Tomahawk, WI 01/13/2014 (BasicsMedia) – Twitter Inc (NYSE:TWTR) has never been a hot favorite with analysts, they were predicting that the IPO would not do well, and then they predicted that the share prices would fall and now they are busy downgrading the stock. After all how could professionally qualified people recommend a stock which is valued at almost 50 times its revenues and that too, when it is losing money?

Twitter’s Business

Everybody knows that Twitter Inc (NYSE:TWTR) is a social media platform, users publish their views or comments or even their social updates on this site. These are then broadcast to their circle (followers). Like Facebook Inc (NASDAQ:FB) or LinkedIn Corp (NYSE:LNKD) or even Google Inc (NASDAQ:GOOG), Twitter does not charge such users from using its services. The subscriptions are free. The social media sites then approach advertisers who place their advertisements as in normal media channels like newspapers or television shows. One major difference is that these social media sites can target ads based on the social profile of the users. So, they have a better chance of being relevant and in turn a better chance of translating to sales. Nobody has been able to measure the exact amount of sales generated but that is true for all media, including the traditional ones. In this sense, Twitter is doing the same thing its competitors are doing.

What is different?

The real difference is the amount of revenues generated. Twitter is still very new in this line and its revenues have just touched the $1 billion mark. The correct figures will be known when Twitter releases its first financial results in February. It is also yet to turn profitable. In spite of this the company is still valued at over $31 billion and that too after falling for the last several days.

The second factor behind the downgrade could also be a survey of 50 advertisers by Cowen & Co. Those surveyed were not very pleased with the results obtained from Twitter sites as compared to the other social media platforms.

Twitter is taking steps to address both the issues. After all there is some serious money available in internet advertising. The company has tied up with Nielsen Holdings to measure audience engagement. It has also tied up with Comcast Corp (NASDAQ:CMCSA) to improve viewing experience.

How do we reach a definite conclusion? Is Twitter Inc (NYSE:TWTR) an internet bubble company or does it have a serious role to play in the future? We should hold our horses till we have some definite financials to look at.

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