Twitter Stock: Why the Twitter IPO Will Succeed Where Facebook Failed

On Thursday, Twitter announced — via a tweet — that it filed for an initial public offering. The disappointing Facebook IPO has left some investors wary of a Twitter IPO. Twitter’s IPO, however, will be successful right out of the gate because of the company’s great potential in TV and mobile advertising.

Twitter has gradually transformed itself into a service that enables advertisers to “craft ads tailored not only to a Twitter user's general tastes and demographic profile, but to what that user is doing at the very moment they see the ad.” Twitter users tend to use Twitter actively in conjunction with specific events such as television shows or breaking news events. It has become a “second screen” that users check while they are watching TV. Because of this, Twitter views TV as a major part of its monetization efforts. In December 2012, Twitter announced a partnership with Nielsen to develop a new metric called Nielsen Twitter TV Rating, which measures the conversation that a TV show spurs on Twitter. Earlier this year, Twitter acquired social analytic TV services Bluefin Labs and Trendrr. In May, Twitter announced the launch of TV Ad Targeting, which determines those users who are tweeting about TV shows on which companies have advertised and shares this data with those companies. This allows the advertisers to target those users with ads via Twitter. With these moves, the social media company has positioned itself as a unique and lucrative advertising platform and analytics service.

Twitter has also positioned itself on the cutting edge of mobile advertising. On Monday, Twitter announced the purchase of Mopub, the world’s largest mobile ad exchange. Mopub will give Twitter "a platform through which to sell mobile ads that target users based on data that Twitter has collected from them on their desktop computers." According to Antonio Garcia, former Facebook product manager, the Mopub acquisition puts Twitter within reach of the "Holy Grail of marketers: a permanent, stable, and immutable key that identifies everybody online, on every device, all the time."

Why will Twitter’s IPO succeed where Facebook’s failed? One of the major factors that caused the early stumbles of Facebook’s stock was the fact that the social media giant had only begun its mobile advertising service during the IPO process, causing investor concern that the company would struggle in this area. However, no such concern exists for Twitter. According to projections from March by market research firm eMarketer, Twitter’s mobile advertising revenues are expected to be $309 million in 2013, $551 million in 2014, and $811 in 2015. The Mopub acquisition is likely to help Twitter surpass those estimates. Perhaps more importantly, Twitter will be able to learn from Facebook’s mistakes and keep expectations down while using a better pricing strategy than Facebook did.