Last week Snap Inc. (aka Snapchat) released their Form S-1. This SEC filing contains business and financial information about the company. It's typically filed prior to a company going public.
I was curious to read how Snap Inc. described their business in the S-1. Are they a software company that makes Snapchat? Are they an advertising platform? Where do Spectacles fit in the company vision?
I found the answers (and more) in the "Management's discussion and analysis of financial condition and results of operations" section:
Snap Inc. is a camera company.
We believe that reinventing the camera represents our greatest opportunity to improve the way that people live and communicate. Our products empower people to express themselves, live in the moment, learn about the world, and have fun together.
Our flagship product, Snapchat, is a camera application that was created to help people communicate through short videos and images. We call each of those short videos or images a Snap. On average, 158 million people use Snapchat daily, and over 2.5 billion Snaps are created every day. On average, our users visit Snapchat more than 18 times per day, and spend 25 to 30 minutes on Snapchat every day.
Our strategy is to focus on innovation and take risks to improve our products. We do this in an effort to drive daily user engagement, which we can then monetize through advertising. We often create new technologies and high engagement products that often require high-end mobile devices and high-speed cellular internet, and consequently the majority of our users come from developed markets. Global advertising spend—especially mobile advertising spend—is extremely concentrated among a few countries, and our advertising business has benefitted greatly from our strong penetration in these countries. This means that we can scale our business in markets where we have the highest revenue per user and capital efficiency, which in turn generates cash flow that we will invest into future product innovation.
For a discussion of the key opportunities and challenges we face in growing our business, see “—Factors Impacting our Business.”
We are headquartered in Venice, California, and have several offices around the world.
Reading Snap Inc.'s S-1 piqued my interest to explore other tech giants that had IPO'd. I was interested to learn how these companies described their businesses in their S-1, and to contrast that with how they describe their businesses today (in their most recent 10-K).
I looked at filings from these seven companies:
- Google (Alphabet Inc.)
The passages below were pulled from either the "Management's discussion and analysis of financial condition and results of operations" section or the "Business Overview" section in the linked documents.
Amazon.com is the leading online retailer of books. The Company also sells a smaller number of CDs, videotapes and audiotapes. All these products are sold through the Company's Web site.
The Company was incorporated in July 1994 and commenced offering products for sale on its Web site in July 1995. For the period from inception through July 1995, the Company had no sales and its operating activities related primarily to the development of the necessary computer infrastructure and initial planning and development of the Amazon.com site and operations. Operating expenses in 1994 were minimal. For the period beginning with the opening of the Amazon.com bookstore in July 1995 through December 31, 1995, the Company continued the foregoing activities and also focused on building sales momentum, establishing vendor relationships, marketing the Amazon.com brand and establishing fulfillment and customer service operations. The Company's cost of sales and operating expenses have increased significantly since the Company's inception. This trend reflects the costs associated with the formation of the Company, as well as increased efforts to promote the Amazon.com brand, build market awareness, attract new customers, recruit personnel, build operating infrastructure, and develop the Company's Web site and associated transaction-processing systems.
The Company has a limited operating history on which to base an evaluation of its business and prospects. The Company's prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets such as online commerce. Such risks for the Company include, but are not limited to, an evolving and unpredictable business model and management of growth. To address these risks, the Company must, among other things, maintain and increase its customer base, implement and successfully execute its business and marketing strategy, continue to develop and upgrade its technology and transaction-processing systems, improve its Web site, provide superior customer service and order fulfillment, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that the Company will be successful in addressing such risks, and the failure to do so could have a material adverse effect on the Company's business, prospects, financial condition and results of operations.
Since inception, the Company has incurred significant losses, and as of December 31, 1996 had an accumulated deficit of $6.0 million. The Company believes that its success will depend in large part on its ability to (i) extend its brand position, (ii) provide its customers with outstanding value and a superior shopping experience, and (iii) achieve sufficient sales volume to realize economies of scale. Accordingly, the Company intends to invest heavily in marketing and promotion, site development, and technology and operating infrastructure development. The Company also intends to offer attractive pricing programs, which will reduce its gross margins. Because the Company has relatively low product gross margins, achieving profitability given planned investment levels depends upon the Company's ability to generate and sustain substantially increased revenue levels. As a result, the Company believes that it will incur substantial operating losses for the foreseeable future, and that the rate at which such losses will be incurred will increase significantly from current levels. Although the Company has experienced significant revenue growth in recent periods, such growth rates are not sustainable and will decrease in the future. In view of the rapidly evolving nature of the Company's business and its limited operating history, the Company believes that period-to-period comparisons of its operating results are not necessarily meaningful and should not be relied upon as an indication of future performance.
