Phew! tweeted Anthony Noto, the lead banker on behalf of Goldman Sachs for Twitters much-awaited IPO. That one word captured the relief his bank and Twitter would have felt following the start of trading of Twitters stock on Thursday. The shares opened at $45.10, up 73% from the IPO price of $26. There did follow some uncertainty for a while, with the stock swinging up and down, but it soon settled at $46 and spent the rest of the day in that region. The shares closed at $44.90. The reason there was so much anxiety surrounding Twitters IPO was because of the debacle that was Facebooks public offering. Facebooks IPO price was $38.46, considered by many as being too high. The market backed this view, with the social networks stock trading almost $10 below its IPO price within a week. And the stock price maintained a steady decline for two months thereafter. The concern with Facebook was that it did not have a strong revenue modelits advertising model at the time was patchy and was non-existent in mobile, the segment that was driving Facebook usage growth. Recently, Facebooks stock has recovered, but thats only after the company solidified its advertising revenue model.
In Twitters case, investors dont seem too concerned about its revenue model; indeed, they seem quite confident about the future prospects of the companyquite an interesting perception considering the fact the Twitter has yet to turn a profit. Twitters advertising model is pretty strong. It consists of sponsored tweets being placed prominently on your feed. However, considering a tweet is just 140 characters long, these sponsored tweets do not intrude on those who are not interested in the ads, while effectively targeting those who are. And, happily for Twitter, it works as well on mobiles as it does on a computer.