1. NYSE: TWTR
Sector: Technology
Industry: Internet Media
Current Price (as of 12/05/14): $38.49
Recommendation: BUY
INTRODUCTION
In evaluating Twitter we came to the
conclusion that their model of value creation is
sustainable for two specific reasons. The first is the
consistent increase in the amount of Monthly
Average Users (MAUs). Since Twitter’s inception
they have had constant growth in terms of MAUs
and, as we will explain in the report, users
contribute to the network effects that create value
for Twitter. The second reason is the increase in
future ad spending that will occur in the next five
years, with some analysts forecasting this spending
doubles to $214 billion by 2018. Twitter generates
the majority of their revenue through money spent
on advertising. The final reason was the
acquisitions that Twitter has made. We believe that
Twitter’s revenues will continue to grow as the
company continues to be innovative in their
approach to the market.
BUSINESS DESCRIPTION
Thomas Benson
Twitter, Inc. is an internet media service and
a global social networking platform. Using the
Bloomberg function DES, we were able to find
Twitter provides a compelling and efficient way for
people to stay informed about their interests and
stay involved with what is going on in their world
right now. The company offers users the ability to
follow other users’ activity, read and post
tweets. Tweets are limited to 140 characters, but
can include photos, videos and other types of
media. Twitter operates at a global scale, and has
over 240 million monthly active users (MAU’s). On
average, users generate over 500 million tweets
per day. Twitter’s user base includes multiple
influential personalities, such as world leaders,
government officials, celebrities, athletes,
journalists, sports teams, media outlets, and
brands. The company offers a Twitter app for iOS,
Android, and Windows mobile operating systems,
giving users the ability to tweet on the go. Twitter’s
mobile products are critical to the business. In the
three months ended December 31, 2013 76% of
Twitters MAU’s accessed Twitter from a mobile
device, and 75% of Twitter’s advertising revenue
was generated from mobile devices. Twitter
generates its advertising revenue primarily from the
sale of its three Promoted Products: Promoted
Tweets, Promoted Accounts and Promoted
Trends. Using the GP Bloomberg function, we can
analyze Twitter’s price history. As of October 20,
2014, Twitter is trading around $50.64. This figure
is below Twitter’s 52 week high of $73.31 on
December 26th
, 2013 and is above Twitter’s 52
week low of $26.00 on November 6th
2013. Twitter
operates out of San Francisco, California. Twitter
completed their IPO in November 2013 and its
common stock is listed on the NYSE under the
ticker symbol “TWTR”. -TB
SECTOR & INDUSTRY OVERVIEW
Thomas Benson
With personal computers on the decline, the
technology sector is filled with aging companies
failing to innovate and adapt to the new
marketplace. However, within this massive sector,
there is an industry that is thriving, and it’s just
getting started. That industry is the Internet Media
industry, and it’s composed of new technology
companies that are constantly using mobile devices
and social media to innovate and stay relevant;
companies like Twitter. These new tech stars that
are using social and mobile application are the
future of the Technology sector.