Our primary source of revenue is the sale of a wide range of products and services to customers. The products offered on our consumer-facing websites primarily include merchandise and content we have purchased for resale from vendors and those offered by third-party sellers, and we also manufacture and sell electronic devices. Generally, we recognize gross revenue from items we sell from our inventory as product sales and recognize our net share of revenue of items sold by third-party sellers as service sales. We also offer other services such as compute, storage, and database offerings, fulfillment, publishing, digital content subscriptions, advertising, and co-branded credit cards.
Our financial focus is on long-term, sustainable growth in free cash flows1 per share. Free cash flows are driven primarily by increasing operating income and efficiently managing working capital2 and cash capital expenditures, including our decision to purchase or lease property and equipment. Increases in operating income primarily result from increases in sales of products and services and efficiently managing our operating costs, partially offset by investments we make in longer-term strategic initiatives. To increase sales of products and services, we focus on improving all aspects of the customer experience, including lowering prices, improving availability, offering faster delivery and performance times, increasing selection, increasing product categories and service offerings, expanding product information, improving ease of use, improving reliability, and earning customer trust. We also seek to efficiently manage shareholder dilution while maintaining the flexibility to issue shares for strategic purposes, such as financings, acquisitions, and aligning employee compensation with shareholders’ interests. We utilize restricted stock units as our primary vehicle for equity compensation because we believe this compensation model aligns the long-term interests of our shareholders and employees. In measuring shareholder dilution, we include all vested and unvested stock awards outstanding, without regard to estimated forfeitures. Total shares outstanding plus outstanding stock awards were 490 million and 483 million as of December 31, 2015 and 2014.
We seek to reduce our variable costs per unit and work to leverage our fixed costs. Our variable costs include product and content costs, payment processing and related transaction costs, picking, packaging, and preparing orders for shipment, transportation, customer service support, costs necessary to run AWS, and a portion of our marketing costs. Our fixed costs include the costs necessary to run our technology infrastructure; to build, enhance, and add features to our websites and web services, our electronic devices, and digital offerings; and to build and optimize our fulfillment centers. Variable costs generally change directly with sales volume, while fixed costs generally are dependent on the timing of capacity needs, geographic expansion, category expansion, and other factors. To decrease our variable costs on a per unit basis and enable us to lower prices for customers, we seek to increase our direct sourcing, increase discounts from suppliers, and reduce defects in our processes. To minimize growth in fixed costs, we seek to improve process efficiencies and maintain a lean culture.
Because of our model we are able to turn our inventory quickly and have a cash-generating operating cycle3. On average, our high inventory velocity means we generally collect from consumers before our payments to suppliers come due. Inventory turnover4 was 8 for 2015 and 9 for 2014 and 2013. We expect variability in inventory turnover over time since it is affected by several factors, including our product mix, the mix of sales by us and by third-party sellers, our continuing focus on in-stock inventory availability and selection of product offerings, our investment in new geographies and product lines, and the extent to which we choose to utilize third-party fulfillment providers. Accounts payable days5 were 77, 73, and 74 for 2015, 2014, and 2013. We expect some variability in accounts payable days over time since they are affected by several factors, including the mix of product sales, the mix of sales by third-party sellers, the mix of suppliers, seasonality, and changes in payment terms over time, including the effect of balancing pricing and timing of payment terms with suppliers.
We expect spending in technology and content will increase over time as we add computer scientists, designers, software and hardware engineers, and merchandising employees. Our technology and content investment and capital spending projects often support a variety of product and service offerings due to geographic expansion and the cross-functionality of our systems and operations. We seek to invest efficiently in several areas of technology and content, including AWS, and expansion of new and existing product categories and service offerings, as well as in technology infrastructure to enhance the customer experience and improve our process efficiencies. We believe that advances in technology, specifically the speed and reduced cost of processing power and the advances of wireless connectivity, will continue to improve the consumer experience on the Internet and increase its ubiquity in people’s lives. To best take advantage of these continued advances in technology, we are investing in initiatives to build and deploy innovative and efficient software and electronic devices. We are also investing in AWS, which offers a broad set of global compute, storage, database, and other service offerings to developers and enterprises of all sizes.
