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Sharp rise in revenue, users as Twitter readies its IPO

SAN FRANCISCO — As Twitter prepares to hit the road to begin peddling its stock to the public, the company disclosed new revenue numbers Tuesday that may help it persuade investors to buy the shares.

In an updated prospectus for investors, the social networking company reported that its revenue rose sharply in the third quarter of this year, to $169 million, more than double the level of the same quarter a year ago. It also said its monthly users grew to 232 million in the third quarter, about 76 percent of them using the service from a mobile device.

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Twitter continues to lose money, however, incurring high employee stock and compensation costs and spending heavily on research and development.

Twitter plans to price its initial public offering on the night of Nov. 14 and begin trading the next day, according to people briefed on the matter who were not authorized to speak about the offering beyond what is in the prospectus and who cautioned that the timing could still change.

The company has indicated it plans to raise about $1 billion from the stock sale, although that amount could change if demand is heavy or existing stockholders decide to sell.

Twitter is expected to begin meeting with institutional investors as soon as Oct. 25, according to the people briefed on the matter. The company and its advisers will crisscross the country in what is expected to be a series of standing-room-only meetings to persuade investors to pay a higher price.

“Things are looking positive for Twitter,” said Debra Aho Williamson, a principal analyst with the research firm eMarketer who closely tracks the company.

With most Internet companies posting their biggest revenue figures in the fourth quarter, she said, “This sets Twitter up to really have a great year.”

In its filing Tuesday, Twitter also said it had picked the New York Stock Exchange as the home for its listing, giving the market operator a win over its rival, the Nasdaq stock market.

Both exchanges have competed hard to claim Twitter as a client. As of Tuesday, Nasdaq played host to 20 tech IPOs this year, compared with the New York Exchange’s 19.

Twitter disclosed that its largest stockholder is not Evan Williams, the co-founder who owns 12 percent of the company, but investment entities affiliated with Suhail R. Rizvi, a little-known Hollywood investor.

Rizvi and funds affiliated with his firm, Rizvi Traverse Management, have a 17.9 percent stake in the company, according to the filing. JPMorgan Chase and its affiliated funds own 10.3 percent. Twitter’s earliest institutional investors, Spark Capital of Boston, and Union Square Ventures, have 6.8 percent and 5.9 percent stakes.

Benchmark Capital Partners, which first invested when Twitter was a 25-employee company, has a 6.6 percent stake. DST Global, the investment firm founded by Yuri Milner, a Russian billionaire, has a 5 percent stake.

The advertising revenue numbers suggest that the company’s strategy of cutting advertising prices while offering more targeted ads is paying off handsomely. Every time a Twitter user visited the site, conducted a search or refreshed the screen in the third quarter, the social networking company took in an average of 97 cents in advertising revenue, up 49 percent from a year ago.

Still, advertising on Twitter is in its infancy, and the company has been working to convince major brands that its 140-character messages can be an effective platform for reaching customers.

“Can we actually move purchases in stores?” Kevin Weil, Twitter’s vice president of revenue products, asked at an industry conference in San Francisco on Tuesday.

Weil said the company’s research, conducted in partnership with Datalogix, which tracks offline purchase, shows that Twitter ads do lead directly to sales. For consumer brands advertising on Twitter, sales rose 8 percent among those who saw the ad, with higher increases from consumers who clicked on the ad or became followers of the brand.

News of the Twitter road show’s projected timing was first reported by CNBC.

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