TI

Twitter IPO Pitch Deck Financial Model

• 140-character constraint makes Twitter uniquely "live" and high-velocity.
• Four product pillars: Public (personal broadcast network), Real-time (live eyewitness content), Conversational (user-to-user and brand-to-user), Distributed (tweets syndicated across third-party properties).
• Three stakeholder constituencies: Users, Platform Partners, Advertisers.
• Platform partners get distribution into Twitter and embed Twitter content on their own properties (TV integrations, websites, apps). TV x Twitter is a featured product: 60% of primetime TV shows included a Twitter hashtag/handle as of June 2013.
• Advertising products: Promoted Tweets, Promoted Accounts, Promoted Trends - all pay-for-performance and native to the feed.
• MoPub acquisition cited as enabling real-time bidding.
• Interest graph (follow graph) drives targeting: keywords, interests, TV ads, device, followers, look-alikes, search, location, gender.

• Total smartphone users projected 3.7B by 2017.
• Total internet users projected 3.5B by 2017 vs. 2.4B in 2012.
• Twitter MAU at time of deck: 232M - implies ~6–7% penetration of 2012 internet users, and ~6% of projected 2017 smartphone base. Deck frames this as large whitespace.
• No explicit TAM/SAM dollar figure stated for the advertising market.

• Advertising (~85% of revenue): Promoted Tweets, Promoted Accounts, Promoted Trends. Pay-for-performance model (CPE / cost-per-engagement). Sold via direct sales (brand advertisers) and self-serve (SMB). International advertising expansion is a named growth vector.
• Data licensing (~15% of revenue): Licensing the Twitter firehose and derivative data products to third parties.
• Core monetization metric: Ad Revenue per 1,000 Timeline Views (RPM analog). Worldwide $0.97 Q3 2013.
• 71% of advertising revenue generated from mobile devices.

Users

• 230+ million MAUs (as of Sept 2013)
• 77% average MAUs international
• 76% average MAUs access Twitter on mobile
• MAU growth: 167M Q3 2012 → 232M Q3 2013, +39% Y/Y worldwide
• U.S.: 40M → 53M, +30% Y/Y
• International: 127M → 179M, +41% Y/Y

Engagement

• 685 timeline views per MAU, Q3 2013 (up from 635 in Q3 2012, +8% Y/Y)
• Timeline views: 106B Q3 2012 → 159B Q3 2013, +50% Y/Y
• U.S.: 33B → 43B; International: 74B → 116B
• 350B tweets published since founding
• 1B tweets created every two days
• 48B online impressions of tweets off Twitter's own properties
• 44% of Americans hear about tweets through other media channels almost every day (Edison Research)

Revenue

• Annual revenue: $28M (2010), $106M (2011, +276% Y/Y), $317M (2012, +199% Y/Y)
• 2010: Advertising $7M, Data Licensing $21M
• 2011: Advertising $78M, Data Licensing $29M
• 2012: Advertising $269M, Data Licensing $48M
• 9-month revenue (Jan–Sept): $205M (2012) → $422M (2013), +106% Y/Y
• 2012 9M: Advertising $170M, Data Licensing $35M
• 2013 9M: Advertising $375M, Data Licensing $47M
• Advertising revenue growth: 9M 2012 $170M → 9M 2013 $375M, +121% Y/Y

Monetization efficiency

• Ad Revenue / 1,000 Timeline Views, Q3 2013:
• Worldwide: $0.65 (Q3'12) → $0.97 (Q3'13), +49% Y/Y
• U.S.: $1.72 (Q3'12) → $2.58 (Q3'13), +50% Y/Y
• International: $0.17 (Q3'12) → $0.36 (Q3'13), +112% Y/Y

Margins (Non-GAAP, % of revenue)

Adjusted EBITDA (Non-GAAP, in millions)

• Quarterly: -$1 (1Q'12), $2 (2Q'12), $3 (3Q'12), $18 (4Q'12), $12 (1Q'13), $10 (2Q'13), $9 (3Q'13)
• 9-month: $4M (2012, 1.8% margin) → $31M (2013, 7.3% margin)

GAAP Net Loss (9 months):

• 2012: -$70.7M; 2013: -$133.9M (loss widening due to stock-based comp and D&A)

OpEx (Non-GAAP, 9M): $161M (2012) → $320M (2013), +99% Y/Y CapEx (9M): $120M (2012) → $142M (2013)

• 2012: PP&E cash $40M + capital leases $79M
• 2013: PP&E cash $47M + capital leases $96M

GAAP OpEx reconciliation (9M):

• GAAP Opex: $181M (2012) → $394M (2013); SBC: $20M → $74M

• Moat framed as: the Interest Graph (unique follow-graph generating real-time targeting signal); the "live" nature of the platform (140-char constraint); embedded distribution through media partner ecosystem (TV x Twitter, Twitter for Websites, Twitter Cards).
• Competitive set: Not explicitly named. Deck positions Twitter as unique real-time public network; Facebook referenced implicitly via Super Bowl stat (Twitter in 50% of ads vs. Facebook in 8%).
• 35+ major media partnerships across broadcast, sports, music, print.
• Nielsen Twitter TV Ratings launched as new industry standard - creates measurement moat for TV advertising dollars.