Our financial reporting currency is the U.S. Dollar and changes in foreign exchange rates significantly affect our reported results and consolidated trends. For example, if the U.S. Dollar weakens year-over-year relative to currencies in our international locations, our consolidated net sales and operating expenses will be higher than if currencies had remained constant. Likewise, if the U.S. Dollar strengthens year-over-year relative to currencies in our international locations, our consolidated net sales and operating expenses will be lower than if currencies had remained constant. We believe that our increasing diversification beyond the U.S. economy through our growing international businesses benefits our shareholders over the long-term. We also believe it is useful to evaluate our operating results and growth rates before and after the effect of currency changes.
In addition, the remeasurement of our intercompany balances can result in significant gains and charges associated with the effect of movements in foreign currency exchange rates. Currency volatilities may continue, which may significantly impact (either positively or negatively) our reported results and consolidated trends and comparisons.
The Company designs, develops, produces, markets, and services microprocessor-based personal computer systems for individual use in a variety of computing applications. The Company's computer systems are generally composed of a computer mainframe and peripherals, operating software to control the system and applications software to solve problems. In addition, supplemental circuit boards and optional accessories can be added to enable the computer to perform additional or different tasks.
Computer systems powerful enough to solve meaningful computing problems but priced low enough to be used by one person resulted from significant technical and manufacturing advances within the semiconductor and magnetic memory industries over the past ten years. These advances included the development of increasingly powerful microprocessor and memory circuits and significant reductions in the cost of these circuits. Similar developments occurred in magnetic storage as costs per unit of storage declined and capacities increased both for floppy (flexible) and rigid disks.
These advances and the introduction of a growing number of applications software packages resulted in the development of markets and applications for personal computer systems. Penetration of these markets has and will continue to require effective product marketing and distribution as well as the continuing development of easy-to-use software.
In 1976, two of the Company's founders designed, developed and assembled the Apple I, a microprocessor-based computer consisting of a single· printed circuit board. In April 1977 the Company introduced the Apple II computer mainframe which was similar to the Apple I but incorporated additional circuitry and a keyboard, and was packaged in a plastic housing. Although many of the early personal computers, including Apple's products, were purchased by hobbyists who were highly knowledgeable technicians, the Company believes that such purchases currently constitute a small and decreasing percentage of personal computer sales. .
In 1978 and 1979, the Apple II was improved with the addition of a more powerful disk operating system which facilitated the use of optional floppy disk storage in place of less efficient cassette tape storage. These enhancements increased the power and speed of the Apple II and facilitated the development of applications software. Independent firms began supplying a variety of applications" software and peripheral equipment for use with the Apple II, for such applications as small business accounting, text editing, portfolio analysis, laboratory data collection and teac~ing. The development of this software and equipment contributed to the growth of the low-cost personal computer market by increasing the variety of applications for which personal computers could be used. Today, the Company's systems are used by persons without prior computer experience as well as by persons with prior computer experience in business, education, scientific and engineering applications and, to a lesser extent, in the home.
In anticipation of market growth, in 1977 Apple commenced the development of a distribution network of independent regional distributors and local retail outlets. In 1980, Apple terminated its arrangements with its domestic distributors and commenced distribution of its products directly to retail stores in order to improve the management of the channels of distribution and to gain better access to end-users. See "Marketing" and "Litigation". Apple products are currently sold through approximately 800 independent retail outlets in the United States and Canada and internationally through 21 distributors which resell to approximately 1,000 retail dealers. Products are serviced in the United States and in Canada by approximately 700 of the retail stores and internationally by retail dealers.
