Analyst Comments on Twitter's (TWTR) Deal with Omnicom

(Updated - May 27, 2014 2:29 PM EDT)

Earlier WSJ reported that Omnicom (NYSE: OMC) and Twitter, Inc. (NYSE: TWTR) agreed to a $230 million mobile ad deal. Analyst Brian Wieser of Pivotal research thinks the deal highlights ongoing business traction.

"It is unlikely that this activity represents an incremental amount of spending above and beyond what we might have already forecast. For point of reference, Omnicom’s global media spending is approximately $50bn annually, or around one tenth of the industry’s total, and on this basis a $230mm two-year commitment is relatively modest if still substantial relative to Twitter’s historical revenue base. Deals such as these tend to involve agencies rolling up their best guesses regarding how much they are likely to spend with a media owner over a given time horizon and then asking for some kind of incentive to make the agreement (such as priority access to research, first-looks at new products, etc., which were indicated in news of the agreement) paired with some kind of modest penalty for failing to meet spending thresh-holds," said Wieser.

"Still, such an agreement is more notable in context of earlier-stage companies / products such as Twitter, given our view on how meaningful user growth is not necessarily a driver of revenue growth for certain kinds of services. Twitter is at a sufficiently large scale and is sufficiently distinct as a medium that brands of all sizes have an interest in learning how to work with Twitter and use it as part of their overall media mix. Even with a consumer base that we see as ultimately a large niche, it will remain an important medium for marketers for the foreseeable future. Our argument has been and remains that revenue growth is dependent on ongoing socialization of how marketers can best use Twitter. Socialization of related ideas is a function of Twitter’s sales force continually developing ideas and relationships with marketers and the agencies they work with," he added.

Pivotal Research has a Hold rating on Twitter, Inc. with a price target of $34.

For an analyst ratings summary and ratings history on Twitter, Inc. (NYSE: TWTR) click here. For more ratings news on Twitter, Inc. click here.

Shares of Twitter, Inc. closed at $30.50 yesterday.

You May Also Be Interested In

• Amazon.com (AMZN) PT Raised to $215 at UBS
• Keefe, Bruyette & Woods Upgrades Trustmark (TRMK) to Outperform
• Safe & Green (SGBX) Enters Agreement to Produce Four Modular Electrical Distribution Centers