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NYSE: TWTR Jason A. Moser 1
We are witnessing a massive global shift to social media and mobile communications. The coming decade for the big names in social media will be all about engagement. Twitter’s real-time mobile platform and suite of apps is a trusted form of communication for media outlets and users around the world. 2 Why buy?
3 What is Twitter? Twitter is a global communication platform open to anyone with an Internet connection. Tweets are limited to 140 characters and possess a real time dynamic that places the user exactly where they want to be.
What is Twitter? “Twitter is the operating system of news. News organizations were the first to really understand the value and the power of Twitter. They joined Twitter not just as a place where they could break news, but as a place where they could source news and confirm news.” “Ultimately the goal is to reach every person on the planet.” Katie Jacobs Stanton, Twitter VP of Global Media 4
The mission 5 “To give everyone the power to create and share ideas and information instantly, without barriers.”
User growth 6
The move to mobile 7
A suite strategy 8 “When we first saw Periscope in late 2014, we were excited about it for a number of reasons but mostly because it so nicely fits into our mission, to give people the power to create and share ideas and information instantly without barriers. The same was true for Vine. And with both of these products, we now have a suite of mobile apps, including 2 of the most powerful native mobile video apps, and are well positioned as more and more people turn to video as a way to express themselves, share what's happening around them, connect with others and view content they enjoy.” CEO Dick Costolo, 1Q2015 Earnings Call
9 Video offering produces 6-second clips. Acquired in 2012 for reported $30M. More than 40 million users today. Over 1 billion loops played daily. Priority on building a great product, monetization will flow from that.
10 Live video streaming app acquired in 2015 for ~$60M. More than 1 million signed into the app in just the first 10 days. “Fight of the Century” exposed the power and potential of the platform. Priority on building a great product, monetization will flow from that.
Market opportunity 11 Source: eMarketer
Focus on the top line 12
Television Sports Music News Elections Fashion (emerging area) 13 Twitter’s core vertical markets today
This is your second screen 14 90% Better than 90% of the TV conversation today happens on Twitter.
“Around 10 million people watched the finale of Breaking Bad; compare that to the The Big Bang Theory, which nearly doubled Breaking Bad's audience with 20.44 million people. Breaking Bad did not even make the top 20 in terms of TV viewers, but the Big Bang Theory was nowhere to be found on Twitter. It's like these two shows exist in entirely different universes, despite being shown on the same medium.” http://vator.tv/news/2013-10-07-breaking-bad-wins-first-nielsen-twitter-ratings 15 Breaking Bad versus The Big Bang
Improve media planning and buying decisions by factoring in the total Twitter engagement around TV programs. Measure effectiveness of Twitter TV engagement strategies by providing insight into who was actually reached. Identify true influencers – people whose Tweets are actually read by large audiences. 16 Nielsen Twitter TV Ratings
Nielsen Twitter TV Ratings 17 250+ Nielsen SocialGuide identifies, captures and analyzes conversation on Twitter in real-time for every program aired across over 250 of the most popular US TV channels.
Twitter Amplify 18
Exciting content is broadcast on TV or other media channels. Sports, news, entertainment…virtually any vertical. Real-time videos or photos are prepared for Twitter. Short, high impact content from media partner (ESPN for example) shows along with a 6 second ad pre-roll from customer (McDonald’s, Verizon, etc.). Sponsored premium content is delivered to targeted audiences. These audiences go beyond just those who may or may not follow the content provider (organic followers). Feature of this product is the Twitter video card which brings the media into view with a one-tap playback and video analytics. 19 How Amplify works
20 Case study Budweiser participated in the beta testing of the promoted video card in late 2014. This shows as a promoted Tweet in any user’s timeline. In one week Budweiser saw 2.5 million video views of the promoted ad. More importantly they witnessed an earned-to-paid ratio of 6:1. Translation: For every one paid view the card got, it yielded another six earned (essentially free views). Higher the number earned, higher the ROI. Early signs point toward a product here that offers compelling ROI for clients.
