Twitter has finally arrived, bearing a new stock symbol and loads of cash to prove it. The company lit up the New York Stock Exchange (NYSE) yesterday, closing its first trading day with a value of nearly $25 billion. Not bad for a company with zero profits.
After sending investors and the advertising industry at large all atwitter, company stock closed at $44.90, giving it a 73 percent increase over its initial public offering (IPO) price of $26. Twitter stands to raise as much as $2.1 billion from the effort, but the dramatic single-day rise in value from its IPO price also suggests the company left some money on the table — at least in the short term.
The smooth opening and immediate jump in value was a dramatic contrast with Facebook’s turbulent debut on the Nasdaq almost 18 months ago. The company enters its second day of heightened scrutiny with a major boost in value, both perceived and real. Whereas Facebook, which tried to acquire Twitter back in 2008, slogged through 14 months before it regained the value it commanded at the time of its IPO.
“The truth is you don’t know in the first week or two what the real story is here in the long run. The stock market behaves much different than the underlying business,” says Eric Johnson, founder and chief executive of the Los Angeles-based agency Ignited.
“Just going public and being the media darling of the planet for a day or two is going to certainly drive more adoption,” he tells ClickZ. “They’ve built something pretty amazing. In our world, we do a lot of marketing to the young audience and this kind of short-form dialogue is the language of that generation. I think they’re in the right place at the right time.”
Twitter still faces questions about the level of engagement among its users and how it will continue to gain new ones though. After almost seven years of existence, the company continues to suffer from a sense of confusion among new users that join only to abandon their account soon after.
In SEC filings just prior to the IPO, the company reported a current pool of 232 million monthly active users. Roughly 50 million of those are in the U.S.
“Some people saw their active user base and were kind of shocked that it was so low, but I look at it from the other side. I think there’s a lot of opportunity to go north from here,” says John Fletcher, senior analyst at SNL Kagan.
The hardest part – building an audience and brand that people like – is already over for Twitter, according to Johnson. The next challenge, he says, is making the platform more useful for marketers and users alike.
“Agencies and marketers are still struggling a little bit on how do you make it a truly effective marketing platform,” Johnson adds. “I’m just not sure we’ve seen the seminal campaign yet that people go ‘OK, now I get it. It really is a marketing platform, it’s not just a platform to share things at scale quickly.’”
Over the coming months he expects Twitter to start revealing new features and projects that have already been in the works for a while. Like most digital marketers, he’d like to see more innovation on the video front. “Links are only so good, but they don’t have the appeal of a little picture with a forward arrow in it,” he says.
“If you think about the history of advertising, we went from bigger, broader storytelling and now we’ve gotten to shorter form, more limiting medium to tell a brand’s story or get someone intrigued. It actually is harder,” he adds. “OK you’ve got 140 characters, good luck.”
While Twitter’s team of founders and many executives were on hand for the momentous occasion on Wall Street, the ringing of the bell was left to a trio of users. Calling Twitter “the indispensable companion to life in the moment,” Twitter’s chief executive Dick Costolo tells CNBC that the company is investing in improving its platform and ad products for long-term growth. The company will also broaden its appeal with features that “bridge that gap between massive global awareness and quick engagement on the platform,” Costolo says.
— (NYX) NYSE Euronext (@NYSEEuronext) November 7, 2013
— Scott Cutler (@cutlerscott) November 7, 2013