Can Twitter deliver on the huge market expectation?
CEO Dick Costolo plans to amplify his firm's existing platform. But will this be enough, asks Matt Warman
FOR geeks, the first tweet is the most famous: on March 21, 2006, co-founder Jack Dorsey wrote 'Just setting up my twttr'. Yesterday, as a billionaire, thanks in large part to the site's 140-character messages, he revisited that short sentence: 'Just setting up our $twtr'
Floating on the New York Stock Exchange, Twitter boldly went where no 140-character social network has gone before. It gave the opening bell not to its chief executive, or to any of its four founders, but instead to actor Sir Patrick Stewart and Vivienne Harr, a nine-year-old campaigner against child slavery. The intended message was clear: Twitter is not about the four who came up with the idea, or about the money its staff have now made. It wants to be about the power of an innovative communication tool and its users.
It's been a rollercoaster ride for those four co-founders: Evan Williams, Jack Dorsey and Biz Stone were, at least, at the stock exchange to celebrate. Noah Glass, however, was absent. The co-founder who came up with the name Twitter (and who by some accounts drove much of the site's development as it was being born out of failing podcast start-up Odeo) was like Banquo's ghost at this Silicon Valley feast.
Frozen out of the company, his most recent tweet reads coldly "I wish the twitter team the best of luck and trust that they will be successful in continuing to develop this important communication tool." It was sent in September.
That's not to say anyone should feel sympathy for those involved in the soap opera around the creation of Twitter. Soaring to a valuation of $27bn on the first day of trading last Thursday, the social network has made many rich already and no internet giant was built without arguments among its most senior staff.
Twitter has 100 staff at its new European headquarters in Dublin, headed up by Stephen McIntyre. Last week, they watched a live feed as X Men star Patrick Stewart rang the bell at the NYSE. Stock options are a major part of technology company remuneration, so many of the key players in Dublin will have become incredibly wealthy on paper over the past week.
While Dublin is the company's second largest global location, there are also fortunes to be made for staff in other countries. Twitter's London employees are also expected to do well in the flotation, with UK general manager Bruce Daisley leading a charge that will see the site's 2,300 employees share $900m 'stock-based compensation' pot in the near future.
And around the world, many others have profited from Twitter's growth: Amazon founder Jeff Bezos was an early investor, while Prince Al-Waleed Bin Talal invested $300m in 2011. For that, he's estimated to have got some three per cent, making what now looks like a seriously shrewd buy, doubling his money in less than two years. A host of venture capital firms have done well, too, but it's a mark of the site's perceived potential that Bin Talal says he's not selling anything, and didn't deny that he would buy more shares.
The public offering's 89 per cent opening gain is the sixth-biggest on record for major American IPOs, and put Twitter at a higher valuation than venerable Kellogg or web film-giant Netflix. And it put some perspective on the 70 million shares the site sold at $26 apiece on Wednesday, raising $1.8bn.
But the focus for owners, claimed CEO Dick Costolo, was on raising money for future development, rather than for a huge party back in San Francisco. The message again and again from company sources was that this IPO should be more like LinkedIn than Facebook: a solid, professional exercise that's part of a serious story of growth, rather than a jamboree that turns out to be a lengthy disaster.
Asked on CNBC what Twitter could become, however, Costolo did not give away the precise answers many will want to hear: "I think about our platform as public, realtime, conversational and distributed. As long as we invest in the things that have gotten us here and we invest in amplifying those characteristics, in service to making Twitter the indispensable companion to life in the moment, to the live experience, then our success will be determined by our ability to go amplify those characteristics.
"We don't feel like we need to either pivot from many of those characteristics or invest in a fifth characteristic that we don't have. It's all about amplifying the existing characteristics of the platform."
Strip away Costolo's jargon and his message is simple: for all the new riches and for all the new possibilities that investment brings, Twitter isn't changing. More than two-thirds of its revenue – more than Facebook's – comes from mobile phones, and the company claims its 240 million users will continue to grow.
That will reassure fans of the service, but it may not do much for investors. As the share price stabilised and hit $45 last week, it looked as though the company's thousands of new owners were betting on a new future for the company rather than its loss-making present.
As Peter Garnry, Head of Equity Strategy at Saxo Bank, put it: "For Twitter, it is the end of a long journey towards the public market. For investors this is the beginning of nerve-racking journey of whether Twitter can deliver on the huge expectations."
It remains to be seen where that journey ends, but the pressure is unprecedented.
©Telegraph, additional reporting by Nick Webb