Now microblogging service Twitter has released documents ahead of a stock market float, it’s possible to start looking at the viability and stock market valuation of the company.
When Facebook’s float was first mooted in early 2011, we looked at how the social media service stacked up against Google a decade earlier. The question was ‘is Facebook worth $50 billion?’
The stockmarket answer was resounding ‘yes’ despite an initial fall that saw investors face a 50% loss in the early days of Facebook being a public company. Today the stock has a market valuation of $122 billion, with an eye popping price/earnings ratio of 122.
So how does Twitter stack up at the valuations being discussed? Quite well it appears when we put it against Google, Facebook and LinkedIn.
| Company | ||||
| Market Cap | 288 | 123 | 27 | 13 |
| P/E | 25 | 288 | 901 | 29 |
For Twitter, the real challenge is making money from the service and their latest idea is marketing the service as an essential companion to watching TV.
The discussion over how Twitter makes money exposes another problem for the service in it has no obvious revenue stream which makes comparing the platform to Facebook or LinkedIn rather problematic.
Facebook has advertising while LinkedIn has premium subscriber services both of which are problematic.
Not having an obvious revenue model may not turn out to be a problem – as LinkedIn’s P/E shows – and Twitter’s founders are probably more likely than anyway to be the digital media industry’s David Sarnoff.
It may be Twitter makes its money from giving advertisers, marketers and others access to the massive stores of data the company is accumulating.
Whatever way it turns out, Twitter’s going to be the hot IPO news for the tech industry for the rest of the year. At current prices, the investors will be lining up to buy the stock.