Less than a year ago, just before the social-networking website Twitter (TWTR) went public, many investors were dubious about the sustainability of the company’s long-term business model. After all, Facebook (FB), Twitter’s biggest competitor, had gone public the year before to much acclaim, only to lose more than half its value as the perception of a gaudy IPO price ($38 per share), a bungled Nasdaq debut, and concerns about monetizing the world of mobile combined to form the perfect storm.
TWTR stock, however, didn’t suffer through the same growing pains. At $26 per share, or a $14.2 billion valuation, the TWTR IPO was gobbled up by hungry investors (and presumably some avid tweeters), and by the end of its first day of trading TWTR shares were up 73%. But it wasn’t because Twitter was poised to challenge e-commerce giants like Amazon.com (AMZN).
While getting to Amazon’s level of e-commerce dominance may take a while, Twitter made an announcement Monday that puts the company in an enviable position to diversify its revenue stream and start raking in all the dough to be made in the online shopping arena. Twitter announced the new functionality quietly in a brief blog post that gives an entirely new catalyst to TWTR stock:
“Today we are beginning to test a new way for you to discover and buy products on Twitter. For a small percentage of U.S. users (that will grow over time), some Tweets from our test partners will feature a “Buy” button, letting you buy directly from the Tweet.”
For TWTR critics who have long lamented the ad-dependent business model and the plethora of fake accounts that dilute membership numbers and pressure click-through rates, a “Buy” button might be just the remedy needed to earn their respect. That said, Twitter’s move into e-commerce isn’t wholly unexpected; it acquired mobile payments company CardSpring in July, a business that allows merchants to offer customers special deals that can be loaded onto their credit cards and applied instantly at checkout. You’ll probably be hearing something about groundbreaking new mobile payment technology today from Apple (AAPL), too — the new iPhone 6 will be showcased, and Apple is expected to feature near-field communication (or NFC) technology that essentially allows your phone to act as a wallet to make real-world shopping quicker and easier.
Alas, as we all know, TWTR is no Apple. It’s no Amazon. It’s not even a Facebook, which dwarfs Twitter’s annual revenue numbers and actually manages to turn a profit in the process. But TWTR is evolving, and in technology no company, no matter how large or ubiquitous, can rest on its laurels. So, beware Twitter competitors: The “Buy” button is coming.
As of this writing, John Divine was long AAPL stock.