Using the BIP Bloomberg function, Twitter’s
main competitors in the Internet Media industry are
Facebook Inc., Pandora Media Inc., AOL Inc.,
IAC/InterActiveCorp, LinkedIn Corp, Google Inc.,
Yahoo! Inc., and Yelp Inc. Twitter has a market
cap of $30.72 billion, which is above the industry
average of $283.20 million, but below the $200.07
billion market cap of their main competitor,
Facebook Inc. Looking at Twitter’s competitors
from a pure social media platform standpoint,
Twitter is currently second in social network logins,
behind Facebook. (See chart below)

2. The Internet Media industry continues to
grow at a significant rate. Global internet
advertisement spending, global mobile
advertisement spending and global online video
advertisement spending are all increasing at steady
rates. This is a good sign for the future of Twitter
and the future of the Internet Media industry as a
whole. Citing Bank of America Merrill Lynch’s
September 2014 Internet industry overview report,
the number of mobile users is up 39% year over
year and the amount of time spent on mobile
devices is up 52% year over year. This is good
news for Twitter as a majority of their revenue is
generated from mobile devices. Also, with
smartphone users expected to reach 6 billion users
by 2020, Twitter’s total addressable market (TAM)
will continue to increase as well. This gives Twitter
the ability to stay competitive and sustain long-term
growth. -TB
MARKET SEGMENTS
Thomas Benson
Twitter’s top line growth is most
substantially influenced by its ability to generate
third party advertising revenue. Twitter generated
85% and 89% of its total revenue from advertising
revenue in the fiscal year ended December 31,
2012 and the fiscal year ended December 31,
2013, respectively. Twitter tells us to value their
company by the aforementioned advertising
growth, as well as their ability to grow their user
base; which is primarily measured in the amount of
MAUs. Twitter’s Promoted Products give
advertisers the ability to promote their brands,
products, and services by increasing the visibility
and reach to the consumer. These products are
the primary driver for twitter’s revenue. Promoted
Tweets appear within a user’s timeline just like an
ordinary tweet. Using Twitters knowledge of each
individual user’s preferences, combined with a
unique algorithm, Promoted Tweets are only
displayed on the timelines of the relevant users
whose preferences match that of the
advertisement. For example, if a user follows a lot
of sports teams, they might see a Promoted Tweet
in their timeline from Coca-Cola that is themed
around The Super Bowl. The second Promoted
Product is called Promoted Accounts. These
operate in the same style as Promoted Tweets,
only appearing on the users’ timelines who are
relevant to the advertisement. Promoted Accounts
give the advertisers a way to grow their companies’
followers, therefore increasing their community of
users who are interested in their business, products
or services. The final segment of Twitter’s
Promoted Products is Promoted Trends. Twitter
features trending topics each day that are relevant
to a particular country or topics that are relevant on
a global scale. When a user clicks on a trend, they
are shown search results for that trend and a
Promoted Tweet from the advertiser. Twitter allows
for one promoted trend per day, per geography to
be featured in their trends. -TB
DOMESTIC INDUSTRY EXPERT: MATT BISHOP
Thomas Benson
The high growth rate of the Internet Media
industry correlates precisely with the positive views
of the industry provided by our domestic expert,
Matt Bishop. Mr. Bishop lectured about the future
of the Digital Communications industry and gave
his personal insight and what he believes the future
of the industry entails. Using Mr. Bishop’s
example, the media traditionally operates using
parasocial relationships. This means that the
millions of viewers feel like they may know the
media celebrities on a personal level, but on the
other hand the celebrities do not know anything
about the viewers. He suggests that “New Media”
platforms, such as Twitter, provide a new level of
intimacy and connection between the fans and the
celebrities, something that fans have craved
forever. Mr. Bishop states how people want
information to be available right away. Twitter’s
unique platform gives users up-to-the-second
updates of what is going on in the world. Before
New Media and the internet, the public would have
to wait for the evening or morning paper to get
updates on breaking news. Now, newspaper
companies like The Wall St. Journal and The New
Facebook
42%
Twitter,
27%
Tumblr,
12%
LinkedIn,
10%
Instagram
9%
Facebook
Twitter
Tumblr
LinkedIn
Instagram

3. York Times, who have 5.1 million and 13.6 million
Twitter followers respectively. Twitter gives these
companies the ability to update their followers with
breaking news throughout the day. Innovative
platforms such as Twitter, give companies,
journalists and influential personalities a new media
avenue to provide their viewers the live breaking
news they so greatly desire. Twitter’s constant
innovation gives them high multi-year growth
potential. -TB
MACRO ANALYSIS
Thomas Benson
Building a worldwide view of the macro
perspective of Twitter and the Internet Media
industry is essential in projecting Twitter’s revenue
growth rates; rates that will ultimately make
Twitter’s stock go higher. Both cyclical and secular
trends will impact Twitter’s success. From a
cyclical viewpoint, they need worldwide economic
growth to help them “beat the numbers”. More in
depth, Twitter needs to increase their exposure to
to emerging markets so they can grow their user
base as more countries adapt to this new
technology. Another cyclical issue may be if the
world economy slows, advertisers will advertise
less. On the other hand, Twitter has secular trends
in their favor. One of those trends is the improved
speed and overall improvement of the equipment in
the telecommunications industry. The rapid
adaptation of mobile devices around the world
helps keep them competitive and gives them long-
term growth potential.