Fabric: Twitter’s modular SDK (software developers kit); tools for developers to build apps and ecosystems. Syndication: Taking Twitter’s content beyond the core platform and to partners like TV networks, websites, etc. Commerce/Payments: Exclusive NFL Draft Day Jameis Winston jersey experiment, more like this will follow. Video: Periscope, Vine and video taken in the platform could be major drivers in the future (particularly Periscope). Data, data, data: Acquisition of Gnip, partnership with IBM, etc. Value of data these networks offer is still being realized. 21 Pieces to put together
"When we work with studios, we have data on 3 million blogs, YouTube, Disqus, WordPress; we account for conversation on all those platforms as well as Wikipedia page views. Each of them adds value. But Twitter is the kingpin and offers the most value.“ Jaime Brugueras, VP analytics, Networked Insights 22 The Value of Data
“Twitter provides a powerful new lens through which to look at the world – as both a platform for hundreds of millions of consumers and business professionals, and as a synthesizer of trends. This partnership, drawing on IBM’s leading cloud-based analytics platform, will help clients enrich business decisions with an entirely new class of data. This is the latest example of how IBM is reimagining work.” Ginni Rometty, Chairman, President and CEO, IBM 23 The Value of Data
Since going public in November 2013 Twitter has made approximately 19 various acquisitions in order to enhance its capabilities and reach. 24 The age of consolidation
Management Dick CostoloCEO 10/2010 COO 9/2009 to 10/2010Co-founded FeedBurner in 2004 which was acquired by Google in 2007. Anthony NotoCFO since 8/2014Former Director of Technology, Media & Telecom Investment Banking at Goldman Sachs. 25
26 Understanding future worth Source: S&P Capital IQ McGraw Hill Financial
Long term gross margin target high 70%. EBITDA margin target 40% - 45%. How do they look today? 1Q2015 Gross margin 67.1% vs 65.9% year ago. 1Q2015 Adj. EBITDA margin 24% vs 15% year ago. This capital-light and scalable business model supports high margins. In time Twitter will achieve profitability. 27 Margins will matter
Cap IQ estimates imply 40% CAGR from 2014-2019. Balance sheet is strong with ~$2 billion in net cash. Is Twitter “overvalued” today? Assuming Twitter hits $7.8 billion sales in 2019 as estimates imply, what would the market pay then? 5X sales? 10X sales? At 7X sales you have a $56.4 billion market cap, 130% up from today’s number of $24.5 billion. Is it worth trying to peg a specific price in the future? We could be fantastically wrong in either direction. 28 Understanding future worth
A look at today 29 Source: S&P Capital IQ McGraw Hill Financial
30 Using stock as currency Twitter is hardly the first to use stock as compensation, but these are real costs that the business has to bear on the income statement. Understanding the business is still very young and finding its way, we want to see this number start coming down over time.
Leadership: Wall Street questions, however management continues to do what they say they’re going to do. Competition: Nobody is immune. Engagement: Getting them there is one thing, keeping them there is another. Users: While 302M MAUs is impressive, it better grow. Monetization: If Vine and Periscope fail to meaningfully contribute we’ve got problems. Target: There seem to be constant rumors of acquisition which, real or not, could result in significant volatility. Acquisitions: If all of these little bolt-on acquisitions fail to help Twitter ultimately grow sales, it could be painful. 31 Things can go wrong
This will be a bumpy ride 32 Source: S&P Capital IQ McGraw Hill Financial Twitter’s share price since going public.
Twitter is NOT a stock that you want to buy all at once. Twitter IS a stock in which you want to build a position over time. Twitter is more than just a niche communication platform. It’s a tech company with a tremendous amount of valuable data. The biggest challenge investors face with Twitter today is the unknown. Where will this business be in five years? This is a headline stock today, the market loves to punish it when it misses Wall Street’s expectations. Foolish investors should focus less on Wall Street’s expectations game, be patient, make sure management does what they say they’re going to do. Investors who can’t plan on owning these shares for at least the next five years shouldn’t buy them at all. 33 Bottom line for investors
34 Can you take this leap?