By some accounts, the recent Twitter IPO was a success. It looked like it was off to a good start but word got out early that nobody obtained shares except a few fund managers and overnight the price jumped from $26 to $45 at the open. The visuals of people standing in line to take profits looked just about as bad as when Facebook IPO’d and virtually nobody saw a ‘competitive marketplace with actual trading’.
Anyone reading this knows I’m a fan of social media and I’m even a bigger fan of social media stocks. The debate between Facebook and Twitter has only just started and right now I’m more of a fan of Facebook than I am of Twitter which seems to be losing some momentum, but could regain favor with investors in the medium run.
Here’s one reason why I like Facebook more than Twitter. Facebook has a better business model and only a few people have done analysis showing why the social media website is much more robust aside from private work I’ve done for my clients that I’ve seen. In short, Facebook has a better ad serving algorithm because it knows more about its users which allows the site to specifically pinpoint ways to market to them. Twitter accounts can be opened without much information and relative associations aren’t easy to make when it doesn’t know what college you went to, if you’re married, have kids, or what high school you went to.
I speculated a few weeks ago the Twitter would be worth $25 billion and it seems like my speculation was quite right. The market cap is now 21 million and it’s down from the opening day high of $49 per share. Here were my thoughts a few weeks ago……
Twitter could easily be valued at $25 billion but if too many investors are fueled by hopium- it could bring a similar result for impatient investors that couldn’t wait a year. Read TWITTER FILES FOR IPO, BUT WILL IT BE FACEBOOK PART 2? (When it debuted at $45 on the opening day, my market cap prediction was spot on at $25 billion)
Although the IPO wasn’t a debacle for institutional investors, nobody else who purchased TWTR on that day has yet to make any money and I see opportunities coming if it goes much lower, particularly if it’s able to go below the IPO purchase price. (Remember when Facebook hit $18? That won’t happen again anytime soon.)
I’m a fan of both companies and I have exposure to the social media space, so it’s important to think longer-term. To put it frankly, social media is growing and search engine marketing CPCs are falling. I continue to be awestruck by investors piling money into Twitter who have probably never looked at the backend platform and advertising metrics. Facebook is just plain better.
Social media has grown since the Myspace era and is now considered a formidable, serious platform that old media networks want to be involved with. Facebook’s revenue growth could be exponential as it goes through an early Googlish-growth phase.
Early Twitter investors can’t be happy now. I’d rather get exposure through the SOCL exchange traded fund.