A brief corporate history
Founded in 2006, by Evan Williams, Biz Stone, Jack Dorsey, and Noah Glass, the San Francisco based, Twitter is an online social networking service that offers users the ability to follow other users activity, read short messages of up to 140 characters, and post tweets60.The company started with “a simple idea: share what you’re doing, 140 characters at a time” (IPO, 2013: 97). Users took the idea and strengthened it by using
@names to have public conversations, #hashtags 61 to organize movements, and Retweets to spread news around the world.
The first tweet was sent on 21 March 2006. It took over three years, until the end of May 2009, to reach the billionth tweet. It takes, now, less than two days for one billion tweets to be sent. In Twitter's short history, the company went from 5,000 tweets per day in 2007, to 500,000,000 tweets per day in 2013, which represents a six orders of magnitude increase (Twitter Usage Statistics, 2015). The name for the social network was initially envisioned as "stat.us" but was changed to “Twttr” when the prototype was introduced in March of 2006, to finally become "Twitter" as the service was launched publicly on 15 July 2006.
On its website, the company claims to “have democratized content creation and distribution, enabling any voice to echo around the world instantly and unfiltered”, which amounts to a service shaped by the people, for the people. Twitter describes its mission (Annual Report, 2014: 7): “The mission we serve as Twitter, Inc. is to give everyone the power to create and share ideas and information instantly without barriers”.
Twitter serves customers worldwide, operates as a global platform for public self-expression and conversation in real time. Available in more than 35 languages, Twitter has more than 288 million monthly active users. It offers various products and services for users, including Twitter that allows users to create, distribute, and discover content;
and Vine and video, a mobile application that enables users to create and distribute short looping videos of up to six seconds in length.
Business model
Twitter provides promoted products and services, such as promoted tweets, promoted accounts, and promoted trends that enable its customers, the advertisers to promote their brands, products, and services; and subscription access to its data feed for data partners. Advertisers use these promoted products, the majority of which are pay-for-performance, amplify their visibility and reach and complement and extend the conversation around their advertising campaigns. For instance, direct response ads are advertisements that resemble tweets, and let users click on them and take an action, such as downloading an app.
60 A tweet is a type of bird vocalization, Twitter (see logo) used it to describe a message sent using Twitter.
61 A type of label or metadata tag used on social network and microblogging services which makes it easier for users to find messages with a specific theme or content. Users create and use hashtags by placing the hash character (or number sign) # in front of a word or unspaced phrase, either in the main text of a message or at the end. Source: Wikipedia, http://en.wikipedia.org/wiki/Hashtag
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Advertisers are enabled to target an audience based on a variety of factors, including a user’s interest graph. The graph maps, among other things, interests based on users followed and actions taken on the Twitter platform, such as tweets created and engagement with tweets. A user’s Interest Graph it held to produce a clear and real-time signal of a user’s interests, greatly enhancing the relevance of the ads that can be displayed on Twitter for users and enhancing the targeting capabilities of the company for advertisers. Twitter provides real-time analytics to these customers. These promoted products (see figure below) are incorporated into the platform as native advertising and are designed to be as compelling and useful to users as organic content on its platform.
The company develops new ad formats for advertisers, and recently introduced its lead generation and application download Twitter Cards and Twitter Amplify, which allows advertisers to embed ads into real-time video content.
Advertisers generate a majority of the revenues through ads on Twitter with the balance coming from data licensing arrangements and mobile advertising exchange services.
Mobile has become the primary driver of the business, generating significant revenue through mobile applications. Approximately 85% of advertising revenue was generated from mobile devices in 2014.
Twitter - Launch of key advertising products
Source: IPO (2015: 62).
Twitter works with platform partners that contribute content, broadly distributing content from the platform across their properties and using Twitter content and tools to enhance their websites and applications. Many of the world’s most trusted media outlets, including the BBC, CNN and Times of India, regularly use Twitter as a platform for content distribution. In 2015, Twitter began to generate revenue directly from a few platform partners, trying to benefit more from network effects.
In addition, it offers a set of tools (Fabric platform offers lightweight modular software development kits), public APIs, and embeddable widgets that developers can use to contribute their content to its platform; syndicate and distribute Twitter content across their properties; and enhance their Websites and applications with Twitter content.
Crashlytics Kit gives developers a crash reporting solution, beta distribution, and mobile app analytics. Twitter Kit gives developers the ability to allow users to sign in with Twitter credentials or a phone number, embed Twitter content into their app and
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leverage the Twitter API. The MoPub Kit gives developers the ability to generate advertising revenue by connecting their apps to a mobile ad exchange and integrate advertisements into their apps. There is no indication whether this involves any commercial arrangement between the parties or just increases network effects and gathering data from users.
