San Francisco - Twitter, long protected in its Silicon Valley nest, is about to venture into the more unforgiving world of Wall Street.
On Wednesday, Twitter set the price of its initial public offering at $26 a share, valuing the company at roughly $18 billion. Twitter shares are set to begin trading Thursday on the New York Stock Exchange.
With 70 million shares sold in the offering, Twitter raised $1.8 billion. The I.P.O.'s price, the subject of debate between the board and its underwriters up until late on Wednesday afternon, was above an already heightened price range, reflecting the strong demand for the company's stock.
Twitter's initial public offering is a sign of maturity for the social network known for its 140-character 'tweets' and its dainty blue bird logo. Seven and a half years after its founding, the service has become an influential public forum, used by world leaders, dissidents, celebrities, megacorporations, small businesses and tens of millions of regular people who want to listen or join in the conversation.
But as Twitter makes the transition to a publicly traded company, investors have reason to be cautious: the micromessaging platform is having trouble attracting and retaining users.
For one thing, Twitter's interface can be daunting to newcomers. A user has to invest a lot of time to figure out the right accounts to follow and to understand the unique jargon of the service.
And its fundamental design - every tweet is delivered in chronological order, no matter how important or trivial - means that compelling information can get lost in a sea of babble.
'You see the stream of posts coming at you, and it's really overwhelming,' said Debra Aho Williamson, a principal analyst who studies Twitter and other social media for eMarketer, a research firm. 'It's all jumbled.'
Rethinking the design of the service has been a lower priority for Twitter's leadership team, which has focused more on the technical challenges of running the service and on creating sources of revenue, according to current and former Twitter employees. At the same time, the company has no obvious product visionary like the late Apple chief executive, Steve Jobs, to reimagine what the service could or should be to attract new users.
We just priced our IPO. pic.twitter.com/NWXaO4Myq0
- Twitter (@twitter)
Richard Greenfield, an analyst with BTIG Research, said Twitter drew people during breaking news events, like Monday night's shooting at a New Jersey mall, but needed to do a better job helping people find topics they were interested in so they returned frequently.
'The challenge is to prevent that person from waiting for the next event to come back,' said Mr. Greenfield. 'How do you move that dormant user to every day, or multiple times a day, or every minute?'
Twitter's slowing user growth, as well as its rising losses, has made for unfavorable comparisons with Facebook, the world's largest social network, where about 1.2 billion people used the service at least once a month in the third quarter.
Twitter had 232 million monthly users during the same period. That was up just 14 million, or 6.4 percent, from the previous quarter - a much slower growth rate than Facebook had when it was the same size.
Twitter declined to make any executives available for this article, citing regulatory restrictions on public statements around the I.P.O.
Unlike Facebook, which is constantly tweaking its interface to make it easy to share and 'like' things, Twitter is proudly, almost defiantly, geeky.
Users see an unfiltered flow of text messages, most recent first, filled with @ and # symbols and abbreviations like RT, MT and HT. Everything is treated the same -- a tornado alert from the Weather Channel, a joke from Jerry Seinfeld and a recipe shared by a friend down the street.
And the conventions of the service make reading tweets like deciphering code.
Take this recent Friday-night message from the San Francisco dining blog Eater SF: 'EaterWire: last Fort Mason @otgsf tonight, @KronnerBurger at @TheMillSF tomorrow, @SpruceSF starts brunch Sunday: http://eater.cc/17jwNXR.'
Translation: The last Off the Grid food truck gathering will be at Fort Mason on Friday, KronnerBurger will have a pop-up burger joint at the Mill Cafe on Saturday, the Spruce restaurant will begin a new brunch service on Sunday, and more information about all of that is available on Eater's San Francisco restaurant news page.
Twitter fans love such feats of information compression, but many people find it off-putting.
A large percentage of new Twitter users give up on the service within the first three days, according to a former employee familiar with the data, who spoke on condition of anonymity because the company considers it confidential.
Although Twitter acknowledges that it needs to do more to help casual and new users navigate the service, the company's leadership team has been grappling with other issues.
Dick Costolo, who in 2010 became the San Francisco company's third chief executive, focused initially on stabilizing Twitter after its early turmoil under its co-founders Evan Williams and Jack Dorsey.
Under Mr. Costolo, Twitter also developed its first advertising formats, most notably promoted tweets, bringing in $422 million in revenue for the first nine months of this year and establishing the cash flow that has made the I.P.O. possible.
The company's engineers rebuilt the site's architecture so that it no longer crashes regularly, as it did during its first few years of rapid growth.
The site's interface, however, has seen little change since the last big overhaul in 2011.
Twitter executives have avoided tinkering with the simplicity that has been the central to service since the beginning.
Last week, the company finally began showing previews of photos and videos in its message stream -- a nod to the reality that the fastest growing social networks, like Pinterest, Facebook's Instagram and even Twitter's own Vine, are all about sharing visual images.
Yet that change upset some longtime users, like Matthew Long-Rhyne, a soccer fan and supermarket baker in Pullman, Wash.
Mr. Long-Rhyne said the new design made Twitter's feed too crowded, and he refused to update his iPhone app to the new version.
'The photos are too large,' said Mr. Long-Rhyne, who likes to scan his entire feed of 462 accounts several times a day. 'Twitter is in my opinion trying to become Facebook. I like the simplicity of Twitter.'
In its prospectus for investors and comments made before the I.P.O. process got underway, Twitter has argued that the unfiltered, public nature of its service is a unique advantage because it gives everyone a chance to be heard, from an anonymous Egyptian protesting in Tahrir Square to the president of the United States.
'There is an incredible leveling of the playing field that gives every voice the ability to echo around the world instantly,' Mr. Costolo said in a video to pitch the stock to prospective investors.
In contrast to Twitter's give-them-everything approach to its users' information feeds, Facebook actively tinkers with its software to try to highlight the most relevant material.
A hot post from a friend that is generating a lot of comments moves closer to the top, as do posts from people and brands with whom a user frequently interacts. More distant acquaintances only make the cut with big life news, such as the birth of a baby. Routine announcements, such as the fact that someone has joined a group, are pushed down. Photos are prominently displayed, as are advertisements.
Although Facebook originally had a Twitter-like feed showing all posts in reverse chronological order, the company says users interact more with the service when the feed is curated.
Twitter officials acknowledge that they need to make Twitter easier to use. However, despite rumors of a new interface in the works, insiders caution that users are more likely to see a series of tweaks than a complete redesign.
Bulls on Twitter's stock say it will take time for people to learn how to use Twitter and word to spread, just as people had to learn new technologies in the early days of personal computers and the web.
'Right now, it feels like a tool that most of us haven't been trained on,' said Kevin Landis, chief investment officer of Firsthand Funds, which owns about one million Twitter shares that it bought in private transactions before the I.P.O.
And Twitter can always adjust course and make bigger changes to draw users, fans say.
'Is it that hard to fix? No,' said David Sze, senior managing partner at Greylock Partners, which was an early investor in Facebook, LinkedIn and several smaller social networks. 'The fact that they are so vibrant despite it suggests their potential.'
John Maeda, an artist and president of the Rhode Island School of Design, follows nearly 8,000 accounts, from PBS to Kanye West, and likes to 'swim in the flood' of tweets.
He sees an elegance to Twitter's design, which forces people to be creative in 140 characters.
'We humans like to add our creativity to a good design idea,' he said. 'It's the constraint that is sacrosanct.'
Michael J. de la Merced contributed reporting from Menlo Park, Calif.
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