The Inevitable Twitter vs Facebook IPO Post

Source: TwitterWith a big bang, Twitter is now a public company.  It is up 73% to about $45/share.  Now pundits, myself included, are comparing it to the other large social media IPO of recent memory, Facebook.  Most know that Facebook’s IPO was bad.  Glitches, insider sales and hype drove the stock price lower through May 2012.

My hunch that Twitter would be big.  Not because of any technical reason, or the promise that it will be profitable in the near-term, but a simple fact: people like things they use.

Just like has Apple its fanbois and Twitter has a strong following on Wall Street’s trading community because it is a rich source of breaking news.  This means most people who have the ability to buy stock were already familiar with how it works.  Many companies even build tweets into their trading algorithms, which causes panic from time-to-time.  Since it is a service they like, it is easier to bid up rather than short the stock.  Why hate on something needed for your job?

This is unlike Facebook.  Its model is built around local networks that spread gossip, fads and local news.  While important to individuals, much of what is posted cannot be used for financial gain.  It is unlikely that many people in finance even use Facebook regularly. 

I think Facebook’s model is more profitable than what Twitter built mid-term.  It is difficult to see great profit as much of what Twitter relies on is advertising.  Outside Asian languages that use hanzi, It is hard to advertise in 140 characters.  Maybe picture and Vine will help, though I am skeptical.