Twitter Refused to Answer SEC Questions About the Profitability of Ads
Late Friday afternoon Twitter released its "secret correspondence" with the Securities and Exchange Commission leading up to the IPO. The previously private documents show that the SEC had a lot of pressing questions about "slowing user growth and whether people were losing interest in viewing ads." But the company didn't always provide satisfactory answers.
One of the agency's questions was whether Twitter could deliver on its promise of fast growth. Revenue more than doubled over the past year, but the increase in users had slowed. According to Bloomberg's analysis, Twitter is unlikely to be profitable until "at least" 2015.
In its response, Twitter said its revenue growth would become increasingly dependent on its current users becoming more engaged — as measured by how often they view their timelines — since it expected the addition of new accounts to slow. Algorithms to target ads to users with related interests will be used to make them more effective and valuable to marketers, the San Francisco-based company said. [...]
Twitter also declined to offer more details requested by the SEC, for reasons that don't exactly inspire confidence:
In the SEC correspondence, Twitter declined to disclose more detailed information about its advertising business despite prodding from the agency. The company argued that it shouldn't be giving metrics on advertiser retention because "management does not focus on advertiser retention trends" and "such information could be misleading to investors."
The SEC also asked Twitter to disclose the number of ad engagements per 1,000 timeline views, which Twitter said "would decrease the effectiveness of the company's presentation" and "could impair its future negotiations with its advertisers and provide sensitive information to its competitors."
Why do these pre-IPO conversations out of earshot from Joe Shmoe retail investors sound so familiar? Oh yeah.
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