In discussing our bullish opinion for Twitter’s
revenue growth, we wanted make sure we had a
good understanding of a top-down macro view on
Twitter and its industry. We wanted to make a
point of using this data because businesses don’t
occur in a vacuum; and what’s going on outside of
our country will have major implications on long-
term revenue growth ability. Further on in our
report, we will go into detail about the statistics the
students from RMIT, which is located in Australia,
provided us and how they have helped us come to
our revenue growth figure. -TB
VALUE CREATION
Ryan Grogan
In researching Twitter we found it tough to
find concrete pricing information on the products
the company offered. Twitter does not provide
specific pricing information for their products as
they are mostly pay for performance products. We
found Twitter’s most recent 10K filing within
Bloomberg's CF function. Their 10K stated that
Twitter’s platform partners and advertisers are what
help create value for users. Within their 10K
Twitter has said that their revenue does not come
directly from users or platform partners, but rather
from “network effects where more activity on Twitter
results in creation and distribution of more content,
which attracts more users, platform partners, and
advertisers, resulting in a virtuous cycle of value
creation”. In the last six months, Twitter has had a
374% increase in the number of ad engagements,
which has increase the demand for advertising on
Twitter. Twitter measures user engagement
through timeline views. Twitter has seen a 15%
global increase in timeline views in the last six
months. Twitter uses timeline views as a
component in measuring their ability to monetize
their platforms. Advertising revenue per timeline
view is the advertising revenue for every 1,000
timeline views. As of June 30, 2014 Twitter saw a
100% increase in advertising revenue per timeline
view to $1.60. We believe Twitter’ current value
creation strategy is sustainable given the facts that
their user rates and revenues have increased every
year and look to continue this upward progression
into the future. -RG
TWITTER’S STRENGHTS
Ryan Grogan
Twitter has a number of different strengths
which have allowed it to blossom into the company
it is today. The speed of information flow over
Twitter is faster than almost any other media. The
tweets that people send out go viral immediately
and reach people all around the world. Twitter also
gives you the advantage of hearing it straight from
the horse’s mouth as celebrities, corporations,
artists, etc. have their own Twitter accounts which
they, for the most part, post on themselves. Twitter
can also be used as a research tool for companies
as you can do a twitter search to see what people
are saying about your brand/company as well as
your competitors. Companies can also engage
their customers more directly than advertising on
more traditional media outlets. -RG

4. TWITTER’S WEAKNESSES
Ryan Grogan
Twitter’s main weakness is it limits the
person sending out the Tweet to just 140
characters. This can pose a challenge to the
person sending out the message. Research has
also shown that there is a unequal Tweet
distribution, as 90% of Tweets come from just 10%
of users. Content lifespan has also popped up as a
threat to Twitter. We found that the average Tweet
lasted only about an hour, causing the user to
either re-Tweet or risk the Tweet becoming
irrelevant. A final crucial weakness of Twitter is the
users themselves. People often don’t think before
they Tweet, which has promoted many people to
use the saying, “Think before you hit send”. -RG
PRODUCTS & PRICING
Ryan Grogan
According to Bloomberg’s FA function,
Twitter generated revenues of $664.9 million in
2013, a 109% increase from 2012. Twitter
currently has a market cap of $30.72 billion and
expects revenues to grow to $979.11 million in
2014. Twitter does all this with just two main
sources for revenue: advertising and licensing data
to third parties. Twitter’s three main products,
Promoted Tweets, Promoted Trends, and
Promoted Accounts, produce the majority of
Twitter’s revenues and are all varying forms of
advertising.