Twitter has a very high level of R&D62 expenditures (USD 691 million in 2014): as a percentage of revenue it was respectively of 49%, 89%, 38% for the year 2014, 2013, and 2012 (Annual report, 2014: 54). Twitter invested in 2015 in software company Cyanogen, but relies mostly on organic growth.
Financial data
Since its inception, Twitter has been setting up various rounds of fundraising in 2007, 2008, 2009, 2010, 2011 before going public in 2013. It has been raising USD 1.2 billion through this set of rounds (CrunchBase, 2015). Twitter began trading its common stock on the NYSE in November 2013 after its IPO. It took 3 years to reach the threshold of USD 1 Billion. As of April 2015 the market cap was of USD 33.35 billion (Bloomberg, 2015).
Initial investors in 2007 were: Lowercase Capital, Union Square Ventures, and angels investors Jason Port, Greg Yantanes, Brian Pokomy giving a strong flavour of California funding and financial ecosystem. Bezos Expeditions63 invested in 2008. Morgan Stanley joined in 2009, followed by Kleiner, Perkins the next year.
As of 2014, Twitter had 3,638 employees. Over a five year period (2010-2014), Twitter revenue grew from a mere USD 28.28 million in 2010 to 1.4 billion in 2014 (Market watch, 2015). However the company is still not making any profits, in 2014 the net income was negative: USD 577.82 million, its EBITDA is highly negative as well. The net loss for 2014 is impressive: USD 577.82 million, i.e. nearly 42% of the year revenue. In its IPO prospectus, the company acknowledges having “incurred significant operating losses in the past” (IPO, 2013: 23).
Founders
The CEO, Richard Costollo joined Twitter in 2009 as Chief Operating Officer, responsible for both monetization and day-to-day operations. Previously, he was co-founder and CEO of FeedBurner, a digital content syndication platform that was acquired by Google in 2007. Prior to that, Costollo founded two digital media companies in Chicago: SpyOnIt, a web page monitoring service, and Burning Door Networked Media, a web design and development consulting company. He graduated from the University of Michigan with a B.S. in Computer Science and has been recognized by UM with an honorary Doctor of Laws degree.
J. Dorsey, co-founder, attended the Missouri University of Science and Technology then the New York University, but he dropped out. Since February 2009, J. Dorsey has served as Co-Founder and Chief Executive Officer of Square, Inc., a provider of payment processing services. In Oakland in 2000, Dorsey started his company to dispatch couriers, taxis, and emergency services from the Web.
Evan Williams is an entrepreneur who has co-founded two of the biggest services on the Internet, Blogger, which he ran for four years before selling it to Google in 2003, and Twitter, where he was CEO for two years and now serves on the board of directors. Most recently, he launched Medium, a new publishing platform where he serves as CEO.
62 Defined as: “Research and development expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation, for our engineers and other employees engaged in the research and development of our products and services” (Annual Report: 54).
63 Bezos Expeditions manages Jeff Bezos' personal venture capital investments with 41 Investments in 27 Companies. Venture Capital that does Seed, Early Stage Venture, and Later Stage Venture Investments.
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Noah Glass is a software developer. After leaving Industrial Light and Magic, Glass worked on several projects with Marc Canter, founder of Macromind which later became Macromedia, birthplace of Shockwave and later Flash animation and multimedia software. Glass later developed an application that allowed a user to enter an audio blog entry from a remote cell phone location. His small start-up, known as AudBlog, was eventually folded into a partnership with Evan Williams, of Blogger.com, and the duo then created Odeo, a podcasting company. In 2006, while with Odeo, Glass helped to create and develop the seed idea for what would eventually become known as Twitter.
He is acknowledged as being responsible for coining the name "Twitter", which later became abbreviated to "Twttr," the earliest form of the company's name.
Biz Stone attended, but did not graduate from, both Northeastern University and the University of Massachusetts Boston. He helped build other popular social media services Xanga, Blogger, and Odeo.
Key words: advertising model, electronic self-expression, platform partners.
Source: http://investor.twittterinc.com/
Twitter Annual Report : http://files.shareholder.com/downloads/AMDA- 2F526X/1638671382x0x821792/AB7B5D27-2CEB-468B-9C9B-469676E3186A/876564_Twitter_Annual_Report.pdf
Twitter Usage Statistics. http://www.internetlivestats.com/twitter-statistics/ Last accessed May 2015.
IPO prospectus, July 2013.
Bloomberg (2015), http://www.bloomberg.com/quote/TWTR:US, last accessed April 2015.
CrunchBase, (2015). https://www.crunchbase.com/organization/twitter
Marketwatch (2015), http://www.marketwatch.com/investing/stock/twtr/financials https://en.wikipedia.org/wiki/Jack_Dorsey
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