Facebook Inc. and Twitter Inc.’s logos

http://finance.yahoo.com/blogs/breakout/4-reasons-twitter-ipo-rocked-where-facebook-rolled-192651553.html

Twitter Inc.’s IPO on November 7th did extremely well. Their stocks went on the market at $26 and shot up almost 73% in the first day of trading. Lots of debate and discussion preceded Twitter’s IPO with sources arguing both ways in terms of how successful or unsuccessful people claimed it would be. I would argue that a big reason for the magnitude of buzz around the microblogging social media company was due to the disastrous IPO that Facebook had in May of 2012. Although Facebook Inc. has recovered well their IPO provided twitter with a long list of what not to do’s when it came time for them to take a kick at the can. This Yahoo Finance article and interview outlines 4 reasons why Twitter’s IPO was incredibly successful and Facebook’s couldn’t have gone more wrong.

1.Market Timing : The Market is in a much better position now than it was a little over a year ago when Facebook went public, and even furthermore positioned exceptionally well for an IPO.

2. NYSE not Nasdaq: Historically tech start ups have sought out the Nasdaq as home to their IPO’s, which exactly what Facebook did. Unfortunately, the Nasdaq was partly responsible for Facebook’s catastrophe and for that reason Twitter decided to go public the NYSE. According the article the NYSE did an exceptional job with Twitter Inc.’s IPO.

3. Stage of the Company: Facebook was a much more mature company when it went public, it had a massive user base and already began earning revenue. Twitter on the other hand had is and was at much younger stage in its life, this leaves a large amount of opportunity and speculation regarding it’s future.

4. Facebook was 1st: Sometimes being 2nd has its advantages and Twitter undoubtably gained a lot from having its IPO after Facebook. They were able to look carefully at what went wrong in order to decide what to do write when it was their turn.

My question now is that would Twitter’s IPO been nearly as successful as it was had it not been for Facebook’s failure to provide them with a road map of what not to do? How much of Twitter’s success can actually be chalked up to their own company and not their ability to learn from another’s mistakes? How does this relate to their market cap, is it really a proper valuation of their business? It will be interesting to monitor Twitter’s stock over the following year as the begin to implement real revenue generation models.