Promoted Tweets and Promoted Accounts
are interesting tools because customers only pay
Twitter when someone either engages the
Promoted Tweet or follows a Promoted
Account. Promoted Trends have a fixed fee-per-
day basis. In researching these products we could
not find price elasticity because Twitter does not
reveal specific prices it charges for each product.
Twitter faces a large number of substitute products,
but there are only vague similarities in these
products. -RG
COMPANY COMPETITION
Ryan Grogan
As found in Bloomberg’s SPLC function,
Twitter only has four suppliers all of which only add
up to about 0.5% of revenue growth. This means
Twitter’s suppliers hold little to no bargaining power
over the company. Customers of Twitter have no
stronghold over the company either as there are
123 total customers, with the Disney contributing
the largest part of revenue at just 1.24%. As
specified in Bloomberg’s SPLC function, out of 27
competitors 17 of these companies are
growing. These 17 companies can be seen as
substitutes for Twitter’s products. But, Twitter’s
competition is split into two segments: user
competition and advertising competition. Twitter is
currently competing with Facebook, LinkedIn,
Google, and Yahoo! for user growth. As reported in
their annual 10K reports, Twitter saw a 30%
increase in MAUs from 2012 to 2013 (184.9 million
users to 240.9 million users). But, in reviewing the
RMIT students’ data I realized that this still
dwindles in comparison to Facebook’s 1.3 billion
MAUs. Twitter expects their growth in MAUs to
continue, but will face stiff competition. Currently,
Facebook has a $200.07 billion market cap with
$10.01 billion in revenues, Google has a $353.27
billion market cap with $67.19 billion in revenues,
and LinkedIn has a market cap of $24.39 billion
with revenues of $1.85 billion. Twitter’s main
competitors in user growth, with the exception of
LinkedIn, have a significant leg up in terms of
market cap and revenue streams. Although this will
impair Twitter’s ability to continue its user growth, it
does not spell the end for Twitter. –RG
ADVERTISING COMPETITION
Ryan Grogan
The other side of Twitter’s competition is
segmented into advertising. There are a multitude
of factors that affect a company’s ability to compete
within this segment. The size and composition of
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Quarterlyaverageinmillions
Monthly Active Users:
Worldwide

5. over the user base, ad targeting capabilities,
marketing/selling efforts, return advertisers receive,
and reputation of the brand all affect whether a
company’s advertising will be effective. Twitter is
beginning to gain ground in this segment of
competition. As stated in Bloomberg’s BIP function,
digital ads may reach a third of all global
advertising spending. Furthermore, experts expect
this spending on digital ads to double by 2018 to
$214 billion. This is great sign for Twitter, as their
percentage of overall net digital ad revenue has
increased each year as a company (0.26% in 2012,
0.50% in 2013, and 0.79% in 2014). Based on
Twitter’s current trend we project their overall
percentage of the net digital advertising revenue to
reach 1.7% by 2018. -RG
TWITTER’S OPPORTUNITIES
Peter Steinmann
Twitter has many opportunities in which
they can increase their net worth and reputation.
Twitters opportunities they have been presented
with are, the untapped users in other countries, an
increase in technology use in the United States, the
increase in digital ad spending, and the increase in
popularity of twitter. All of these opportunities will
increase twitter’s overall net worth. Another
opportunity Twitter has been presented with is the
ability to now include a “buy now” button in tweets
which will increase sales for other companies as
well as increase the attractiveness of advertising
with Twitter over other platforms. – PS
TWITTER’S THREATS
Peter Steinmann
Like all companies Twitter is always faced
with threats that will affect their company in some
way. Twitter has many different kinds of threats that
can affect their company. Some threats that they
have are threat of substitute service, threat of new
entry, the threat of big name users using substitute
service, the inability to show customers the value of
the company, and the inability to keep the product
up to date including new upgrades to keep
consumers interested. The biggest threat the
company faces is the threat of alternative products.
