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[video] Taking A Risk With Twitter

NEW YORK ( TheStreet) -- Twitter recently filed its S-1 form with the SEC, as investors anxiously await its IPO. However, TheStreet's Chris Ciaccia and Debra Borchardt provide some warning signs for prospective buyers.

The recent success of other social media companies is creating a lot of buzz surrounding Twitter, which plans to use the ticker, "TWTR."

While rather high, 83% of its revenues come from advertising. But Ciaccia was quick to point out that it's a similar story with Facebook (FB - Get Report), Yelp (YELP - Get Report) and other social media companies.

He added that it's up to Twitter to convince advertisers to continue using its promoted tweets and posts, which has seemed to work so far, with revenues continuing to more than double year-over-year.

Another concern is Twitter's active users, which actually fell, according to the filing. The 218 million monthly active users and 100 million daily users significantly lags behind Facebook.

Ciaccia added that 75% of Twitter's revenue comes from the United States, despite its large international presence. That will have to change, as Twitter needs to find a way to tap advertising dollars from other companies abroad.

And while Facebook or Google (GOOG - Get Report) could come up with a similar platform to Twitter, Ciaccia didn't seem to think that will work.

He concluded that Twitter is the place to be for real-time news and breaking stories, which have even moved markets. Although he likes the company's prospects going forward, he admitted that he'd rather buy a mutual fund or business development firm with exposure to the name.
Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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