Twitter may be tapping a much more lucrative user base than Facebook does, says one analyst.
Tom Forte, Managing Director and Senior Analyst with New York-based Telsey Group was on BNN’s “Business Day” Friday to talk about the impending Twitter IPO.
The comparisons to Facebook’s IPO in May of last year will without doubt dog the San-Francisco-based company for months to come, but Forte says Twitter stacks up favourably against the world’s largest social media site.
“I think if you were to do a quick compare/contrast on where Facebook was when they went public, and where Twitter is today, Facebook had a much more mature user audience and was early stage monetization,” he says. “I think that Twitter has more upside in their audience, but they are also much earlier in their monetization than Facebook was at this point in time.”
Forte says Twitter is going to have to show that they can grow their audience and monetize it, but the company is unique, and the Twitter vs. Facebook debate may not be as lopsided as it seems.
“Others are trying to make themselves more like Twitter,” says Forte, pointing out that Facebook itself just added hashtags to its service. “But I really think Twitter is unique…they are very well positioned. The Telsey Group analyst says it is unlikely Facebook or Linkedin will be able to encroach on Twitter’s territory because they have already carved out a differentiated spot in the social media space.
So the million dollar question. what does Forte think Twitter will come out at, valuation wise?
“It’s not unusual right now for some of these faster growing internet companies to trade at EV/EBITDA (a comparison of a company’s enterprise value to its earnings) valuations north of twenty times,” he says. “If you look at some of the more successful companies like Linkedin, or you look at some of the software-as-a-service companies like Saleforce.com, they’re trading at north of thirty times EV/EBITDA.”
Forte thinks Twitter will be at or near the top end of that group. He adds that the recent performance of Facebook, which is trading at all-time highs after slumping following its IPO, bodes well for Twitter, which will make the majority of its profit from mobile advertising sales.
Facebook’s current EV/EBITDA ratio is 20.59.