The Company designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players, and sells a variety of related software, services, accessories, networking solutions and third-party digital content and applications. The Company’s products and services include iPhone ® , iPad ® , Mac ® , iPod ® , Apple Watch ® , Apple TV ® , a portfolio of consumer and professional software applications, iOS, macOS™, watchOS ® and tvOS™ operating systems, iCloud ® , Apple Pay ® and a variety of accessory, service and support offerings. The Company sells and delivers digital content and applications through the iTunes Store ® , App Store ® , Mac App Store, TV App Store, iBooks Store™ and Apple Music ® (collectively “Internet Services”). The Company sells its products worldwide through its retail stores, online stores and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers and value-added resellers. In addition, the Company sells a variety of third-party Apple compatible products, including application software and various accessories through its retail and online stores. The Company sells to consumers, small and mid-sized businesses and education, enterprise and government customers.
Google (Alphabet Inc.)
Google is a global technology leader focused on improving the ways people connect with information. Our innovations in web search and advertising have made our web site a top Internet destination and our brand one of the most recognized in the world. Our mission is to organize the world’s information and make it universally accessible and useful. We serve three primary constituencies:
Users. We provide users with products and services that enable people to more quickly and easily find, create and organize information that is useful to them.
Advertisers. We provide advertisers our Google AdWords program, an auction-based advertising program that enables them to deliver relevant ads targeted to search results or web content. Our AdWords program provides advertisers with a cost-effective way to deliver ads to customers across Google sites and through the Google Network.
Web sites. We provide members of our Google Network our Google AdSense program, which allows these members to deliver AdWords ads that are relevant to the search results or content on their web sites. We share most of the fees these ads generate with our Google Network members—creating an important revenue stream for them.
We were incorporated in California in September 1998 and reincorporated in Delaware in August 2003. We began licensing our WebSearch product in the first quarter of 1999. We became profitable in 2001 following the launch of our Google AdWords program.
As our founders Larry and Sergey wrote in the original founders' letter, "Google is not a conventional company. We do not intend to become one." That unconventional spirit has been a driving force throughout our history -- inspiring us to do things like rethink the mobile device ecosystem with Android and map the world with Google Maps. As part of that, our founders also explained that you could expect us to make "smaller bets in areas that might seem very speculative or even strange when compared to our current businesses." From the start, the company has always strived to do more, and to do important and meaningful things with the resources we have.
Alphabet is a collection of businesses -- the largest of which, of course, is Google. It also includes businesses that are generally pretty far afield of our main Internet products such as Access, Calico, CapitalG, GV, Nest, Verily, Waymo, and X. We report all non-Google businesses collectively as Other Bets. Our Alphabet structure is about helping each of our businesses prosper through strong leaders and independence.
Access and technology for everyone: The Internet is one of the world’s most powerful equalizers, and we see it as our job to make it available to as many people as possible. At its core, Google has always been an information company. We believe that technology is a democratizing force, empowering people through information. We are helping people get online by tailoring hardware and software experiences that suit the needs of emerging markets, primarily through Android and Chrome. We're also making sure our core Google products are fast and useful, especially for users in areas where speed and connectivity are central concerns. Other Alphabet companies are also pursuing initiatives with similar goals.
Moonshots: Many companies get comfortable doing what they have always done, making only incremental changes. This incrementalism leads to irrelevance over time, especially in technology, where change tends to be revolutionary, not evolutionary. People thought we were crazy when we acquired YouTube and Android and when we launched Chrome, but those efforts have matured into major platforms for digital video and mobile devices and a safer, popular browser. We continue to look toward the future and continue to invest for the long-term. We won't become complacent, relying solely on small tweaks. As we said in the original founders' letter, we will not shy away from high-risk, high-reward projects that we believe in because they are the key to our long-term success.
The power of machine learning: Across the company, machine learning and artificial intelligence (AI) are increasingly driving many of our latest innovations. Within Google, our investments in machine learning over a decade are what have enabled us to build Google products that get better over time, making them smarter and more useful -- it's what allows you to use your voice to search for information, to translate the web from one language to another, to see better YouTube recommendations, and to search for people and events that are important to you in Google Photos. Machine learning is also showing great promise in helping us tackle big issues, like dramatically improving the energy efficiency of our data centers. Across Other Bets, machine learning helps self-driving cars better detect and respond to others on the road, and can also aid clinicians in detecting diabetic retinopathy.
Serving our users: We have always been a company committed to making big bets that have the potential to improve the lives of millions of people. As the majority of Alphabet’s big bets continue to reside within Google, an important benefit of the shift to Alphabet has been the tremendous focus that we’re able to have on Google’s many extraordinary opportunities. Our innovations in areas like search and advertising have made our services widely used, and our brand one of the most recognized in the world. We generate revenues primarily by delivering online advertising that consumers find relevant and that advertisers find cost-effective.
