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Kass: How Tweet It Is

Importantly, the company I was most bearish on was AOL (not in the beginning of its life but rather during its maturation and within an increased competitive landscape).

Let me summarize my street cred of Internet skepticism.

  • America Online and the Internet stock bubble. I was among the most vociferous bears extant on technology in the late 1990s. In 1997, I wrote a cautious editorial, "Kids Today" in Barron's, skeptically voicing that the boom in technology/Internet stocks would end in disaster for most traders and investors. AOL's shares eventually fell by 85% -- to this day, it was one of my greatest shorts. AOL had company, for as many recall, the Nasdaq ultimately fell by 75% from the 2000-2001 high. In the second half of 1999 and into the early 2000s, I participated in a number of interviews with Barron's Alan Abelson in which I expressed a negative view directed toward the shares of AOL (later turning more positive). I predicted a steady decline in subscribers as the ISP space became more crowded and competitive -- I was correct -- and for the Internet sector in general. After the merger with Time Warner (TWX) in 2000, the shares fell from the $70s to $10 share. Finally, I invented a "Stock Market Super Bowl Indicator," and my first one (published by Alan Abelson) cautioned that danger was ahead for the Internet sector based on mushrooming in ad spending back in 2000-2001.
  • The Facebook IPO fiasco. Additionally, last year I wrote an out-of-consensus negative analysis of Facebook (FB) well before the company went public. Months before the Facebook IPO, I opined that it would be a grand failure (beginning on the first day of its public offering).

Buy Twitter's Shares

Twitter is uniquely positioned in for the mobile delivery of content and advertising. Twitter reminds me of Web portal America Online during its formative growth period of the early 1990s. Back then, AOL and CompuServe formed a strong duopoly in the Internet service provider and email spaces. Eventually, CompuServe, which served the technical community and was a wholly owned subsidiary of H&R Block (HRB), lost market share, and by providing Internet access to the consumer and aggregating information for those who were not very familiar with navigating the Internet, AOL had a dominating position as it exited the decade. AOL's shares rose spectacularly during the period. Today, Twitter is much like America Online was from 1992 to 1995, practically all alone in its monopoly market position.

Twitter holds a first adopter and monopolistic position. Twitter has a long runway ahead of it, where it faces limited direct competition. Whereas in the early 1990s AOL and CompuServe held a duopoly, Twitter has the market to itself. There are two obvious potential competitors to Twitter: Facebook and Google (GOOG). Facebook is trying but just can't get there as of yet for real-time. On Google, I don't think the company has any interest in competing against Twitter. According to an exchange I had with BTIG's Rich Greenfield, it feels more like Google wants to be the back-end connectivity of your identity online with Google Plus compared to Twitter as a real-time news source.

Twitter stands in the middle of the evolution of content creation, distribution and discovery. Twitter is the natural service that follows the 25-year-old tradition of a changing delivery of content creation, distribution and discovery that were previously the property of Web browsers such as Netscape in the early 1990s, Web portals such as AOL and Yahoo! (YHOO) in the mid to late 1990s, search engines such as Google in the early 2000s and social networks such as Facebook in the late 2000s.

Twitter is gaining broad acceptance. A 2013 study conducted by Arbitron and Edison Research found that 44% of Americans hear about tweets through media channels other than Twitter almost every day. As the company expands, so will the breadth of content and Twitter's reach.

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