Twitter reveals 40% margin target

in San Francisco and ARASH MASSOUDI

Twitter shared an ambitious profit margin target as it embarked on its initial public offering roadshow yesterday, declaring the messaging platform had only just "scratched the surface" of what it could become.

The loss-making internet company, which said this week it would list in New York next month with an indicative valuation of up to $13.9 billion, told investors it wanted to increase profit margins to a level higher than Google and LinkedIn and almost as high as Facebook.

In a video which began with Twitter’s trio of co-founders saying they had no idea what the simple 140-character message service would become, the company laid out plans to increase its user base dramatically and transform its offering to advertisers.

Dick Costolo, Twitter's chief executive, said the management team was "humbled" by the opportunity in front of them.

“We had no idea that it would evolve to become the global world-changing communications platform it has become. It has eradicated all sorts of barriers to communication: socioeconomic, geopolitical and celebrity,” he said.

The company said its target was to increase adjusted earnings before interest, depreciation and amortisation margins more than fivefold, to up to 40 per cent, without stating when it expected to hit this target.

Mr Costolo said it had an “open-ended opportunity” to grow its 230 million user base.

Twitter said it planned to move beyond targeting large brand marketers to look more specifically at selling products from the service and targeting small businesses with its self-serve advertising platform.

Mike Gupta, Twitter's chief financial officer, said the company was not yet making a profit because it had been focused on capital investment.

Twitter’s losses widened in the first three quarters of this year from $70.7 million to $133.8 million. Revenue for the same period rose 106 per cent to $422.2 million. – Copyright The Financial Times Limited 2013