Twitter will have a bigger market cap than Facebook (FB) within three years.
It seems hard to believe when you first read that. Facebook is older, has always been bigger, appealed to more of a mainstream audience and had more revenue than Twitter.
Momentum is a tough thing to stop once it's rolling down a hill. Besides, Facebook is at around one billion users right now while Twitter should get to something like 400 million by the end of this year.So how is it possible that Twitter could surpass Facebook in three years' time in market cap? Here is one scenario to consider. Both Twitter and Facebook are eager to tap into the larger advertising budgets that are allocated by big brands to television and older media compared to online advertising. Facebook was big on spinning this potential growth for itself in its S-1 and I'm sure that Twitter will do the same. Back in the S-1, Facebook tried to spin an average day on Facebook as equivalent for an advertiser to reach an audience that is three times the size of an American Idol finale. Twitter has also been building connections with television and media as well. The Twitter hashtag is now almost on virtually all ads and TV shows today. Market cap is all about future expectations of how a business will grow rather than a reflection of that business today. Therefore, the only way that Twitter could have a bigger market cap than Facebook in three years from now would be if investors then expected Twitter's growth in the next five years (i.e., eight years from now) to be bigger than Facebook's prospects. (YHOO) of three years from now (with a really big user base but not a lot of top-line growth). At the same time, Twitter would have to dramatically change its future prospects. We would all have to see Twitter as something more than a news service.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV