It’s off to the races for Twitter Inc., with the first draft of a registration for a long-awaited public offering filed and ready for the media feeding storm. The bottom line: Twitter is not making money. Does that matter? It depends on whether you think creating something great (yes, TMN is an avid user) and changing the world (yes, Twitter is doing that) automatically equals a good investment. There’s reason to be queasy about investing in any IPO that has to be evaluated on a price-to-sales basis because it has no earnings.
There’ll be plenty of discussion about all this over the next months, as more information comes out of Twitter, though no amount of information will really alter the basic dilemma. For now, three quick points:
1) The new rules giving the public less early access to IPO filings really don’t make a difference here. As Bloomberg View’s Matt Levine has argued, investors will have plenty of time to evaluate Twitter’s financials.
2) Yesterday’s filing is such an early draft that it’s missing all the good stuff about the capital structure and who owns how much of the company. Bloomberg’s reporters, Douglas MacMillan and Brian Womack, had to dig up the number of shares Twitter has outstanding (620 million) elsewhere. All that will certainly be in later revisions.
3) Twitter has plenty of users who almost never go to the Twitter website, and instead use TweetDeck (owned by Twitter) or other Twitter clients. I’m one of them. The consequence of this is that I essentially never see promoted tweets or recommended follows. Perhaps there is some setting there I’ve missed. If so, others have too, and in any case I’m not especially inclined to turn on advertising.
From my point of view, not having ads is a feature, but it feels like from Twitter’s it’s more like a bug. Lots of hardcore users — those who are active enough to use a TweetDeck or the like instead of visiting the website constantly — don’t seem to provide Twitter with any income. That seems strange, no?
And by the way, you can go here to follow @markgimein on Twitter >>