Google's core products such as Search, Android, Maps, Chrome, YouTube, Google Play, and Gmail each have over one billion monthly active users. But most important, we believe we are just beginning to scratch the surface. Our vision is to remain a place of incredible creativity and innovation that uses our technical expertise to tackle big problems.
Google’s mission to organize the world’s information and make it universally accessible and useful has always been our North Star, and our products have come a long way since the company was founded nearly two decades ago. We used to show just ten blue links in our results, which you had to click through to find your answers. Now we are increasingly able to provide direct answers -- even if you're speaking your question using Voice Search -- which makes it quicker, easier and more natural to find what you're looking for. We also introduced the Google Assistant, which allows you to type or talk with Google in a natural conversational way to help you get things done. Over time, we have also added other services that let you access information quickly and easily -- like Google Maps, which helps you navigate to a store while showing you current traffic conditions, or Google Photos, which helps you store and organize all of your photos.
This drive to make information more accessible has led us over the years to improve the discovery and creation of digital content, on the web and through platforms like Google Play and YouTube. And with the migration to mobile, people are consuming more digital content by watching more videos, playing more games, listening to more music, reading more books, and using more apps than ever before.
Fueling all of these great digital experiences are powerful platforms and hardware. That’s why we continue to invest in platforms like our Chrome browser, Android mobile operating system, Chrome operating system, and Daydream virtual reality platform, as well as a new family of great hardware devices like the Pixel phone and Google Home.
Google was a company built in the cloud and has been investing in infrastructure, data management, analytics, and AI from the very beginning. We’ve taken those long-term investments and offer many of the same cloud services to our enterprise customers. Because more and more of today’s great digital experiences are being built in the cloud, our enterprise cloud products help businesses of all sizes take advantage of the latest technology advances to operate more efficiently.
Our mission is to make the world more open and connected. Facebook enables you to express yourself and connect with the world around you instantly and freely.
We build products that support our mission by creating utility for users, developers, and advertisers:
Users. We enable people who use Facebook to stay connected with their friends and family, to discover what is going on in the world around them, and to share and express what matters to them to the people they care about.
Developers. We enable developers to use the Facebook Platform to build applications (apps) and websites that integrate with Facebook to reach our global network of users and to build products that are more personalized, social, and engaging.
Advertisers. We enable advertisers to engage with more than 800 million monthly active users (MAUs) on Facebook or subsets of our users based on information they have chosen to share with us such as their age, location, gender, or interests. We offer advertisers a unique combination of reach, relevance, social context, and engagement to enhance the value of their ads.
We generate substantially all of our revenue from advertising and from fees associated with our Payments infrastructure that enables users to purchase virtual and digital goods from our Platform developers. For the year ended December 31, 2011, we recorded revenue of $3,711 million, operating income of $1,756 million, and net income of $1,000 million. We were incorporated in July 2004 and are headquartered in Menlo Park, California.
Our mission is to give people the power to share and make the world more open and connected.
Our top priority is to build useful and engaging products that enable people to connect and share through mobile devices, personal computers, and other surfaces. We also help people discover and learn about what is going on in the world around them, enable people to share their opinions, ideas, photos and videos, and other activities with audiences ranging from their closest friends to the public at large, and stay connected everywhere by accessing our products, including:
Facebook. Facebook enables people to connect, share, discover, and communicate with each other on mobile devices and personal computers. There are a number of different ways to engage with people on Facebook, the most important of which is News Feed which displays an algorithmically-ranked series of stories and advertisements individualized for each person.
Instagram. Instagram enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends.
Messenger. Messenger allows for a rich and expressive way to communicate with people and businesses alike across a variety of platforms and devices, which makes it easy to reach almost everyone seamlessly and securely.
WhatsApp. WhatsApp Messenger is a fast, simple and reliable messaging application that is used by people around the world and is available on a variety of mobile platforms.
Oculus. Our Oculus virtual reality technology and content platform power products that allow people to enter a completely immersive and interactive environment to play games, consume content, and connect with others.
