How Twitter's IPO Will Change the Company Forever
I love Twitter . I'm not ashamed to say it. I tweet photos of my food. I talk about my frequent visits to Starbucks and the -- ahem -- interesting patrons that hang out there. I enjoy sharing random tidbits of my life on the social network 140 characters at a time.
But now that the Twitter IPO came and went on Nov. 7, it has me nervous. It's a great step forward for the company, don't get me wrong. If anything, it legitimizes the tweet in a whole new way. But I'm leery as to what going public will do for the social network and how it will affect its most loyal users.
Due to savvy pricing and a lack of internal controversy, Twitter got a nice start on the market, raising $1.8 billion and selling 70 million shares. The company also learned from the mistakes of its going public social predecessor, Facebook. And even though Facebook has since steadied, that initial flop gave the wrong impression to the general populace about the way social networks would be received by investors. Twitter is doing pretty well and that's good news.
The reinvestment potential here is also good. With a substantial amount of capital raised, Twitter could foreseeably bolster backend operations. I'm talking greater server stability, security, and bandwidth. While we don't see the "Fail Whale" all that much these days, anything a tech company can do to prevent downtime is a worthwhile investment.
Twitter also rolled out an expanded feature earlier this year called Twitter cards. They're only viewable when you go to the dedicated page for an individual tweet at the moment, but they feature videos and photos embedded in the tweet. Expanding this function to be more streamlined into the standard feed would be beneficial for users and advertisers. There's even the possibility of expanding this so links in cards open up in other apps. With the shift to mobile imminent, this has the potential of being lucrative for many companies, not just Twitter.
Another good thing is how much the company values its users. At the opening, they brought along three people they felt represented that value implicitly: Sir Patrick Stewart (@sirpatstew), Vivenne Herr (@vivienneherr), and the Boston Police Department (@bostonpolice). All three of these users engage actively on the social site and create the very reason people sign up for an account in the first place. Without compelling and interesting tweets to follow, there'd be no Twitter. So long as the company drives home this point and supports its users (and the user experience) there should be no problem.
One last good thing? The IPO gives tweeting a bit more legitimacy. People can make fun of #hashtag everything (or "that hashtag crap," as one Starbucks-goer I just overheard, call it) but the platform is useful for quick sharing of information, for connecting and creating community.
On the business front, it's useful for advertising, marketing, and promotion. Social media is here to stay for developing brand awareness. It has a lot going for it in terms of combining form with function in that it has a very simple function and a very simple form that can be utilized for a variety of purposes.
But it's not all rosy when contemplating Twitter's future.
There is a lot of pressure for Twitter to become profitable. A lot. Just a few days before the IPO, the company rolled out an interface update that increased the prominence of photos and videos, a bid largely thought to make ads more visible (and harder to ignore). Trying to find a balance between turning a profit and maintaining a pleasant user experience is difficult and I'm skeptical that they'll be able to walk that fine line.
And what about the dreaded "MySpace Effect," as Rolfe Winkler of The Wall Street Journal calls it? Many websites that surged with popularity in their early years have since seen their user bases wane a la MySpace. Since Twitter depends on its users as noted above, a loss of consumer interest would be a death knell for the company. Now that the company is public, such a loss of interest is a much bigger deal than it would have been if the site was still private and went gently into that good night.
Another potential bad aspect of the Twitter IPO is content moderation. Twitter has usage and content restrictions already, but who's to say what they'll do if one advertiser comes on board and demands the company restrict disparaging tweets about their brand?
This isn't particularly likely but it could happen if there is substantial advertiser revenue on the line. As with any company, money talks and anything that pushes Twitter into profitability faster might get more leverage than @whoeverwithanopinion's desire to talk about how much they dislike company XYZ.
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The article How Twitter's IPO Will Change the Company Forever originally appeared on Fool.com.Fool contributor Brenda Barron has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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