Twitter (TWTR) has been a great and largely speculative investment for investors who managed to get a piece of the IPO. But since the public offering, the company has been a favorite among momentum investors, driving the shares as high as the $70s.

But Twitter's user base, demographic data, and engagement levels are a lot less impressive compared to other social media stocks, which limits its future growth trajectory. The company's valuation levels are extremely high compared to even other pricey stocks like LinkedIn (LNKD.DL) and Yelp

Competition for time on social media
Twitter competes heavily with a number of other social media and Internet companies for user time spent and engagement. Twitter has roughly 232 million monthly active users, which is well below other leading social networks like Facebook's (META 0.20%) 1.2 billion and LinkedIn's 259 million users. Facebook is a casual networking site, LinkedIn is a professional networking site, and they both hold an immense amount of demographic data on their users, unlike Twitter.

Twitter's value proposition to users is geared toward self-expression and conversation among users, which makes it a little grey for many to understand. Twitter is more useful for celebrities and influential users to build their respective brands, and a lot less useful for the average person.

And Twitter's competitors Facebook, Instagram, and LinkedIn have all added functions that allow users to follow and keep up with celebrities, and in the process steal user engagement away from Twitter. The network effects of Twitter are minimal because most of the users find very few friends and families on its service, and thus reducing the value of the service to even registered users. 

According to survey work done by the Pew Research Center, more U.S. adults favor using Pinterest and LinkedIn relative to Twitter. The study of 1445 Internet users, found 22% are using LinkedIn, 21% are using Pinterest, 71% are using Facebook and only 18% are using Twitter. Further, younger demographics are increasingly leaning toward newer social platforms like Instagram and Snapchat. Amidst all these social and more engaged platforms, Twitter might have a hard time convincing its members to spend a lot of time on its site. 

Advertising revenue and competition
In line with other social media names, Twitter generates most of its revenue from advertising. Advertising revenue represented 89% of Twitter's total sales in the first three quarters of 2013, and Twitter generates 70% of its advertising revenue on mobile devices. Twitter is accessed by 76% of its users from mobile, so the company has the ability to keep growing its mobile revenue. 

However, in each of the last six quarters, the company saw the number of ad engagements rise, but the average cost-per-ad declined for six consecutive quarters. This may limit Twitter's growth prospects on mobile devices, because mobile ads generate less revenue for companies, relative to a desktop. 

Twitter could earn a lot more revenue on desktops because of the company's advertising products which includes Promoted Tweets. Accounts and trends, could potentially transform the company into a great platform for content-marketing. But as there is a lot less real estate on mobile, the monetization potential of these Promoted Products might hit a brick-wall on mobile devices.

Mobile ad spending is supposed to grow from $13 billion in 2013, to $39 billion in 2018, according to Juniper Networks. But that market is extremely competitive with Facebook, GooglePandora, YouTube all having large market positions. Lower priced ads, and an extremely competitive market for mobile ads doesn't bode well for Twitter.

Discrepancy between user engagement and revenue.
In the last quarter, 77% of Twitter users came from outside the U.S., but revenue from the International market made up only 26% of sales in the third quarter. 76% of page-views or Timeline views are outside the U.S., but this large International audience is not being monetized due to different attitudes toward online advertising.

Twitter's 179 million users in the International segment generated only $0.36 in advertising revenue per timeline view, and the company's 53 million U.S. users generated ad revenue of $2.58 per timeline view in its third quarter. In other words, Twitter's majority of users are not being monetized fully, because of less-developed ad markets, and also lower prices in ad markets outside the U.S.

Facebook also has much higher ad revenue per user in the U.S., compared to international markets, but Facebook is a very profitable company, and has a lot more room to grow on mobile devices. On the other hand, Twitter's usage is almost exclusively on mobile. And this gap between user engagement and revenue generation might never narrow. 

Valuation is out-of-this-world
Twitter is not expected to be profitable until 2015, but the company currently has a market cap of roughly $38 billion. Based on the Price/Sales ratio, Twitter trades at 69 times trailing 12-month sales, which compares poorly to Facebook and LinkedIn at 20 times and 18 times respectively. 

And on a forward-looking basis, Twitter trades at roughly 34 times its projected 2014 sales of $1.13 billion, according to estimates from Yahoo!. Worth noting, Twitter's revenue estimates for 2014 are already lofty, considering the company's sales in the last twelve months stood at $535 million.

The bottom line
Clearly, Facebook and LinkedIn represent much more robust stories and more compelling valuations for astute investors. And Twitter's speculative run-up could cause the stock to drop heavily after its reports earnings. While Twitter may be a great company, it definitely is not a great stock to own.