Twitter says lack of smartphone penetration in India a potential risk

Microblogging platform Twitter in its initial public offering (IPO) filing has listed lack of smartphone penetration in India as one of the potential risks that could impact its performance going ahead.

Twitter, which is likely to go public later this year, filed its so-called S-1 document with US Securities and Exchange Commission (SEC) late last week.

The Twitter IPO, which could value the company at more than $10 billion, is the most-awaited stock market debut of 2013.

“…in certain emerging markets, such as India, many users access our products and services through feature phones with limited functionality, rather than through smartphones, our website or desktop applications. This limits our ability to deliver certain features to those users and may limit the ability of advertisers to deliver compelling advertisements to users in these markets which may result in reduced ad engagements which would adversely affect our business and operating results,” Twitter said in its IPO document.

Bulk of India’s estimated 800 million phone market comprises of feature phones or non-smartphones.

However, driven by low-cost android handsets the smartphone market is growing at a fast pace.

According to research firm IDC, India mobile phone market grew by 24% year-on-year for the three months ending March 2013, with total shipments of 60.7 million. The growth was largely driven by a surge in the smartphone shipments, which grew 74% during this period.

Facebook, which made its stock market debut last year, too had raised concerns over mobile advertising in its IPO filing. At a time of going public, Facebook had hardly any ad revenues from its mobile service.

Mobile advertising has been a challenge for social media players like Facebook, Twitter, Instagram as more and more users access these services from mobiles instead of traditional medium like desktops.

Twitter has also said its performance will hinge on its ability to expand in international markets.

Out of Twitter's over 215 million average month active users, 77% are from outside its home market, US.

“We may not be able to monetize our products and services internationally as effectively as in the United States as a result of competition, advertiser demand, differences in the digital advertising market and digital advertising conventions, as well as differences in the way that users in different countries access or utilize our products and services. Differences in the competitive landscape in international markets may impact our ability to monetize our products and services,” Twitter wrote in its S1 filing.