Can A Twitter IPO Trump Facebook's?

James Dennin, Kapitall: A potential Twitter IPO continues to draw speculation, but what does that mean for investors?

In case you haven't heard – Twitter is going to great lengths to avoid some of the mistakes made by Facebook (FB). It's disastrous public offering, with excessive hype and an absurdly high valuation ($100 billion vs. an actual value around $5 billion), caused computer glitches and botched the IPO of the premier name in social networking. The problem for Facebook was that it rolled out too quickly, before it started to actually generate much revenue. Twitter is trying, and failing, to keep a low profile as the media seizes upon every new hire and every new acquisition, that the micro-blogging site makes.

[Read more from Kapitall: Whats Next For Bill Ackman?

The first instance came last May, when the internet jumped on Twitter's job posting for a stock administration analyst. The company tried to plug the hole by taking the listing down, but by that point it was too late, and Twitter went ahead with the hire anyway. Just this week Twitter made another important hire in Nathan Hubbard, an executive from Ticketmaster and Live Nation (LYV), to run its nascent "commerce" division. The 38-year-old former musician has already described the early stages of a plan to pair Twitter users with vendors more directly. 

I say nascent, because Twitter is still working tirelessly to monetize its world of shout-outs and hash-tags. Much of the company's acquisitions have been related to video streaming or advertising – including the video app Vine and the smaller Trenderr, a marketing company that tracks social media engagement around television advertisers. And Twitter still isn't as big as Facebook, which has more users and, perhaps more importantly, far more information about those users to sell to advertisers

However, Twitter is managing its growth more carefully than Facebook did, moving in slower increments. Its valuation of $10 billion seems like a lot for a company with only $350 million in yearly revenue. However, that's only a tenth of the initial estimate mounted by its competitor. And it leads Facebook in one extremely important area – mobile ads. As early as last year, Twitter's take of mobile ad-sales was almost double Facebook's. When you consider the importance of mobile advertising, and its growth prospects, Twitter is looking even better.

Bankers have already begun creating accounts in the hope of fashioning a Twitter-friendly reputation for themselves, in time for the IPO. Sources close to the matter say the early 2014 IPO dates put forward by speculators are likely too soon. But evidence that Twitter is making moves in this direction is starting to get pretty overwhelming. Amazon (AMZN) and Ebay (EBAY), you've been warned. 

Click on the interactive chart below to see analyst ratings over time.

[Compare analyst ratings to annual returns for stocks mentioned]

 

Will Twitter's acquisitions (and future moves) rattle the rest of these online giants? Use the list below to begin your own analysis. ​

1. Amazon.com Inc. (AMZN): Operates as an online retailer in North America and internationally. Market cap at $128.1B, most recent closing price at $280.93.

 

2. eBay Inc. (EBAY): Provides online marketplaces for the sale of goods and services, as well as other online commerce, platforms, and online payment solutions to individuals and businesses in the United States and internationally. Market cap at $65.64B, most recent closing price at $50.61.

 

3. Live Nation Entertainment, Inc. (LYV): Operates as a live entertainment company internationally. Market cap at $3.26B, most recent closing price at $16.90.

 

4. Facebook, Inc. (FB): Operates as a social networking company worldwide. Market cap at $95.41B, most recent closing price at $39.64.

 

  (List compiled by James Dennin, a Kapitall Writer. Analyst ratings sourced from Zacks Investment Research, all other data sourced from Finviz.)

null