Also, another threat which has become a popular
threat to a lot of companies is the threat of privacy
with user’s information. There have been many
breaches in companies information servers like
Target, Snapchat, and Home Depot. The last threat
I will talk about is a very major threat towards twitter
due to the fact they rely heavily on their reputation.
The threat is damage to Twitter’s reputation. Twitter
addresses some of these threats in their 10K
report. -PS
THREAT OF NEW ENTRY
Peter Steinmann
Twitter is one of the most widely used social
media sites around. People use it all around the
world. So when companies see a company do so
well with an idea they immediately think of spin offs
and similar ideas. This creates a threat of new entry
for Twitter and their sub-companies like vine and
#music. Vine was very popular in 2013 and is still a
popular social media application. Vine is a video
creating social media device that would be on a
loop for 6.5 seconds. Vine has helped many people
become “social media famous” such as Marcus
Johns, his brother Cody Johns, and Lauren
Geraldo. All very young and each can make $2,000
with just a click of the “revine” button on a
sponsored vine. So, when people become famous
off of using a platform, it makes more and more
people use it. When more people use it, spinoffs
are formed. The threats of new entry for Vine that
have currently happened are Instagram (owned by
Facebook), who have added a record button to
their already very famous photo-sharing social
media platform. There have been many other
companies who have tried to replicate vine but
none of them have been successful.
Twitter as a whole has very little threats of
new entry. They have purchased new office
buildings and have increased been increasing in
number of new members therefore this are all
common signs that twitter has control of their
market. According to Financial Times Twitter has
the most loyal social media Customers than any
other platform which is why they are ahead. Also
according to the Merrill Lynch Article “September
Mobile Minutes”, they have estimated that in the
year 2028 there will close to 800 Million twitter
Users. Using Bloomberg’s FA function I found that
the operating expenses from 2011 to 2013 are
171.92, 265.25, and 1034 Million dollars. This
increase in operating expense shows that twitter is
innovating. Also using Bloomberg’s FA function I
found they have been spending a lot of money on
research and development keeping them ahead,

6. and limiting the threat new entry. In 2013 they have
increased the amount of money they invest towards
research and development by 399 million dollars. -
PS
TWITTER CUSTOMERS
Peter Steinmann
There are two different types of customers
Twitter has, Twitter users, and the advertising
agencies/ companies that want to advertise on
Twitter. The bargaining power of the Twitter users
is very limited. The Twitter users really only have
one way in which they could take down Twitter
which is that they can decide to either use Twitter
or not. This is a big power however Twitter is so big
that Twitter would need a colossal collapse.
Twitter’s growth is so huge you would need to lose
double the growth per year to really make a
substantial impact on the company. Twitter is not
only for friends to talk or post about their feelings
but its huge with news and sports teams, as well as
other companies. So when your population consists
of other companies it would be hard to imagine
another company going out and creating something
to destroy twitter. If a company destroyed Twitter
they would be losing a means of customer service,
and communication with their customers. An
example of how companies use Twitter when using
the EVT function in Bloomberg, I found a
conference for Goldman Sachs where the head of
technology for Goldman Sachs, James Covello,
talks about how Twitter really helps when it comes
to advertising information about meetings and
conferences. This shows how companies utilize
Twitter. Also at the SUNY Oswego Media Summit
this year, Steve Levy stated that he uses Twitter
constantly because it gets the information out there
so quick and fast.
However, the main customer that makes
Twitter money would be the companies buying to
advertise on twitter. Online advertising is a growing
industry because so many things are done online.
As you can see from the graph of digital ad
spending from 2012 to 2018 (see below), which is
found from using the BIP function in Bloomberg, it
is projected that in four years from now the total
money spent on digital advertising will almost
double what it currently is spending.
A bargaining factor that the advertisers have
is the choice of which platform to advertise in and
the other bargaining factor the advertisers have is
how much money advertising on Twitter is worth.