We generate substantially all of our revenue from selling advertising placements to marketers. Our ads let marketers reach people based on a variety of factors including age, gender, location, interests, and behaviors. Marketers purchase ads that can appear in multiple places including on Facebook, Instagram, and third-party applications and websites.
We are also investing in a number of longer-term initiatives, such as connectivity efforts and artificial intelligence research, to develop technologies that we believe will help us better serve our communities and pursue our mission to make the world more open and connected.
Microsoft designs, develops, markets, and supports a product line of systems and applications microcomputer software for business and professional use. The Microsoft Software Product Line chart inside the front cover of this Prospectus illustrates the evolution and diversity of the Company’s product line. Microsoft markets over 40 software products, including three operating systems, computer language products in six computer languages, and business applications software in the following categories: word processing, spreadsheet, file management, graphics, communications, and project management. The Company’s products are available on 8-bit, 16-bit and 32-bit microcomputers domestically and internationally, including IBM, Tandy, Apple (Macintosh and Apple II series), COMPAQ, Olivetti, AT&T, Zenith, Wang, Hewlett-Packard, DEC, Siemens, Philips, Mitsubishi, and NEC.
Microsoft MS-DOS, introduced in 1981 as a 16-bit operating system for Intel microprocessor architectures, is running on approximately four million IBM PC and IBM compatible microcomputers, according to industry publications. The Company believes that more of the widely used business applications programs run on Microsoft MS-DOS than on any other 16-bit microcomputer operating system. Microsoft XENIX, a UNIX-based multi-user 16-bit operating system for microcomputers, is designed to accommodate transaction oriented data processing tasks. The Company’s first product, Microsoft BASIC Interpreter, which was introduced in 1975, and newer versions of Microsoft BASIC Interpreter are running on an estimated eight million microcomputers, according to industry publications. The Company also markets compiler products in the following computer languages: BASIC, “C”, FORTRAN, COBOL, and Pascal, and machine language assembler products. Microsoft Word, a word processing program introduced in 1983, Microsoft Multiplan, an electronic spreadsheet introduced in 1982, and Microsoft Chart, a graphics product introduced in 1984, are business applications products which run on Microsoft MS-DOS-based computers and on the Apple Macintosh. Microsoft Excel, an integrated spreadsheet introduced in 1985, and Microsoft File, a file management product also introduced in 1985, run on the Apple Macintosh. Microsoft Access, a communications tool released in 1985, and Microsoft Project, a project management product introduced in 1984, are MS-DOS applications.
Microsoft develops most of its software products internally using proprietary development tools and methodology. As of December 31, 1985 the Company employed 271 persons in software product development.
Microsoft markets and distributes its software products domestically and internationally through both the OEM and retail channels. In the OEM channel Microsoft generally provides an OEM with master copies of the software and documentation and the OEM duplicates, packages, and distributes them, although there is increasing OEM marketing of Microsoft’s packaged language and applications products. The Company’s domestic OEM sales force of approximately 20 has an active technical and business information relationship with approximately 100 OEM customers. Domestic retail marketing involves the distribution of Microsoft’s packaged software products primarily through independent distributors, large volume dealers, corporate key dealers, and other dealers, and direct marketing to corporate customers, government agencies, and colleges and universities. International OEM and retail marketing and distribution of domestic and foreign language versions of the Company’s systems software and applications software are conducted through seven foreign subsidiaries and several independent sales representatives. International Operations maintains an active technical and business information relationship with approximately 80 OEM customers.
The Company also designs and markets Microsoft® Mouse pointing and editing devices. Microsoft Press has published 27 books since it commenced operations in 1983, including Running MS-DOS®, by Van Wolverton and The Peter Norton Programmer’s Guide to the IBM PC, by Peter Norton.
Microsoft is a technology company whose mission is to empower every person and every organization on the planet to achieve more. Our strategy is to build best-in-class platforms and productivity services for a mobile-first, cloud-first world. We develop, license, and support a wide range of software products, services, and devices that deliver new opportunities, greater convenience, and enhanced value to people’s lives.
We generate revenue by licensing and supporting an array of software products, by offering a wide range of services, including cloud-based services to consumers and businesses, by designing, manufacturing, and selling devices that integrate with our cloud-based services, and by delivering relevant online advertising to a global audience. Our most significant expenses are related to compensating employees; designing, manufacturing, marketing, and selling our products and services; datacenter costs in support of our cloud-based services; and income taxes.