Management team:

• Dick Costolo, CEO (prev. Google, Feedburner)
• Ali Rowghani, COO (prev. Pixar, McKinsey)
• Mike Gupta, CFO (prev. Yahoo, Zynga, Merrill Lynch)
• Chris Fry, SVP Engineering (prev. Salesforce)
• Adam Bain, President Global Revenue (prev. News Corp)
• Vijaya Gadde, General Counsel (prev. WSGR, Juniper Networks)

IPO / Funding ask: This is an IPO roadshow deck. Specific share price, proceeds size, and use of funds are not stated in the slides provided.

• Archetype + why: Ad-platform operating model (analogous to social media/digital advertising P&L). Revenue decomposed as: MAU × Timeline Views/MAU × Ad Revenue/1,000 TLV + Data Licensing revenue. Twitter explicitly uses this MAU × TLV/MAU × RPM framework as its management KPI stack. A 3-statement model is appropriate given this is a public-company IPO with GAAP and Non-GAAP financials disclosed.

• Forecast horizon & granularity: Quarterly for Year 1 (FY2014) + annual FY2015–FY2016, stepping toward the target model margin structure. Historical base: FY2010–FY2012 annual + 9M 2013 actuals.

• Key drivers & assumptions:

*User growth*

• Worldwide MAU, Q3 2013 base: 232M
• MAU Y/Y growth rate: 39% in Q3 2013; expected to decelerate - model at ~30% FY2014, ~20% FY2015, ~15% FY2016 as penetration rises
• U.S. / International split: 53M / 179M as of Q3 2013; International growing faster (+41% Y/Y)

*Engagement*

• Timeline views/MAU: 685 in Q3 2013, growing 8% Y/Y; modest ~5–8% growth p.a. reflecting product maturity
• Total timeline views = MAU × TLV/MAU

*Monetization*

• Ad RPM (worldwide): $0.97 in Q3 2013; growing 49% Y/Y
• RPM growth decelerates: ~30% FY2014, ~20% FY2015, ~15% FY2016, driven by international mix shift (intl RPM much lower at $0.36) and product/targeting improvements
• U.S. RPM: $2.58 Q3 2013; International RPM: $0.36 Q3 2013 - model separately
• Data licensing revenue: $47M in 9M 2013; ~$65M FY2013, growing ~15–20% p.a. (slower/steadier than advertising)
• Mobile as % of ad revenue: 71%; stable/growing

*Costs (Non-GAAP % of revenue - target model from deck)*

• Cost of Revenue: 33% (current) → 21%–23% (target); linear step-down over 3 years
• R&D: 35% (current) → 19%–21% (target)
• S&M: 30% (current) → 20%–22% (target)
• G&A: 11% (current) → 10% (target)
• D&A: 16% (current) → 10% (target)
• Target Adj. EBITDA margin: 35%–40%

*CapEx*

• 9M 2013 CapEx: $142M ($47M PP&E cash + $96M capital leases)
• CapEx as % of revenue ~25–30% near term, declining as infrastructure scales

*SBC*

• 9M 2013 SBC: $79M; grows with headcount, use as % of revenue (declining from ~19% toward 10%)

*D&A*

• 9M 2013 D&A: $77.7M; drives from CapEx schedule

• Scenarios (Base / Bull / Bear - which variables flex):
• Base: MAU growth ~30% FY2014 declining to 15% by FY2016; RPM growth ~25–30%; cost ratios step toward midpoint of target model by FY2016.
• Bull: MAU growth sustains ~35% on international expansion; U.S. RPM approaches $4+ as TV/native ad formats scale; cost leverage achieved faster (EBITDA margin 30%+ by FY2016).
• Bear: MAU growth decelerates to ~20% by FY2014 (user engagement concerns); RPM growth stalls at ~15% (ad market competition); cost ratios sticky at current levels; EBITDA margin stays 7–10%.
• Primary flex variables: MAU growth, RPM (especially international), S&M spend efficiency, SBC dilution.

• Required sheets / outputs:

1. Assumptions - all drivers with toggle for Base/Bull/Bear
2. Revenue Build - MAU (US/Intl split) × TLV/MAU × RPM/US and RPM/Intl + Data Licensing
3. P&L - GAAP and Non-GAAP income statement (advertising, data licensing, CoR, R&D, S&M, G&A, D&A, SBC, EBIT, Net Income/Loss)
4. Adj. EBITDA Bridge - reconcile GAAP net loss to Adjusted EBITDA (matching deck format, slide 63)
5. CapEx & Working Capital - PP&E, capital leases, D&A schedule
6. Target Model Tracker - current vs. target margin comparison (matching slide 60 format)
7. KPI Dashboard - MAU (US/Intl), TLV, TLV/MAU, RPM (worldwide/US/Intl), Ad Revenue, Data Licensing Revenue, Adj. EBITDA margin (matching slides 49–57 format)
8. Sensitivity - MAU growth vs. RPM growth → Revenue and EBITDA margin grid