Twitter’s business model has been pegged to generate $1.194 billion in revenue in 2016 on net margins of 25 percent, says a new report.
The analysis, published on SharesPost and written by Candlestick Advisors, also predicts $166 million in revenue for Twitter in 2011 and $329 million in 2012, but is dependent on seeing some early success from Twitter’s largely unproven ad platform.
Twitter currently makes money from Promoted Trends, Promoted Tweets and Promoted Accounts, and also by licensing its data to official partners, such as Microsoft. The company also recently announced a new business model – political advertising.
“We estimate Twitter will earn $166.9M, $328.9M and $501M in revenues in 2011, 2012 and 2013 respectively, based on estimated customer growth and per customer charges. However, we take note that Twitter‘s revenue model is still being tested, [and] we believe the company is still a year or two from fully monetizing all aspects of its platform.”
eMarketer recently downgraded their forecast for Twitter’s 2011 revenue from $150 million to $139.5 million, and projects $400 million in revenue by 2013.
As a comparative aside, Facebook is projected to make $4.27 billion in revenue in 2011.
To date Twitter has received $756.9 million in funding, leading to a recent valuation of $8 billion. However, the Candlestick report suggests this is way too high, even with their bullish revenue numbers.
“Assuming steady state revenues of $1.195B in 2016, normalized net margins of 25 percent, a growth multiple of 25x, and discounting to 2011 at a discount rate of 20 percent, we arrive at a target 2011 enterprise value of $3.0B. Accounting for estimated cash in hand of $600M we arrive at a market capitalization of $3.6B.”