Making your life easier is what Twitter, Google, Apple, Priceline and every other tech company is supposed to be doing, right? Creating platforms and growing their earnings for their owners as the fill a demand in the marketplace are so important to long-term Revolution Investing success in technology that we have to use these concepts in our analyzing our stock picks and whether or not the upcoming Twitter stock should be one of them.
Let’s put it this way to start here — How much do you think $TWTR should be worth relative to say, Priceline PCLN or Yahoo YHOO or Facebook? Which should be worth more and by how much?
Twitter says they’ve got at least 100 million users a day. Let’s assume they can figure out how to generate 0.1 cents (1/10th of a cent per day, that is) per daily user — that would give you a daily revenue run rate of a $10 million. That’s about three and half billion dollars a year in sales. Put a 5-10x multiple on that revenue number and you’re going to end up with a $20-35 billion valuation for Twitter when it comes public.
Right now the valuation for Twitter at its IPO is rumored to be running around $10-15 billion, and if that’s the case, I expect the stock will pop huge the first day of trading. If it comes public closer to a $30 or even $40 billion valuation, I’d imagine there’s still some long-term upside for investors, but obviously it’s riskier at a higher valuation.
Yahoo! is worth $33 billion right now, generating $4.5 billion a year in sales. Revenues are actually down from the levels Yahoo was generating five years ago and flat from last year and aren’t expected to grow faster than even the US GDP this year or next.
Priceline is worth $55 billion right now, generating nearly $7 billion a year in sales, up 20% plus annually the last few years and expected to continue growing at that kind of clip next year.
Facebook is worth $100 billion, generating $7 billion a year in sales, up 45% this year expected to grow more than 30% per year into the future.
Google is worth $340 billion on $60 billion a year in sales on 40% growth this year and another 15-20% growth expected the next few years too.
And Apple is worth $475 billion on $170 billion a year in sales, which have been and are modeled to continue growing at just under 10% per year.
Notice that Twitter, Yahoo and Priceline are all using their apps to help grow their sales and earnings. Priceline’s Android and iPhone apps are likely to contribute more than half of all sales for the company in another year or two. I’ve been all over the “App Revolution” for years, as you guys know and recently, one of my companies acquired an app-company called Scutify, which is a stock-market-centric resource. We have both an Android app and an iPhone app and, wow, I have been learning a lot more about Apple vs. Google in the app wars since we bought Scutify.
Here’s an email I got from my co-CEO at Scutify, Kheang Ly, the founder of the company and a well-versed app developer, and it rather sums up today’s analysis rather well, I think.
Hey mate, Hope you had a good time off. The new Scutify Android app is live as I told you previously, but I had to update it a few times to fix some critical bugs that were spotted by friends who did testing for me. So the current version up there is pretty good now. The new Scutify iOS7 app should hopefully be done sometimes this week and then I will get my hands on it to again clean it up and finish it off. At this stage, probably won’t be live until sometimes next week since the App Store takes around 2-3 days to push it live. The Play Store is so much easier and quicker to deal with. I seriously think Google will overtake Apple one day (they make things quite simple for users). Cheers.
I bolded the part that really stuck with me in that email. It’s all about making things quite simple for users so that you can grow your revenues and earnings as that user base grows. It’s simple, I know, but really it’s one of the hardest concepts to stay on top off as you ride these wild Revolution Investments. You notice in every case above that the companies who create extremely easy to use apps and platforms are those that are growing their revenues the fastest and are being valued by the stock market most dearly.
Is Facebook app easier to use than Twitter’s app? Is there really a future to a platform like Twitter’s that is so limited in even using the old 140 character limit from the original SMS text messaging limit on your old Motorola Razr? I think Twitter’s limiting their long-term upside potential with some of their old-school strategies. Does Twitter have critical mass in the same way that Facebook does? Probably not.
Is Google email easier to use than Yahoo email? Everybody knows that. But is Yahoo Finance easier to use than Google Finance? Yes.
Will other app developers and content/data aggregators come along and make their own apps that outdo either Yahoo and Google Finance apps? Without a doubt, and as you know I think that the Scutify Android app and the Scutify iPhone app blows away the other such offerings including Yahoo’s and Google’s.
Can you say the same thing about Priceline’s and other travel aggregator sites and apps? Yes, plenty of competition will continue to roll out and I’m not sure Priceline’s got much of a platform or a moat to keep their users loyal. I recently bought Priceline puts and am holding them steady for now.
Is Apple’s iOS easier to use than Google’s Android for the end user? Definitely. Is Google’s Android easier to develop for than Apple’s iOS? Definitely. What matters more in the long-run? I’m not sure so I continue to own both Google and Apple as I have for years.
I’m back in the saddle in front of the monitors after a few days in NYC catching up with old friends and investors. After a few days away from the market this tight range today doesn’t seem strange, but given how strong some of the recent intraday actions have been, it does seem strange if you’ve been as on top of the markets as you have been. Maybe we need another batch of earnings either good or bad to drive the next major market move, as $AMZN and $MSFT did on Friday for example. That would likely mean $FB and $AAPL earnings will be the big drivers for the Nasdaq this week.
I’m trimming about 1/8 of my Amazon today, it’s a huge winner for us and this is the playbook. Nibble on weakness if you haven’t built up your long picks as big as you want them and trim your big winners on the next spike.