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Twitter a middle market company? Yep.

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Who says the middle market isn’t sexy?

Twitter’s recently-filed S-1 provides some very interesting information, including the fact that this highly-visible, almost ubiquitous service is, in fact, a middle market business. 

Information disclosed as part of its initial IPO filing shows $253.6 million in revenue generated in first half of 2013, putting it squarely in the middle (on an annualized basis) of the typical middle market range of $50 million to $1 billion in revenue.

As a private company, Twitter has been something of an enigma. 

Its presence is everywhere.  From websites to elections, from televised sports to newscasts, from sparking simple human interaction to facilitating revolutions, Twitter has become a global phenomenon.  And, along with its social media counterparts like Facebook, Instagram and LinkedIn, Twitter has become intriguing to businesses as something of a pioneer in showcasing the power of “big data.”  It’s famous “what’s trending” concept is perhaps the most intuitive and accessible application of big data today.

But the question has always remained, much as it did for Facebook:  how will it monetize this presence?

Well, with the issuance of its Form S-1, the initial filing to commence the process of issuing public securities, some of the mystery has been illuminated.

First, as noted above, Twitter is generating a significant amount of revenue and cash-flow.  From 2010 to 2012, the company increased its revenues from $28 million to $316 million, and increased Adjusted EBITDA from a negative $51 million to a positive $21 million. (Adjusted EBITDA is basically traditional EBITDA adjusted for stock-based compensation.) 

Second, Twitter’s revenue model is pretty vanilla, relying as it does almost exclusively on advertising revenue.  The company does generate about 10% of its total revenue from data licensing – that is, licensing user behavior data to other companies – but the filing indicates that the company expects this revenue source to decline as a percentage of total revenue.  So, bottom line, Twitter is an advertising vehicle, full stop.

Third, the company is apparently focusing its growth plans on expanding its user base through mobile applications, international expansion and enhanced content distribution capabilities, and new advertising services.  Again, the revenue will come from advertising, according to the S-1.

The company is attempting to raise $1 billion, and it is reported that the implied value the company is seeking is $12.8 billion, which would be 28.6 times trailing twelve-month revenue.

The actual filing can be found here.

 

 

 

 

 

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