Social network Twitter has set ambitious targets for its IPO. The company hopes to raise as much as $1 billion to finance its continued operation and expansion, largely from institutional technology investors and those interested in the technology company.
Twitter has been largely dependent on venture capital for its growth over the past seven years, receiving upwards of $1.16 billion in funding from well-known Silicon Valley investors such as Union Square Ventures and famous VC Marc Andreessen.
The company has also spent over $600 million on acquisitions during its seven-year history. Some of its higher-profile acquisitions include MoPub – a mobile app service that focuses on monetisation – and formerly third party application TweetDeck.
Despite its immense funding and long string of acquisitions, Twitter has struggled to generate significant amounts of revenue. The company’s net loss for the six months to June 2013 was $69.3 million on revenues of just $253.6 million.
What’s particularly worrying for investors is the growing gap between the amount that Twitter is spending to remain operational and the total amount of revenue the company is generating.
Twitter’s losses have grown in the last six months, leading many analysts to predict that the company will never make a profit. Large growth in revenue has been hurt by the company’s growing losses, which increased 41 per cent in the last six months.
Analysts are also concerned about the likelihood of companies buying advertising on Twitter’s platform. Many of the companies that could purchase Twitter’s paid Sponsored Tweets service are already achieving a reasonable ROI from a normal Twitter account.
Whether Twitter’s spend-big-to-grow strategy will be successful is currently a major mystery for many in the start-up community. However, the service’s massive base of regular users gives it a valuable asset to use for future monetisation experiments.
