Twitter gets most of its revenue from advertising in the form of “promoted tweets,” but has only been doing this for about three years, and the model is not fine-tuned, said Nate Elliott at Forrester Research.
“Marketers’ most common objective on Twitter is to build brand awareness. But consumers are most likely to become a fan or follower of a company in social media after they’ve already bought from that company,” Elliott wrote on a blog.
“Twitter must do more to support marketers. Twitter’s marketing business is still relatively young… but that business must mature quickly.”
Other analysts are sceptical, saying the company’s model is unproven and that social media trends are too unpredictable to justify its high valuation.
A report by investment firm Sterne Agee said Twitter is valued more than 50 percent higher than its “high growth peers” including Facebook, LinkedIn and Yelp.
Pivotal Research said it sees Twitter as “a highly volatile security,” but said it “will probably maintain an upward trajectory” unless it stumbles.
Victor Anthony at Topeka Capital Markets said he expects Twitter to grow faster than most expect, and set a $54 price target for the stock.
“A look back shows that consensus has underestimated social media financial performance,” Anthony said in a note to clients.
“Hence, we stand by our numbers.”
As the IPO hits Wall Street, another offering appeared on the horizon from Square, led by one of Twitter’s founders, Jack Dorsey, according to the Wall Street Journal.
The newspaper said the mobile payments platform was in discussions for an IPO which could be launched in 2014.
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