News of Twitter's initial public offering brings with it an array of questions, not least of which is a puzzling valuation picture compounded by serious questions over where the popular microblogging site goes from here.
Is it worth about $10 billion, as much of Wall Street figures? How about $100 billion, as no doubt its most ardent supporters hope?
Or, is it just another tech bust, an overvalued fad doomed to the dustbin of IPOs where such flameouts as Groupon reside?
Nick Colas, chief market strategist at ConvergEx, puts together the user base—200 million and counting—multiplied by per-user ad spending of $7 and margins of 30 percent to 40 percent, to arrive at $3.1 billion in ad revenue for 2015 and an $11.1 billion valuation.
But he also poses 10 issues, in the form of the pound-sign (#) hashtags the site users to identify subject matter.
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A summary (most of which is taken verbatim from a note Colas sent to clients):
Twitter's biggest strength right now is its growing importance in the land of social commerce sales...(accounting) for 22 percent of social-generated e-commerce sales during the second quarter of this year...Twitter is gaining on Facebook in terms of social media e-commerce sales referrals—and gaining fast. Advertisers are bound to take notice, and Twitter recently hired its first head of commerce to discover how users can shop via tweets.
Twitter users tend to live in upper-income households and to fall within the 18 to 35 year old category that advertisers target...Additionally, 22 percent of internet users who are on Twitter live in households earning more than $75,000 a year, versus 15 percent living in households making less than $30,000 a year.
Through the end of August, 131 companies have filed for an IPO this year, compared with just 91 during the same time period in 2012..So for companies in the market for an IPO, now is broadly-speaking a good time to get in on the action. Of course, we'll have to wait and see how much stock Twitter wants to sell.
(Read more: Twitter IPO: 'Grey market' indicates appetite high)
4. #Losing Control
Twitter's most high-profile weakness is the widespread gossip about its corporate culture...One anonymous blogger and apparent employee described the work culture as "good but chaotic" and said the firm was getting so big so fast that "communication is difficult, and duplicate work is starting to happen."
Former employees also opened up to the press about structural flaws. According to Business Insider, sources say Twitter started with mediocre engineering talent (which isn't all that uncommon in Silicon Valley), but it magnified the issue by promoting them into positions of power and allowing them to hire their own teams, rather than choosing the best talent for the most important roles.
E-commerce conversion rates are another thorn...Facebook's social commerce conversion rate is anywhere from 1.08 percent to 3.3 percent...These numbers are nothing to brag about, but Twitter's projected conversion rate range of 0.36 percent to 0.9 percent is significantly lower.
As for opportunities, Twitter has several in the pipeline, as it focuses on building out its advertising system and firming up revenue growth in the wake of its IPO...The opportunity to continue raising ad prices and improve the appeal of promoted tweets represents potential key drivers of revenue.
(Read more: The bizarre reason why revenue growth will be tiny)
Another opportunity involves Twitter's deal with ESPN...This finally affords Twitter access into the world of TV, something the company had been interested in for a while
Corporate customer service accounts, too, could offer future benefits for Twitter...It's clear that top brands are making the effort to communicate with their customers via social media platforms, though the process has yet to prove efficient.
Facebook dominates the social media arena right now, but Pinterest appears to be Twitter's greatest threat. Three distinct studies on the average value of online orders stemming from social media sites all came to the conclusion that Pinterest leads both Facebook and Twitter in referring big spenders to retailers' websites.
To get to a major valuation—Colas suggests $100 billion—Twitter needs to grow organically, develop other business lines, and garner interest as a takeover target.
Expansion is evident, but missing from the story is a clear corporate vision. The underlying factor in all successful tech companies is the ability to create products that people will pay for and enjoy, over and over and over. People thought Groupon, too, was worth about $10 billion before its IPO, and that hasn't turned into a success story. If Twitter is going to go the way of the Amazon, Google, Apple, etc. then investors need more clarity on its path. Otherwise we're in for another Groupon.
_ By CNBC's Jeff Cox. Follow him @JeffCoxCNBCcom on Twitter.