The Unspoken Reason Twitter Isn't Going Public Soon

Four years ago, I wondered aloud in these pages whether Twitter could become a legitimate alternative to wire services such as Reuters and Bloomberg. New data from the Pew Research Center would appear to validate my thesis -- but not as much as I'd like.

Online and mobile sources now account for 39% of news consumption, Pew reports, beating newspapers (33%) and radio (29%). TV news topped all sources with a 55% share, although that's down substantially from 68% in 1991.

Source: Pew Research Center.

There's just one problem: Twitter is no longer leading the online world's rebellion against traditional news delivery. Instead, Pew says Facebook (NAS: FB) and Google's (NAS: GOOG) Plus social network account for 19% of online news consumption versus 9% two years ago. Twitter's 3% share is up just one percentage point over the same period.

CEO Dick Costolo can't like seeing this data. At one time, Twitter was the first source for breaking news around the globe. The microblogger famously drew headlines for how eyewitnesses used the service to report on terror attacks in Mumbai, India, in December 2008. Similar uprisings in Iran and throughout the Arab world were broadcast to the world first via Twitter, right alongside sports scores and celebrity meltdowns. What CNN was, Twitter had become.

The shift seemed permanent a year later, when cable network MSNBC acquired the rights to manage a Twitter account called @BreakingNews started by a 20-year-old Dutchman named Michael van Poppel. Today, the feed attracts some 4.6 million followers. Yet if Pew is to be believed, it's Facebook and Google that are doing the most damage to traditional news media.

How much damage? Both Gannett (NYS: GCI) and New York Times (NYS: NYT) have seen declining revenues in each of the past five fiscal years, according to S&P Capital IQ. Each company's signature paper now gets at least half of its readers from online sources: 48% for USA Today and 55% for The New York Times, Pew reports.

Twitter, meanwhile, remains in transition. "It's not something we're focused on right now," Costolo told CNBC reporter Julia Boorstin when asked whether the company was entertaining a 2013 IPO, as many have speculated.

"I think about IPOs as a mechanism for financing the future growth of the company, and when I think about the growth of the company right now, I focus specifically on user growth, user engagement, and growing the team," Costolo said.

Smart. Twitter may still be growing but not at the same outrageous pace it once was. According to website tracker comScore, Twitter was the 28th most-visited website, with 38.2 million unique visitors in August, up a solid but not spectacular 12.6% from 33.9 million uniques during the same period last year. Twitter, for its part, wants potential advertisers to look past volume and understand the quality of users populating its network.

At a recent presentation to marketing executives, the company's vice president of global brand strategy said half of Twitter users follow at least six brands, TechCrunch reports. That may help to explain why some are expecting Twitter to post $1 billion in annual revenue by 2014 -- or about double earlier estimates, according to Bloomberg.

So what is Twitter, if not a new wire service? Let's call it a potential Rule Breaker that defies categorization, creating a serious management challenge for Costolo in the process. He's been up to it so far, and he's right that the public markets can wait.

Instead, Costolo needs to be doing more of what he has been doing: identifying and developing assets and then building around those that yield the highest returns. After years of dysfunction, it's about time someone at Twitter did.

A friend request for your portfolio
The Motley Fool has launched numerous premium research services recently, including one designed just for those interested in Facebook. Sign up now and you'll get a detailed report on the company's opportunities and major risks in the years ahead, as well as a full year's worth of quarterly updates. Click here to read more.

The article The Unspoken Reason Twitter Isn't Going Public Soon originally appeared on Fool.com.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakersstock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Google at the time of publication. Check out Tim's web home, portfolio holdings, and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool owns shares of Google and Facebook. Motley Fool newsletter services have recommended buying shares of Google and Facebook. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.