Much of our focus in fiscal year 2016 was toward transforming our organization to support our strategy of building best-in-class platforms and productivity services for a mobile-first, cloud-first world. We achieved product development milestones, implemented organizational changes, and made strategic and tactical moves to support the three central ambitions that support our strategy: reinventing productivity and business processes; building the intelligent cloud platform; and creating more personal computing.
We design, manufacture and sell high-performance fully electric vehicles and advanced electric vehicle powertrain components. In addition to designing and manufacturing our vehicles, we sell and service them through our own sales and service network.
We were incorporated in Delaware in 2003 and introduced our first vehicle, the Tesla Roadster, in early 2008. In July 2009, we introduced a new Roadster model, the Tesla Roadster 2, and its higher performance option package Roadster Sport. As of December 31, 2009, we had sold 937 Tesla Roadsters to customers in 18 countries. We are developing our planned Model S sedan which we currently expect to introduce in 2012.
We market and sell our vehicles directly to consumers via the phone and internet, in-person at our corporate events and through our network of Tesla stores. We opened our first store in Los Angeles, California, in May 2008 and as of December 31, 2009, we operated a total of 10 Tesla stores in North America and Europe.
We have entered, and intend to enter, into development and commercial agreements with other manufacturers for the development and sale of electric powertrain components. From inception through September 30, 2009, our powertrain development activities related exclusively to an agreement entered into in May 2009 with Daimler AG, or Daimler, for the development of a battery pack and charger for Daimler’s Smart fortwo electric drive. We have been selected by Daimler to supply it with up to 1,000 battery packs and chargers to support a trial of the Smart fortwo electric drive in five European cities. We began shipping the first of these battery packs and chargers in November 2009 and started to recognize revenue for these sales in the quarter ended December 31, 2009.
Since inception through September 30, 2009, we have recognized $108.2 million in revenue. As of September 30, 2009, we had an accumulated deficit of $236.4 million. We experienced net losses of $30.0 million for the year ended December 31, 2006, $78.2 million for the year ended December 31, 2007, $82.8 million for the year ended December 31, 2008, and $31.5 million for the nine months ended September 30, 2009.
We design, develop, manufacture, and sell high-performance fully electric vehicles, and energy storage products. We are currently producing and selling our Model S sedan and our Model X sport utility vehicle. Since the introduction of Model S in June 2012, we have enhanced our vehicle offerings with all-wheel drive capability, autopilot options, and free over-the-air software updates. We commenced customer deliveries of our Model X in September 2015 and are currently ramping production. We have delivered over 107,000 vehicles through December 31, 2015. We intend to unveil Model 3, a lower priced sedan designed for the mass market, in the first quarter of 2016 and expect to commence production and deliveries of this vehicle in late 2017.
In addition to our automotive products, we recently announced the next generation of our energy storage products, the 7 kWh and 10 kWh Powerwall for residential applications and the 100 kWh Powerpack for commercial and industrial applications. We began production and deliveries of these products, which we will sell under the Tesla Energy brand, in the third quarter of 2015. We transitioned the production of these products from the Fremont Factory to the Gigafactory during Q4 2015.
Our primary source of revenue is from the sale of our vehicles. During the year ended December 31, 2015, we recognized total revenues of $4.05 billion, an increase of $847.7 million over total revenues of $3.20 billion for the year ended December 31, 2014, primarily driven by growth of Model S deliveries worldwide. Gross margin for the year ended December 31, 2015 was 22.8%, a decrease from 27.6% for the year ended December 31, 2014.
We continue to increase our sales and service footprint worldwide and expand our Supercharging and destination charging networks. With the continued global expansion of our customer support and Supercharger infrastructure, selling, general and administrative expenses were $922.2 million for the year ended December 31, 2015, compared to $603.7 million for the year ended December 30, 2014.
Twitter is a global platform for public self-expression and conversation in real time. Our platform is unique in its simplicity: Tweets are limited to 140 characters of text. This constraint makes it easy for anyone to quickly create, distribute and discover content that is consistent across our platform and optimized for mobile devices. As a result, Tweets drive a high velocity of information exchange that makes Twitter uniquely “live.”