With a high about of users I’m sure that the
advertisers would be paying a pretty penny to
advertise with twitter. Also if you combine the
increase in the number of Twitter users plus the
projected increase in digital advertising that makes
for great reason to advertise with twitter. Twitter
has a very strong and bright future ahead of them.
Twitters worst nightmare would be if the whole
social media industry fell through or if Twitter
became irrelevant which I don’t see happening any
time in the near future. When I used the SPLC
function in Bloomberg However there are only 123
companies that are customers of twitters and the
revenue they receive from their top Customer
Disney all accounts for 1.24% of their revenue.
There are only 3 companies that account for 1% or
4 if you combine Comcast’s .92 % with Time
warner’s .85% due to their recent merger which
would make them their top customer at 1.77
percent, all the rest of the companies are less than
1% revenue. They do have some big name
companies that are customers like Disney,
Samsung, Microsoft, AT&T and Proctor & Gamble.
- PS
$105
$120
$140
$160
$178
$196
$214
$-
$50
$100
$150
$200
$250
2012 2013 2014 2015 2016 2017 2018
DigitalAdSpending(Billions)
Digital Ad Spending Worldwide, 2012-
2018

7. REVENUE PROJECTION & SENSETIVITY ANALYSIS
In projecting Twitter’s future revenues, we chose to tie their revenue growth rate directly toward the
growth rate of their ability to generate advertising revenue. Twitter mentions in their 10-K that their ability to
generate advertising revenue is one of two variables that should be used to value the growth of their company;
with the other variable being the growth in their monthly active users, or MAU’s. We conducted our sensitivity
analysis by using the “=FORECAST” function in excel, which calculates or predicts a future value along a
linear trend by using existing variables. Based off of the growth rate of Twitter’s advertising revenue, we
forecast a 2014 advertising revenue amount of $600M. According to our model, a value of $600M in
advertising revenue gives us 2014 fiscal year total revenues of $1,357.6M. After reaching this figure, we used
the FA function on Bloomberg to see how our revenue projections compared to theirs. Bloomberg estimated
2014 total revenues of $1,306.5M, a figure that is only .21% off of our estimate. In projecting 2015 revenues,
we estimated Twitter would grow their advertising revenue to $1 billion, resulting in total revenues of
$2,183.5M. This is only off Bloomberg’s projection of $2,276.9M by 6.1%. We projected 2016 and 2017 total
revenues of $3,009.84M and $3,628.80M, respectively (see chart below for visual display of revenues).
To find how sensitive our 2014 total revenue projection is to a change in advertising revenue, we
adjusted our advertising revenue by percentages of -20%, -10%, +10% and +20%. This gave us resulting
2014 projected total revenues of $1,109.80, $1,233.70, $1,481.50 and $1,605.40, respectively (See chart
below for visual display of revenue sensitivity).
Fiscal Year Ended 2010 2011 2012 2013 2014 E 2015 E 2016 E 2017 E
Revenue (M) 28.3 106.3 316.9 664.9 1357.6 2183.5 3009.4 3628.8
Revenue Growth YoY 276% 198% 110% 104% 61% 38% 21%
Advertising Revenue (M) 7.3 77.7 269.4 600.0 1000 1400 1700
Ad Rev Growth YoY 964% 247% 123% 67% 40% 21%
% Change in Ad Revenue -20% -10% 0% 10% 20%
Resulting Ad Revenue 480 540 600 660 720
Resulting Total Revenue (M) 1,109.80$ 1,233.70$ 1,357.60$ 1,481.50$ 1,605.40$

8. Outside Sources
"A SWOT Analysis of Twitter - Eyeflow Internet Marketing." Eyeflow Internet Marketing. N.p., n.d. Web. 27 Oct.
2014.
"Loyal Users Key to Snapchat and Twitter Fortunes - FT.com." Financial Times. N.p., n.d. Web. 27 Oct. 2014.
"The Strengths and Weaknesses of Social Media Platforms." Renelly Morel. World Press, n.d. Web. 22 Oct. 2014.