Newegg files for $175 million IPO

Ronny Kerr · September 28, 2009 · Short URL:

Online electronics retailer, seeing yearly growing profits, seeks to expand company

NeweggElectronics seller Newegg, Inc is going public with an initial public offering estimated to raise $175 million for the company, according to a regulatory filing. A venture capital-funded online retailer of computer components and other consumer electronics, Newegg is seeking to take advantage of growth in the stock market to raise new capital.

Since its founding in 2001, Newegg has seen profitability every year, with revenues growing in recent years. Last year, the company tallied $2.1 billion in sales, a significant rise from the $1.9 billion in sales the year before. Newegg also says that net earnings rose from 18 cents a share to 34 cents a share.

Nevertheless, nearly a decade into its life, the computer retailer sees potential competition encroaching from many sides. Circuit City, for example, despite having filed for bankruptcy last year, continues to operate its online retail site, where customers can shop around for the same kinds of computer products that Newegg specializes in.

Newegg's plan for addressing new competitors is expanding its customer base. Though the site primarily targeted consumers for much of its life, small and medium-sized businesses are increasingly becoming important buyers. Likewise, initially a solely U.S. retailer, the company is quickly expanding operations abroad, especially in China. Sales there were only $31.3 million last year, versus $54.4 million just for the first-half of 2009.

In 2005, Newegg raised $20 million from Insight Venture Partners, according to peHUB. Four years later, the New York-based private equity firm is still Newegg's largest shareholder. Coincidentally, Insight is also a major shareholder in social networking site Twitter, which confirmed the closing of a major fundraiser at the end of last week.

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What is Twitter?

Twitter is an online information network that allows anyone with an account to post 140 character messages, called tweets. It is free to sign up. Users then follow other accounts which they are interested in, and view the tweets of everyone they follow in their "timeline." Most Twitter accounts are public, where one does not need to approve a request to follow, or need to follow back. This makes Twitter a powerful "one to many" broadcast platform where individuals, companies or organizations can reach millions of followers with a single message. Twitter is accessible from, our mobile website, SMS, our mobile apps for iPhone, Android, Blackberry, our iPad application, or 3rd party clients built by outside developers using our API. Twitter accounts can also be private, where the owner must approve follower requests. 

Where did the idea for Twitter come from?

Twitter started as an internal project within the podcasting company Odeo. Jack Dorsey, and engineer, had long been interested in status updates. Jack developed the idea, along with Biz Stone, and the first prototype was built in two weeks in March 2006 and launched publicly in August of 2006. The service grew popular very quickly and it soon made sense for Twitter to move outside of Odea. In May 2007, Twitter Inc was founded.

How is Twitter built?

Our engineering team works with a web application framework called Ruby on Rails. We all work on Apple computers except for testing purposes. 

We built Twitter using Ruby on Rails because it allows us to work quickly and easily--our team likes to deploy features and changes multiple times per day. Rails provides skeleton code frameworks so we don't have to re-invent the wheel every time we want to add something simple like a sign in form or a picture upload feature.

How do you make money from Twitter?

There are a few ways that Twitter makes money. We have licensing deals in place with Google, Yahoo!, and Microsoft's Bing to give them access to the "firehose" - a stream of tweets so that they can more easily incorporate those tweets into their search results.

In Summer 2010, we launched our Promoted Tweets product. Promoted Tweets are a special kind of tweet which appear at the top of search results within, if a company has bid on that keyword. Unlike search results in search engines, Promoted Tweets are normal tweets from a business, so they are as interactive as any other tweet - you can @reply, favorite or retweet a Promoted Tweet. 

At the same time, we launched Promoted Trends, where companies can place a trend (clearly marked Promoted) within Twitter's Trending Topics. These are especially effective for upcoming launches, like a movie or album release.

Lastly, we started a Twitter account called @earlybird where we partner with other companies to provide users with a special, short-term deal. For example, we partnered with Virgin America for a special day of fares on that were only accessible through the link in the @earlybird tweet.


What's next for Twitter?

We continue to focus on building a product that provides value for users. 

We're building Twitter, Inc into a successful, revenue-generating company that attracts world-class talent with an inspiring culture and attitude towards doing business.

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