We have already achieved significant global scale, and we continue to grow. We have more than 215 million MAUs spanning nearly every country. Our users include millions of people from around the world, as well as influential individuals and organizations, such as world leaders, government officials, celebrities, athletes, journalists, sports teams, media outlets and brands. Our users create approximately 500 million Tweets every day.
The value we create for our users is enhanced by our platform partners and advertisers. Millions of platform partners, which include publishers, media outlets and developers, have integrated with Twitter, adding value to our user experience by contributing content to our platform, broadly distributing content from our platform across their properties and using Twitter content and tools to enhance their websites and applications. In addition, advertisers use our Promoted Products to promote their brands, products and services, amplify their visibility and reach, and complement and extend the conversation around their advertising campaigns. Although we do not generate revenue directly from users or platform partners, we benefit from network effects where more activity on Twitter results in the creation and distribution of more content, which attracts more users, platform partners and advertisers, resulting in a virtuous cycle of value creation.
We generate the substantial majority of our revenue from the sale of advertising services, with the balance coming from data licensing arrangements. We generate nearly all of our advertising revenue through the sale of our three Promoted Products: Promoted Tweets, Promoted Accounts and Promoted Trends. The substantial majority of our advertising revenue is generated on a pay-for-performance basis, which means advertisers are only charged when a user engages with their ad, creating an attractive value proposition for our advertisers.
We launched our first Promoted Products in mid-2010 in the United States by introducing Promoted Tweets in search results and Promoted Trends. Since that time, we have expanded our Promoted Products to add Promoted Accounts and extended our Promoted Products across our platform and to additional geographies. We generate advertising sales in the United States and certain other geographies through our direct sales force, as well as through our self-serve advertising platform.
We introduced Promoted Products on our iOS and Android mobile applications in February 2012. Over 65% of our advertising revenue was generated from mobile devices in the three months ended June 30, 2013.
Our international revenue was $53.0 million and $62.8 million in 2012 and the six months ended June 30, 2013, respectively, representing 17% and 25% of our total revenue for those periods, respectively. We launched Promoted Products in selected international markets in the third quarter of 2011, and we expect to continue to launch our Promoted Products in additional markets over time. We have recently focused our international spending on sales support and marketing activities in specific countries, including Australia, Brazil, Canada, Japan and the United Kingdom. In certain international geographies where we have not invested to build a local sales force, we rely on resellers that serve as outside sales agents for the sale of our Promoted Products. In the six months ended June 30, 2013, we and our resellers sold our Promoted Products to advertisers in over 20 countries outside of the United States. We record advertising revenue based on the billing location of our advertisers, rather than the location of our users.
We are headquartered in San Francisco, California, and have offices in over 15 cities around the world.
Twitter gives everyone the power to create and share ideas and information instantly without barriers. Our service is live—live commentary, live connections, live conversations. Whether it is breaking news, entertainment, sports, or everyday topics, hearing about and watching a live event unfold is the fastest way to understand the power of Twitter. Twitter has always been considered a "second screen" for what is happening in the world and we believe we can become the first screen for everything that is happening now. And by doing so, we believe we can build the planet’s largest daily connected audience.
Our Users. We are committed to refining our core service to better enable people to more easily create, share and consume content that is important to them. As part of that strategy, we will be focusing on live streaming video, which we believe is a strong complement to the live nature of Twitter. We will also be working toward giving our creators and influencers better tools to build and connect with their fans and audience through Twitter. Finally, we intend to invest more resources in making our platform safer by implementing technology to better detect the use of repeat abusive accounts, making it simpler for our users to report multiple abusive Tweets or accounts, and giving people simpler tools to curate and control their experience on Twitter.
Our Advertisers . Our three main initiatives to improve our advertisers’ ability to connect with their customers are: (i) building a rich canvas for marketers by incorporating additional features such as video into our Promoted Products, (ii) increasing advertisers’ return on investment, or ROI, with improved measurement, bidding and relevance capabilities and (iii) increasing advertisers’ scale and reach by leveraging Twitter’s unique global audience.
Our Developers. We are committed to providing a platform for developers to build, grow, and generate revenue with their sites and apps. In turn, we believe that these sites and apps provide us with strategic value by enabling us to demonstrate the importance of Tweets and extend their reach beyond Twitter.