Twitter Could Be Profitable Now: Galloway

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Nov. 11 (Bloomberg) -- NYU Stern School of Marketing's Scott Galloway discusses the Twitter IPO with Deirdre Bolton on Bloomberg Television's "Money Moves." (Source: Bloomberg)

About what will make or break twitter.

When will twitter be profitable?

I think they could be now.

A lot of people say they are losing money and slam the organization for it, but it is a great business model with great technology.

You and me provide the content for free.

I think they could be doing 30% ebitda.

They are plowing a ton of money back into the business, the same way that linkedin was doing when they went public.

They are hiring like crazy.

It is a massive injection into the new york real estate and silicon valley real estate economies.

They are hiring like crazy.

To your point, they can be profitable now.

They announced a layering system where eventually you and i may or may not choose to pay for the streams that we really care about.

We are contributing for free and we get the information for free.

Linked in is one of the few platforms that shows multiple revenue streams, which they are getting from upgraded accounts.

There are a few things to love about twitter.

A quarter billion users, well- respected management team, externally and internally.

Dick costolo gets fantastic marks from his employees.

They are the only company pursuing this amorphous strategy, getting a piece of the worlds largest media market, the television advertising market.

Facebook is there but they are late.

Twitter is number one.

There are some great things about the company.

You and i have talked about how twitter is eating saving life tv.

You are watching a sports event, and you comment on a play, and that makes you want to watch tv, support the advertisers of that event.

Even though we have more appointment television, there are still shows that have this huge social media presence.

"mad men" is one of them.

It is this experience of watching tv, updating their feet, amplifying the commercials.

That is the good.

Now let's talk about the bad.

Valuation, in one word.

This is trading at 45 times revenue come a compared to 18 for facebook, linkedin, 20. it is hard to make a rational argument why, on a price to sales basis, this is worth 2.5 times every other social media platform.

This is a great company, but the question is, how does it sustain this type of valuation?

One of my colleagues said they needed $3 billion in two years and $33 billion in revenue in 10 years.

That is big.

Those are some pretty lofty aspirations, even if they have the right leadership and great demographics.

Then there is the ugly.

Some research shows twitter does not play that key a role in the ecosystem.

If you look at the amount of traffic they drive for likely advertisers, it is actually very modest.

In addition, the traffic is not very high value.

Live time value and the conversion of purchase from traffic from twitter is really weak.

So where this all heads is probably lower power, ctm's, and not a lot of pricing power.

That is an important thing to point out.

What about these companies feeding into facebook and twitter?

Let's say bmw is a client.

If you are in the tri-state area and you are watching tv and a bmw ad comes on tv, and you are working with the right ad company, you will get it on your twitter and facebook news, but that is not enough.

That is a great strategy.

If they can coordinate with broadcasters, that is a neat idea, but it is still not as powerful as you typing in bmw into your search box.

Better yet, if you are on amazon and you type in bmw format, you can get them to your door within two days, and now even on sunday.

Lower cpm's. always great to see you,

This text has been automatically generated. It may not be 100% accurate.


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