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that’s where you and I can havedifferent values for Twitter.But at least we’re talking about substance.So if you made a stand saying, I thinkit’s going to be % of the market, OK.So you have to go marshal the ammunition for that.So I use %.
And then I had to make a judgmentas to what percentage of that market Twitter would capture.That’s tough.You’ve all seen how Twitter ads work, right?It’s that sponsored Tweet that shows up– pisses me off,no end.I’ve never clicked on a sponsored Property Valuations Brisbane Tweet.I hope nobody ever does.But that’s the way they make their advertising revenues.And that’s their strength and their weakness.Their strength is characters.Their weakness is characters.That’s a strength, because it makes it nice, compact.The weakness is, it can’t be your primary advertising.So the way I see it is,
even if Twitter succeeds,it’ll never be Google or a Facebook.It’ll be a lesser player.And that led me to use a market share of about %for Twitter, which is still about $ billion.Here’s a company with a half a billion dollars in revenuesright now.And over the next decade, I’m assumingit’s going to go -fold to $ billion.So that gave me half the game.I then have to figure out how much money theywill make once they’re past this growth phase.And there are two big targets here.One is Google, and the other is Facebook.Both are immensely profitable.Google’s margins are about % of revenues.Facebook’s are about %.And Facebook’s margins are dropping,each year that you watch them.
Because as they get bigger, it’s tougher and tougherto maintain– these are immense margins.But I thought I was being optimistic, when I useda % end margin for Twitter.I said, that’s what you’re shooting for.So I’ve got my revenues in year .I’ve got my margins in year .I also had to bring in that final piece, which is, thisisn’t going to happen by magic.You’re not going to go from half a billion in revenuesto $ billion, without doing something.So I had to estimate how much theywould have to put back into the business,in acquisitions, new technology.That’s a reinvestment I’m getting.And I’m computing it based on how much their revenues arechanging each year.Those three pieces give me my cash flows.The small revenues become big revenues.The losses become profits.
The reinvestment gives them the engineto drive the revenue growth.That’s what I spent the bulk of my time on.Most people who do this kind of cash flow valuation,there are two parts to DCF, Discounted Cash Flow valuation.There’s the D and the CF.The D is the discount rate.Here’s my problem with the way DCFs are done.% of the time that most analysts spendis on the D.
