Microblogging website, which is expected to float for $11bn, records meagre profits in British subsidiary’s first accounts
Twitter, which is inching towards an $11bn (£6.8bn) US stock market flotation, posted profits of just £16,500 in the much-delayed maiden accounts for its UK subsidiary.
It is too early to tell, however, whether the microblogging website will adopt the kind of financial structures favoured by other internet firms such as Google, Amazon and eBay to lower their UK tax bills.
Very little is known about the finances of the San Francisco-based group, which is incorporated in the US tax and secrecy haven of Delaware. The business is estimated to have taken $288m in global advertising revenues last year, according to the research firm eMarketer – a figure that is projected to rise to $545m this year and $807m by 2014.
While the US only accounts for 10% to 20% of Twitter’s estimated 200 million active users around the world, eMarketer researchers estimate the more commercially mature US market will still generate 83% of the group’s advertising revenues for 2013.
So-called “promoted” adverts started appearing on Twitter feeds in 2010 in the US, and in Britain in September the following year. Among the first advertisers targeting the UK that autumn were Sky, BT, Eurostar, Electronic Games and Paramount Pictures UK.
By 2011, just $5.6m, or 4%, of the group’s ad revenues were estimated to have come from markets beyond the US. The UK was one of the first new territories targeted, with a small staff recruited in central London in May 2011 about the same time as the firm acquired the filtering site Tweetdeck, located near London’s so-called “Silicon Roundabout”.
Abbreviated accounts, covering the first seven months of Twitter UK’s life, were only signed off by Ali Rowghani, the US group’s chief financial officer, last month. The three-person board consists of Rowghani, Twitter chief executive Dick Costolo and the site’s group counsel Alex MacGillivray – all of whom are based in San Francisco. The UK firm’s registered office is given as that of its solicitors, Baker & McKenzie.
Small British firms can file abbreviated accounts if they meet two of three conditions: having turnover less than £6.5m, a balance sheet under £3.26m, and with fewer than 50 staff.
Twitter UK’s parent company is a holding company in Ireland called Twitter International Company. The Irish firm is not required to file accounts and is ultimately owned by the Delaware-incorporated Twitter Inc.
Last month Google’s boss, Eric Schmidt, brushed aside criticisms of the group’s elaborate corporate structure – involving an international company in Ireland and a parent company Delaware – which have seen it shift revenues of about $9.8bn into a Bermuda shell company where they are sheltered from tax. “It’s called capitalism. We are proudly capitalistic. I’m not confused about this.”
A Twitter spokesperson declined to comment on the record but privately insisted that figures in the 2011 accounts for its British subsidiary were in line with the scale of UK trading at that time.