Twitter Inc, racing toward the largest Silicon Valley IPO since Facebook Inc's 2012 coming-out party, hopes to woo investors with rip-roaring revenue growth despite never having made a profit in the past three years.
Twitter, the eight-year-old microblogging service, the preferred communications tool for celebrities and politicians alike, gave potential investors their first glance at its financials on Thursday when it publicly filed its IPO documents.
Revenue almost tripled to $316.9 million in 2012, driven largely by advertising. In the first half of 2013, it posted revenue of $253.6 million but had a loss of $69.3 million.
Crucially, Twitter managed average revenue per user in the second quarter of 2013 of 64 cents compared to Facebook's roughly $1.60, according to Reuters' calculations.
Losses are "a non-issue," said Brian Wieser, analyst at Pivotal Research Group. "It would have been a surprise if they had a profit. Here's the number that really matters. It's the revenue per customer. The question is how much is the typical commitment they're getting from advertisers at this time."
In a typical laundry list of risk factors appended to all company IPO filings, Twitter warned it was heavily reliant on advertising revenue. It said more than 87 percent of its revenue came from advertising in the first half of 2013.
Although its user base is expanding steadily, Twitter's IPO filing showed that the ad prices it has commanded from marketers had been falling for the past five quarters.
"We generate the substantial majority of our revenue from advertising. The loss of advertising revenue could harm our business" the company said in its filing.
The average cost per ad engagement slid 46 percent in the June quarter, compared with the previous quarter. But the company said that decline was the result of a conscious effort to rapidly expand its available inventory, and change its algorithm to distribute ads more frequently throughout each day.
Revenue has risen because this strategy attracted more advertisers, especially small- and medium-sized businesses and international clients, it said.
Twitter's debut will be the culmination of its journey from side-project to sociocultural phenomenon, today the platform of choice for everyone from the Pope to President Barack Obama.
Its target is to raise $1 billion, a figure devised mainly for registration purposes and that will change as the company embarks on a roadshow to sell its IPO to investors.
Assuming everything goes smoothly, Twitter could begin trading in November.
The company, which spun out of a struggling San