NEW YORK (TheStreet) -- Twitter's initial public offering could wind up going down as the "anti-Facebook (FB)" debut, as the company is proving more than capable of blasting the skeptics of its long-term revenue growth potential. Twitter's accelerated buildup of media partnerships prior to its pending IPO on the New York Stock Exchange is significantly bolstering the potential for an ad dollar multiplier effect that could generate enough investor excitement to keep shares sharply higher post-IPO.
Since September, the micro-blogging site has signed media relationships with a prominent array of names including the National Football League, CBS (CBS), BBC Global News, Comcast (CMCSA), and Comcast unit NBCUniversal. Each group has partnered with Twitter through its Amplify promotional program tying together social TV conversations and embedded video clips from TV broadcasters. Comcast has gone even further than the others by developing a "See It" feature with Twitter, from which it is poised to connect millions of Twitter users to its live TV programming.
"Any media outlet that does business has got to have an agreement with Twitter," says Jeff Sica, a consultant to the entertainment industry and the chief investment officer of Sica Wealth Management, which oversees more than $1 billion in assets. The media partnerships should be a big boost to all parties involved because all that content generated from the partnerships could drive an increase in engagement for Twitter and heighten viewership for the broadcasters from mobile devices, the hottest market right now for advertisers. Advertisers would see the benefit of strengthening their agreements with both sides of the partnership.
Of all the media deals inked by Twitter recently, the most impressive has been the one with Comcast and NBCUniversal because they went the extra mile to expand their presence on Twitter. With people likely to spend more time on their mobile devices tuning into Comcast and NBCUniversal's live programming via Twitter and with a boon to all the brands involved, there will be a tremendous incentive for more mobile advertising dollars to come rolling in.
Three or four more of such types of deeply integrated media relationships would trigger an exponential growth in annual mobile ad revenues off of the initial media-partnership driven base of hundreds of millions of potential dollars. "Twitter's redefining how people watch TV," said Sica. "I think it's a brilliant partnership."
In addition to following a strong, viable action plan for revenue growth, Twitter, unlike Facebook during its IPO process, has also shrewdly avoided the possibility of overestimating demand. According to its latest S-1 securities update, Twitter intends to sell 70 million shares at $23 to $25 each, though pricing and the size of the offering are subject to change. Twitter, earlier had said it would sell its shares at a range of $17 to $20.
The combination of strong growth potential, a conservative offering and buying momentum could fuel a doubling in Twitter share prices.
Sica predicts shares will hit up to $40. His estimate factors in the potential for a giant retailer like Wal-Mart (WMT), Costco (COST) or Amazon (AMZN) to take advantage of the accelerating Twitter buzz to announce a high profile agreement that would spread the word about big promotions and boost traffic to the retailer's website. Having invented and perfected online retailing and demonstrated epic growth, Amazon in particular, would see incredible synergies with Twitter. "A platform such as Twitter would potentially harness the holy grail of retail, which is impulse buying," says Sica.
Santosh Rao, a senior analyst at Greencrest Capital Management, has pegged the surge at a more conservative 25% to 30% from a valuation in the low $20 range at the open. He's urging some self-control, as he would do for any hot IPO. If the shares were to exceed $30, he'd wait for a few more incremental data points on mobile ad rates and a pullback first before making any definitive buying decisions. He says that a valuation increase of up to $25 to $27 would be justifiable based on current revenue growth assumptions.
Already deep into its eight-day roadshow, Twitter's meeting with investors has been generating reports about some preoccupation with the company's earnings, as it has been reticent about providing detail in the way of turning a profit. However, these concerns are being offset by ongoing confidence that the company is still easily on track to profitability in light of hard evidence that Twitter's mobile ad revenue is showing no signs of slowing down.
Although mobile advertising already represents nearly half of Twitter's total advertising revenue, digital marketing expert eMarketer estimates there's still more room for the company to grow in this area. It's forecasting a compound annual growth rate in U.S. mobile ad revenue of over 66.8% from 2012 to 2015. The majority of Twitter's ad revenues are generated in the U.S., but the company stated in its S-1 that it's working on strengthening partnerships abroad to build out its presence in new and emerging markets.
Big enterprises will continue to be persuaded to gravitate towards Twitter for media partnerships, feeding its mobile ad revenue growth machine. Likewise, Twitter will also continue to be an attractive promotional tool for celebrities and politicians.
"Comparatively, Twitter's advertising method is much clearer than Facebook's," comments Sharada Panchal, a senior market research analyst at MarketsandMarkets. The guarantee of speed and conversation is what makes Twitter's marketing platform ideal for brand promotion. Promoted tweets, promoted trends and promoted accounts offer large companies new opportunities to both leverage a huge number of followers as well as target a very specific set of customers in a very short time. Furthermore, Twitter's platform encourages greater levels of interaction between advertisers and users, bolstering the advertisers' ability to further widen their audience reach.
-- Written by Andrea Tse in New York
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