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In Twitter We Trust ... Maybe

In Twitter We Trust ... Maybe
Photograph by Chris Ratcliffe/Bloomberg

Twitter’s market cap stands at almost $25 billion, as of the close of trading on Nov. 14. Twitter isn’t alone—all of the leading “next-generation digital” companies, whether public or pre-IPO, have extremely attractive valuations. The combined value of all the publicly traded traditional television companies in the U.S.—studios, broadcast networks, TV stations (excluding cable companies)—is roughly equal to Facebook’s $115 billion market cap. Investors have similarly high expectations for pre-IPO companies as varied as Pinterest, BlueKai, Criteo, and Snapchat to one day reach the same staggering valuations.

These next-generation digital businesses share with traditional media the fact that they get, or will need to get, the lion’s share of their revenue from advertising and other marketing services. But to tap into this pool of spending, they must develop new and better services that offer a much more complete and tailored understanding of consumers. Almost all of these services require the use of consumer data in ways far outside the original purpose for which the data were collected, whether it’s location information from a smartphone used to deliver a geographically targeted ad, data from a social network to recommend a new product, or purchase stats to offer a “flash sale.”