(MoneyWatch) -- Twitter shares took flight Thursday on the New York Stock Exchange, marking the social media firm's swift ascent from geekster microblogging platform to mainstream Internet giant.
Roughly 90 minutes after Twitter CEO Dick Costolo rang the Big Board's ceremonial opening bell to signal the start of daily trade, the company's stock opened at $45.10 a share after pricing last night at $26. Within minutes, shares had shot up to more than $50.
The high opening price today underlined the strong investor demand to get in on the largest technology IPO since Facebook's May 2012 offering, which raised $16 billion in what is the biggest ever Internet company initial offering.
Twitter raised $1.8 billion in the IPO, making it the third-biggest Internet IPO of all-time but only the third-largest public offering so far this year, after animal health company Zoetis and energy company Plains GP Holdings. Yet Twitter's IPO, which values the social network at $18 billion, has generated the kind of feverish excitement that recalls the dot-com boom.
The company, which will trade under the symbol "TWTR," raised the price range for its stock earlier this week to $23 to $25, from an initial range of $17 to $20. The message from investors: Get it while it's hot.
Indeed, Twitter's market debut puts a capstone on the company's rapid rise. Launched only in 2006, it now draws 230 million monthly users around the world, making it the second-largest social network after Facebook (FB). Its signature 140-character per tweet platform has become ubiquitous as a place where everyone from media kingpins and Hollywood celebrities to political leaders and revolutionaries communicate.
If Twitter is to thrive, however, it must not only continue to attract the rich and famous with masses of "followers," but also make deeper inroads among average users. That is why, even with Twitter's outsized cultural impact and brand recognition, technology and financial experts are more cautious in judging its long-term commercial prospects.
By any measure, Twitter has grown fast. The company more than doubled its revenue in the third quarter, to $169 million, compared with the year-ago period and is on track to top $620 million for the year. Analysts expect it to generate sales of around $1 billion by the end of 2014.
Still, Twitter has yet to turn a profit. It lost $67 million in 2010, $164 million in 2011 and $79 million in 2012. The company has continued to bleed cash this year. Losses have piled up as the company quickly ramps up its work force and spends aggressively to expand its offerings. Twitter's advertising revenue is increasing, but at 66 cents per user the company remains well behind Facebook's $1.38 in ad revenue per user, noted Morningstar stock analyst Rick Summer.
More worryingly, the rate at which Twitter is adding users is slowing, especially among younger people. Its rate of revenue growth, while still fast, has slowed. A key question for the company is whether it can continue to add profit-driving features and services without alienating its core users.
That is easier said than done. Social networking is among the most competitive online arenas, with Twitter facing off against powerhouses such as industry leader Facebook and its Instagram photo-sharing platform, content-sharing site Pinterest, Yahoo's (YHOO) Tumblr, and scores of social media startups. To grow, Twitter will also have to boost its popularity overseas, never an easy proposition.
Users of such services are notoriously fickle, raising the risk that Twitter could one day lose its hipness quotient in the same way that MySpace, once the king of the hill among social networks, did when Facebook came along. That may be of particular concern with Twitter, whose purpose and utility remains a mystery to some Internet users.
"There's a bit of a stickiness problem with Twitter users," said Brian Blau, research director in consumer technology at Gartner. "Some users come to the site and are confused -- they don't really know what it's about. Others may be hesitant to talk in an open and public environment."
Twitter is also coming of age at a time of intense competition not only from rival social networks, but also from the millions of mobile applications that now vie for people's attention. The average smartphone owner tries five new apps per month, according to Gartner. Although many people access Twitter using a mobile device, meanwhile -- 70 percent of the company's revenue comes from mobile traffic -- the company remains far behind companies like Facebook, Google (GOOG) and Apple (AAPL) in terms of total unwired users.