Twitter hits all-time high; what it did right post-IPO

Twitter expanded its ad product, appointed its first woman board member and introduced alpha testing

Financial trends and news by Steven Loeb
December 26, 2013
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Hey everyone! Nice to see you back. I hope you had a nice Christmas, got lots of nice presents and were able to spend some quality time with your families.

Me? I got a new leather jacket from my girlfriend, tickets to the Book of Mormon from my sister and a $100 Cinemark gift card from my girlfriend's family, among other things. I think I did pretty well. Plus I got to eat a lot of ham.

And for those who own shares of Twitter, its continuous rise has been a nice gift as well.  

The company, which went public a month and a half ago, reached an all-time high in trading on Thursday, breaking the $70 mark for the first time. The stock is currently up 6.46%, or $4.52, to $74.48 a share.

Even more impressive is that shares traded at $40.78 at the start of the month, exploding nearly 83% in a little over three weeks. 

At current prices, the company is valued at $41.02 billion. Based on JP Morgan analyst Doug Anmuth's revenue estimate of $1.06 billion in 2014, Twitter is trading at price-to-revenue multiple of almost 39.  

Merry Christmas indeed!

So what has Twitter been up to since it its IPO that's caused its stock to climb to such great heights? Let's take a look.

  • Global retargeted ads

In what was probably its most important post-IPO move, Twitter expanded its retargeted ads product to a global audience.

Twitter's retargeted ads product is now out of beta, and it is going global, the company announced in a blog post on Thursday.

The product, which is called "tailored audiences," was first revealed back in July. It relies on browser cookie IDs to retarget users on Twitter who have visited a website.

For example: If you visit a hotel website, say The Hilton, and are searching for hotels in Los Cabos, you may then see an ad while you're on Twitter in the form of a sponsored post talking about discounted night stays in Los Cabos. The users only see the ad, if The Hilton shares its browsing information, namely cookies, with Twitter through one of its ad partners.

Why is this so important? Because, as I've elaborated on before, Twitter makes nearly every single dollar of its revenue from advertising.

In the third quarter, advertising counted for $153.4 million. Out of $168.6 million. That is an astounding 91% of revenue. And that number is rising quickly. In the second quarter of the year it had roughly $121 million from advertising, for an increase of around 27%.

That means that any time it expands its ads program, it will be a sign to investors that the company is more likely to be a good investment in the long-term.

  • Alpha testing program

Another key aspect for Twitter's long-term health is to get as many people onto the platform as possible. And that means giving people products that they will like. Seems pretty simple, eh?

What better way to do that than to actually have the people themselves testing out, and reporting on, products as early as possible? So Twitter launched  an alpha test group for Android, to let users try out apps and features even earlier in their development. 

The company also introduced a beta program back in August, called "Twitter for Android Experiment" to let select users try out app features before they debut.

These types of groups are a win-win: users get the chance to test out products before anyone else, and maybe even use some that never actually get released, while Twitter gets free feedback from those that count the most.

  • Custom curated timelines

In another bid to attract advertisers and brands, Twitter introduced a new type of timeline, one that can be created and customized by each individual user.

This feature allows users to create their own custom timelines by choosing the Tweets they want to include, put then in any order, name the timeline and then share it with their followers. The point being to take only the best, most entertaining and informative tweets, and make it easier for users to find them.

Honestly, I have a hard time imaging most regular people using this feature. There aren't very many topics that I care that much about that I would feel the need to make sure that all of my followers get the best information about them.

But you know who that would benefit? You guessed it: brands and advertisers.

Companies can create whole feeds with nothing but positive things people have said about their products. Or they can create one with people who have benefited from a special promotional offer.

Entertainment studios can create feeds that show off all of the positive reviews their movies and television shows get, or use them to, like Carson Daly, to promote new episodes of the Voice. And they can include their own promoted and sponsored tweets, to make sure they hit a broader audience.

  • Expanding Twitter alerts

Twitter has a distinct advantage over Facebook, in that it allows information to get out in real-time. Facebook has been trying to bridge that gap lately, but Twitter definitely still holds the lead. 

And, even before it went public, the network did the responsible thing, putting that advantage to good use by creating an emergency alert system, which was first available in the United States, Japan and South Korea .

Since going public, it has expanded the service to four more countries and added new features.

First, it debuted in the United Kingdom and Ireland, with 57 accounts having signed up to be part of the alert system. They included the UK’s 47 police forces, An Garda Síochána, the London Fire Brigade, the Mayor of London’s office, the Foreign Office, CEOP and the Environment Agency.

Most recently, it was launched in Australia and Brazil as well, with organizations like Centro de Operações da Prefeitura do Rio de Janeiro (COR), the City of Sydney and the Australian Red Cross participating.

More importantly, Twitter made it easier to sign up for alerts by allowing people to subscribe directly for push notifications via the iOS and Android apps.

The company also added in-app notifications for iOS, which means that when a user is browsing on Twitter they will now receive a notification at the bottom of their screen when an alert is sent by an organization that they are subscribed to.

Twitter has major competition from Facebook for social media supremacy; exploiting its biggest advantage could help it stay competitive in the long-term.

  • A woman on the board of directors, FINALLY!

This one was a long time coming, and probably will not do much to help the company right now, but it is a good first step toward getting rid of a stigma and mentality that Twitter has been carrying around for way too long.

Earlier this month, Twitter appointed a woman, former Pearson CEO Marjorie Scardino to its board of directors, for the first time.

And not just any woman; one with deep qualifications and experience: Scardino served as CEO of Pearson from 1997 to 2012. Prior to that she spent 12 years at The Economist Group, serving as Chief Executive Officer. Scardino also served on the board of directors of Nokia Corporation from 2001 to April 2013.

Given that resume, is really makes you wonder why it took so long for Twitter to find her. Or could it be that they weren't looking?

The issue of the lack of women on the board of directors at many of Silicon Valley's top companies, including Twitter, has been talked about for years now, but the issue reared its ugly head earlier this year after a snarky tweet from Dick Costolo, which seemed to try to downplay the issue of the lack of female representation.

It started when technology entrepreneur and academic Vivek Wadhwa called out Twitter and other Silicon Valley companies for their exclusion of women:

“This is the elite arrogance of the Silicon Valley mafia, the Twitter mafia. It’s the same male chauvinistic thinking. The fact that they went to the I.P.O. without a single woman on the board, how dare they?" he wrote. Twitter CEO Dick Costolo replied to Wadhwa's comments with this: “Vivek Wadhwa is the Carrot Top of academic sources.”

The fact that Costolo seemed to be brushing off what was, no doubt, a valid criticism caused an uproar, combined with a flyer that was found soon after in the women's bathroom showing a busty St. Pauli Girl cartoon, caused a major uproar.

The company was being accused of running what amounted to a boys club, and it was making it hard to see it any other way.

Scardino's appointment is a step in the right direction, and its good to see Twitter joining other companies like Facebook, Yahoo, Microsoft, Google, Amazon, Apple, Zynga, LinkedIn and eBay, all of which beat them to the punch by having at least one female member on their board.

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