This isn’t the first time the tech community has had an exciting social media initial public offering (IPO) to post incessantly about in 140 or fewer characters. But past IPOs in the industry have had varying levels of success. Companies that once seemed on a permanent trending trajectory stumbled under the harsh scrutiny of public investors (see Zynga, Groupon, and Facebook, circa summer 2012 for reference). As Twitter approaches its IPO and begins its publicly-traded existence, can current CEO Dick Costolo steer the company clear of similar embarrassment?
Costolo himself has a lot to win — or lose — in the process. A successful IPO effectively validates Twitter’s decision to bring him in as CEO, replacing co-founder Evan Williams in 2010. Much has been made of Costolo’s previous improv comedy experience, but Twitter’s board was likely more impressed by his 20 plus years of experience in consulting, technology, and taking startups through successful acquisition (FeedBurner, et al).
He’s already shown he’s more capable at the helm than either of Twitter’s co-founders, maturing Twitter from its startup, hacking adolescence into a well-managed company. There’s much to say for startup culture and flexibility, but when your company is routinely valued around $14 billion, that label — and management style — have to undergo certain changes. Shareholders probably wouldn’t have met the company’s previous “make better mistakes tomorrow” motto with much enthusiasm.
As Twitter becomes publicly traded and continues to grow, it’s imperative for Costolo to maintain a tricky balance: retaining the company’s sex appeal and tech buzz, while also setting a course for consistent profitability. If you ask Twitter’s employees, they overwhelmingly — to the tune of 96% — approve of Costolo’s balancing act thus far. He has revamped management practices while sustaining a trajectory that increases the company’s valuation by billions every year.
If Costolo’s decision-making in moving towards an IPO is any indication, Twitter has sustained success in its future. The company continues to grow steadily to the point now where it’s too big for acquisition to even have been an option. Phil Libin, CEO of Evernote, confirms that Twitter “wouldn’t have any problems getting private investment,” if that were the growth strategy it had chosen. A quick look at Twitter’s valuation chart over the past several years makes it clear why private investors would clamor the chance to give Twitter more capital. If recent trends in the company’s revenue continue, stock market investors will step into the action with glee.
Twitter is moving towards an IPO now because the climate is better for a social media public offering than ever before. Facebook played a big, messy game of minesweeper last May in its own public debut, clearing hazards and making plenty of mistakes that Twitter now gets to avoid. Additionally, the economy has also improved steadily, and investors seem to have developed a stronger affinity for social media companies than ever. Even those maligned social media IPOs mentioned earlier are on the upswing — Facebook’s stock is up 109% this year, Groupon has risen almost 140%, and even Zynga has gone up almost 10% (this after destroying 80% of its value in the first half of 2012). Signs point to social media’s much-hyped potential and treasure trove of big data finally paying off in terms all investors understand: profits.
With Costolo in charge, Twitter is poised to makes its debut in an incredibly sunny IPO projection. His steady hand will guide the company to producing returns for investors for years to come. Twitter is coming of age at exactly the time the investment community is most ready to take it seriously. Financial analysts can tweet their recommendations without exhausting their allotment of characters. They’ll only need three: b-u-y.