Some updated thinking on Twitter as an investment idea.

1. NYSE: TWTR
Jason A. Moser
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2. 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.
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Why buy?

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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.

4. 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
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5. The mission
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“To give everyone the
power to create and share
ideas and information
instantly, without barriers.”

6. User growth
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7. The move to mobile
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8. A suite strategy
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“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

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 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.

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 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.

11. Market opportunity
11Source: eMarketer

12. Focus on the top line
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13. Television
Sports
Music
News
Elections
Fashion (emerging area)
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Twitter’s core vertical markets today

14. This is your second screen
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Better than 90% of the TV
conversation today happens on Twitter.

15. “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
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Breaking Bad versus The Big Bang

16. 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.
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Nielsen Twitter TV Ratings

17. Nielsen Twitter TV Ratings
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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.

18. Twitter Amplify
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19.  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.
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How Amplify works

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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.

21.  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.
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Pieces to put together

22. "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
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The Value of Data

23. “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
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The Value of Data

24. Since going public in November 2013 Twitter has made
approximately 19 various acquisitions in order to
enhance its capabilities and reach.
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The age of consolidation

25. Management
Dick Costolo
CEO 10/2010
COO 9/2009 to 10/2010
Co-founded FeedBurner in
2004 which was acquired by
Google in 2007.
Anthony Noto
CFO since 8/2014
Former Director of Technology,
Media & Telecom Investment
Banking at Goldman Sachs.
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Understanding future worth
Source: S&P Capital IQ McGraw Hill Financial

27. 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.
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Margins will matter

28.  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.
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Understanding future worth

29. A look at today
29Source: S&P Capital IQ McGraw Hill Financial

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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.

31.  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.
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Things can go wrong

32. This will be a bumpy ride
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Source: S&P Capital IQ McGraw Hill Financial
Twitter’s share price since going public.

33.  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.
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Bottom line for investors

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Can you take this leap?