2011: Year of the Tech IPO!

I am not sure whether this is a prediction or wishful thinking but I am willing to to go out on a limb here -- 2011 will be the year tech IPOs came roaring back. There are too many great companies lying in waiting for the public markets. They are grossing tens, even hundreds, of millions of dollars. They are profitable. They are growing. They are everything that the failed dot coms of the late '90s were not. They are real businesses that deserve to be traded on the public markets. And so they will be in 2011.

If the rumors even vaguely resemble the truth, there could be a half dozen of the most exciting IPOs in decades. These IPOs would not only be driven by staggering fiscal results but, also, by public demand for shares in great consumer brands. Individuals will lead the charge in buying shares in the companies they love and trust with their time, money and attention.

Facebook is, of course, the one everyone is waiting for. Like Google before it, many pin their market hopes on the coattails of a Facebook offering. There can be little doubt that a Facebook IPO will be monumental. With more than half a billion users, and many tens of millions of truly fanatical Facebook groupies, demand for the shares will be daunting. And that demand will be backed up by equally daunting growth and revenue numbers.

But Facebook is not alone when it comes to the fanatical devotion of its end users. LinkedIn has tens of millions of customers, many of whom have transformed their businesses and their careers thanks to the service. How many LinkedIn users would want to spend a few of the extra dollars they are making thanks to LinkedIn on shares in the company?

And then there's Zynga. Untold millions expend countless hours playing Zynga games each day, while spending real dollars for virtual satisfaction. What if Zynga were to sell its end users the ultimate "virtual" good -- shares in the company itself. Better yet, why not buy Zynga shares with Facebook credits -- a one two punch for the consumer IPO market.

And what companies would be better suited to sell shares in their IPOs than the new ecommerce juggernauts. Its unlikely that Groupon turned down a $6 Billion acquisition offer in hopes of driving the price of a sale up even higher into the stratosphere. That leaves one alternative -- IPO. How many Groupons for IPO shares do you think the company could sell in one day? I'd venture to guess they could do even better selling Groupon Groupons than they did selling Gap coupons. And what if Gilt group made shares of its own stock available to the fashionista crowd on a first come first served basis? Both Groupon and Gilt are direct marketers extraordinaire. Why not let Groupon and Gilt use that same formidable marketing muscle to support the resurgence of the public markets.

That, of course, leaves Twitter. Unlike these other companies, Twitter lacks the massive revenue to support a public offering. But if ever there was to be another IPO built upon massive scale and the promise of revenue to come, Twitter is the right candidate. Seven percent of the American public is now on Twitter and growing (and an amazing 87% are aware of the Twitter phenomenon). What would happen to the Twitter IPO price when #twitterIPO became a trending topic? There's no question it would set StockTwits ($TWIT) on fire. My only fear is that a Twitter IPO, reported on StockTwits, and retweeted on Twitter, might create a recursive loop so powerful that Twitter's stock price would rise to infinity. But imagine what a great news story that would be for CNN to tweet about.

It is amazing to think that the 90's created four consumer Internet giants (Amazon, Ebay, Yahoo and AOL), the 2000's birthed only one incredible public consumer juggernaut (Google), and here we are at the dawn of the 2010's with six consumer tech powerhouses ready to break out and dominate the public markets. I personally can not wait for these fantastic companies to trade on the public markets. It will be great for entrepreneurs, investors and consumers alike.

Comments

[Angie]

Interesting predictions, Facebook I think unlikely, but the others I could definitely see happening. The challenge with monetizing social media is that it will mean either fees for service or ads, neither of which users are terribly interested in. Great post! :)

Angie
Social Media Manager at Circus Strategic Communications
www.circuscommunications.ca

[Wiseleo]

Looking forward to it, David.

The S&P 500 is overdue for an upgrade :)

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Agree with Wise...Great predictions...but no looking forward to a monetized social media platform :/

[Hooman Radfar]

Do you think 2011 is the year, or 2012? My guess is 2012 given that many bankers will probably advise clients to time their IPO around Facebook. Either way I agree with the sentiment in your post - this is great.

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[John J. Walters]

Very interesting stuff to consider.

Social media is really an explosive field with so much potential. It will be exciting to see where it gets taken in the next ten years.

I wonder if we can expect a future populated with ads similar to the ones tailor-made to individuals in "Minority Report," not just online but in our everyday lives as well. The power of social media is immense already and will only grow. There is a lot of money to be made with targeted advertising (much better returns) which may make public offerings more appetizing. Just a thought.

[RandomAlternate]

Nice predictions - but in reality, there will be a Tech bubble burst - oh yeah. It will.

[Fredabramson]

I doubt Facebook will have an IPO an 2011. Check out this analysis by Business Insider http://www.businessinsider.com/rule-12g5-1b3-or-how-facebook-just-announced-plans-to-go-public-2011-1

[John J. Walters]

Good link, Fred. Interesting article.

It's a little worrisome that FB is willing to try to be sneaky to get around the law. If they are willing to do that, what are they willing to do to their users? I realize it's not the same, but it does send a cautionary message.

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I can't see FaceBook...valued with a crazy P/E of 106 (NUTS!!) Goldman due to so much media attention and their mis handling of it offering it only outside of America 2012 maybe 2011 I wouldn't think so.

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A very interesting prediction - I hope you're right! Wall Street has been wary of dot coms since the last bubble burst, and I think it's time for that to change. Many of our top clients are internet brands, and I see many of them as a far better investment than many traditional brick and mortar stocks. The only one I'd disagree about is Twitter - the revenue model just isn't clear. Moreover, the phenomenon you described would lead to an incredibly inflated stock price based on hype rather than the true value of the company. Still, not a bad deal if you can buy it early, before the price skyrockets...

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Without facebook joining the IPO party, it won't be counted as the year of it:)

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In turn, Facebook has a ton of hype on its shoulders, and it needs to deliver. Especially with large investments coming in.

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I just don't understand the allure of FaceBook or Twitter. How do they intend to make money? They haven't exactly been forthcoming with proof that they can turn a profit.

Apple, Microsoft, and Google have products, services, and patents they have developed. What does FaceBook have? What does Twitter have? Popularity. That's it. And that's fleeting. Remember MySpace?

Even Amazon has a hit with the Kindle. These are huge companies, but I don't see them betting their futures on social. Sure, they give it a half-hearted attempt, but in the end, they don't see the value of the market. But people see the value of FaceBook and Twitter?

I'll make a prediction: FaceBook is ultimately doomed, just as MySpace was, and it's not just because Zuck is unethical. As soon as they attempt to monetize, or it becomes obvious to their customers that they'll say anything or do anything to make money, even at the expense of their customers, people will start moving onto another platform. Why will people put up with ads when they can move to some nascent service without them?

VCs can continue to pour money into FaceBook, Twitter, Foursquare, or the next cool thing, but in the end, there is no barrier to entry, no IP to prevent an upstart from eating their lunch.

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