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article imageTwo industry reports help shape a bullish Twitter valuation

By Michael Krebs     Jan 22, 2014 in Business
As equities analysts struggle to find a consensus and an overall value for Twitter, just months after the company went public, important details are emerging on how wrong the commercial social media community is viewing Twitter.
The Twitter IPO has been considered among the more volatile in recent Wall Street memory. From its public debut just over two months ago, Twitter (TWTR) has run from just under $39 to just under $75, closing today at $62.49.
But there is no meaningful consensus on how to assess a valuation on the company, with some analysts suggesting the stock is worth roughly $32, while others place its 12-month price at $65, and another camp pushing a bullish $75 valuation.
As Twitter's prospects rely on the revenues the company generates from the advertising and corporate communications communities, it would appear the industries served by the social media concern should provide some judgement on the matter of the company's value. Two reports published today helped deliver that insight.
In a blog post by business-to-business marketing veteran Eric Wittlake, the evaluation of Twitter's advertising platform was more closely scrutinized.
"What happens when you survey 50 media buyers," Wittlake wrote. "You learn that media buyers have put a bit of social lipstick on their buys but they still don’t understand the potential of social media, the importance of content, and so much more."
Wittlake cited a survey conducted by two research equity analysts at Cowen & Company that sourced 50 media buyers on the question of overall social media return-on-investment. 60 percent of those surveyed said Facebook delivered the best ROI, 25 percent chose LinkedIn, and only 5 percent selected Twitter.
According to Wittlake, the media buying community does not understand the complexities found in the advertising platform offered by Twitter. And, given this collective lack of understanding, the analysis provided by Cowen & Company (recommending Twitter's value at $32) is not entirely complete.
PR Daily also released a Mashable report on Twitter usage, exposing a widespread lack of understanding of social media - and of Twitter in particular - across 98 of the top 100 brands using Twitter.
The study, conducted by Simply Measured, found that "the majority of brands average at most ten tweets per day. This includes @replies and retweets."
Both industry reports suggest that Twitter remains an under-utilized social media tool among industries - advertising and public relations - that consider themselves savvy in the social media space.
In large part, this lack of understanding is Twitter's fault - as it is necessary for their commercial teams to educate the communities most responsible for Twitter's future revenue gains. However, if equities analysts are making their valuation recommendations from a misinformed and under-educated community, Twitter's upside - as the commercial communities become more aware of the company's many solutions - seems very much unrealized.
Twitter is expected to announce their fourth quarter and fiscal year 2013 results on February 5.
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