NEW YORK – As long anticipated, Twitter is going public. It almost goes without saying that the social network broke the news on Twitter. Its announcement came in five characters under the microblogging site’s 140-character cutoff.
Analysts valued Twitter at $10 billion earlier this year, and it may be worth a little more than that today. But the fact that it is filing confidentially implies that its annual revenues have not yet reached $1 billion. Following the lead of Facebook and other Internet companies whose fortunes depend on an enormous user base, Twitter has been cautious about turning its service into a money-maker so far, with ads few and far between on the site. So how does it make money, and why might it be worth so much?
The fact that the company broke its own IPO news via Twitter — and saw the news retweeted by thousands of people within minutes — underscores the company’s growing role as a global source of breaking news and instant analysis. It is in some ways the CNN of the Internet — the key difference being that it costs CNN an awful lot of money to produce its content, whereas Twitter gets it all for free from users. A disproportionate share of those users are, in fact, paid journalists for other companies, including CNN. The result is that Twitter today is valued at some $10 billion, more than five times as much as The New York Times — and it has the potential to become more valuable still.
Equally important in the near term is Twitter’s role as a “second screen” that people check while watching TV. That gives advertisers a chance to play off of a program that it knows millions of people are watching.
Finally, Twitter is poised to be a big player in the fast-growing realm of mobile advertising. Just three days ago it splashed a reported $350 million to buy MoPub, the world’s largest mobile ad exchange, which allows advertisers to target users on their mobile devices.