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Thursday, July 29, 2010

Where are the Social Media IPOs?

from Michael Terpin





Yesterday was the start of the AlwaysOn Summit at Stanford, which I’ve always seen as a midsummer touchpoint for how Silicon Valley’s venture economy is doing headed into its annual August snooze (like July in northern Europe and August along the Mediterranean, the last two weeks of August are widely recognized in Silicon Valley as the times everyone on Sand Hill Road mutually agrees to take time off).

Some years there is an excitement about the hot economy, more recently it’s been shock and awe over the 2008-09 financial meltdown. But, just as the Valley climbed out of much worse ditches (nothing was worse than the slow-motion, dot-com meltdown of 2000-03, yet out of its ashes came a new bull market for tech and a Google IPO in 2004.

Today, amidst talk of double-dip recession, funds not being able to raise money (which is never true for the top-top-tier; just ask Sequoia Capital), and a return to the dismal days of down rounds, a recent rash of legitimate tech IPOs has taken hold. What’s more remarkable is that three of them have been in Los Angeles, the oft-overlooked poor stepchild to San Francisco, Silicon Valley and even San Diego when it comes to California tech hotspots. Yet here are RealD (NASDAQ: RLD), Meru Networks (MERU), and Green Dot (GDOT) – all with sizeable valuations despite the “not applicable” sign under their P/E ratios. (OK, one can quibble that Green Dot is more of a finance and retail play than tech, but it was funded by the Tech Coast Angels and Sequoia Capital and has a strong technology component in its structure.)

But if social media is the future of the Internet, and the Internet is still the future of the future, where the heck are those Facebook and Twitter IPOs? Like Google holding out for an absurdly long time past high growth and predictable profitability (so much so that the market consensus was that its $85 a share IPO was pricey; how many shares would you like to have at that entry point today?), Facebook and Twitter have virtually no pressure to go public now from their well-heeled investors. Ditto for Foursquare, which has only two million users and yet has turned down relatively astronomical offers to be acquired (and inevitably made irrelevant) by Yahoo.

The sign of a broad-based healthy market for new issues isn’t the lone player at the top. Google so dominated search that it didn’t spark a firestorm of me-too IPOs the way Netscape ignited the dot-com fever in 1995 that brought us not only the bad deals remembered by so many, but also Amazon, EBay and Yahoo. Will the inevitable IPO of Facebook in the next year or two bring on a rush to the public exits for Twitter, Hi5, Foursquare and a MySpace spin-off? Will a new passion for growth spread to hot B2B companies embracing a social structure? Perhaps the difference in whether Facebook ignites a firestorm of new retail investment among the baby and echo boomers at times in their lives they would be investing more will not be how high Facebook climbs, but whether it takes a diverse portfolio from Hi5 to Brickfish along for the ride.

Michael Terpin is the founder of SocialRadius, a social media marketing consultantcy. He began SocialRadius in 2007 and has been engaged in social media marketing campaigns since 2003 through its sister company Terpin Communications, a leading international public relations boutique. Terpin also founded Marketwire, one of the world’s largest and most comprehensive international press release newswires. Originally known as Internet Wire, Marketwire was acquired in April 2006 by Toronto-based media company, CCN Matthews, and is now owned by OMERS Capital Partners, the private equity arm of a $41 billion pension fund. Marketwire employs more than 200 people and has annual revenues of more than $70 million, with offices on four continents. Terpin holds an MFA in Creative Writing from SUNY at Buffalo and a dual bachelor degree in Newspaper Journalism and English Literature from Syracuse University. He serves as an advisor to SU’s Newhouse School of Public Communications, where he was inducted into its prestigious Wall of Fame. Terpin was a finalist in the 2000 Ernst & Young Entrepreneur of the Year Award. This piece was originally posted on his blog, at socialmediaworld.com.


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