Twitter (TWTR) is currently trading at around $44 a share, but media analyst and NYU marketing professor Scott Galloway thinks the company is worth about a quarter of that.
In a conversation at the Ad Age Digital conference Wednesday, he said traders are making a mistake valuing the company’s market capitalization at $24.75 billion, a figure that is currently about 37 times its annual revenues.
By comparison, Galloway notes that LinkedIn (LNKD) is trading at about 20 times revenues, a statistic that should be especially troubling for Twitter given that LinkedIn has a more diverse revenue stream due to its advertising, job-seeking and subscription businesses. Twitter, on the other hand, is entirely reliant on advertisers.
“We believe it’s vastly overvalued and that the love affair with Twitter is about to come to an end,” said Galloway, who also runs the L2 digital innovation think tank. “If you look at the number of advertisers advertising on each platform, LinkedIn actually has more advertisers than Twitter.”
He went on to say that Twitter will have trouble earning advertising dollars once marketers decide to stop experimenting with new platforms and instead choose to focus their budgets on the one or two platforms they feel work best.
Galloway predicts these platforms will be Facebook (FB), YouTube, and Instagram, and social networks like Twitter, Foursquare, and Pinterest will be left fighting over crumbs. That’s because he feels the two requirements for a successful social business are that they be mobile-first and have a strong visual component.
“Your clients are sort of done playing in traffic trying to spread their peanut butter across eight or nine different platforms. I think you’re going to see a consolidation like, ‘These are the two platforms we’re going to invest in, and everybody else is going to be left out in the cold,’” Galloway said.
“You see a substantial decline in shareholder value based on the expectations you’re talking about. Anybody who can do math looks at Twitter and says, ‘That stock should not be above 10 bucks a share.’”