. There would be massive copyright issues and all that involved in what I just described, but the consumption of media, culture and ideas is headed towards something like that. (Or something completely different that no one has thought of yet, because … did anyone see 140-character messages from pop singers as a big thing in 2006?) The Twitter IPO is a stop along the way. And to think, it all began so humbly with this first-ever tweet from anyone, ever…

Ted Bauer