Social media companies have not been able to reap the full benefits from going public, as discussed in an earlier post. The worth of public offerings in terms of profits and risks is unreliable in the case of social networking, due to their volatile business and huge dependence on user sentiment. This has led to some of the worst IPOs in the history of technology. Take the example of Groupon Inc (NASDAQ:GRPN), which started off with $20, now at $4.30. Facebook Inc (NASDAQ:FB) started with $38, and is now at $19. Zynga Inc (NASDAQ:ZNGA) from $10, now trades at $3, and not even a year has passed since their IPOs.
While public companies plunge, we see a general stability in private setups that are not as influenced by shareholder pressures and market swings. Judging the exact valuation of private companies is not easy, but there are many other factors and stats that point to success in social networking.
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There were speculations about Twitter’s IPO in 2013, although it is not likely to occur in the coming year. Twitter is valued at close to $8 billion, a figure confirmed by Twitter CEO Dick Costolo in October 2011. Revenues for 2011 were expected to equal $140 million, while eMarketer predicts $400 million in sales for 2o13. The website had 50 million visits per day, and more than 140 million active users as of March 2012. Twitter also made a significant acquisition, namely Posterous, a blogging and sharing portal, which was an early competitor of Tumblr. This year Twitter has also expanded its footing in mobile ads and brought more Promoted Products to the iOS and Android environment. To Twitter’s benefit, we keep on hearing reports that Apple Inc. (NASDAQ:AAPL) has plans to acquire the social network. It is also rumored that Apple Inc. (NASDAQ:AAPL) could furnish Twitter with an investment that could take its valuation up to $10 billion.
Take the case of Pinterest, the small startup that has gradually gained a lot of popularity. According to the latest research by Experian Marketing Services, Pinterest is now the third most visited social network, beating out Google+ and just behind Facebook and Twitter. The valuation of the company has increased from $1 billion to about $1.5 billion, after a fresh investment of $100 million led by the Japanese conglomerate, Rakuten, and contributed to by Andreessen Horowitz, Bessemer Venture Partners, and FirstMark Capital. Rakuten has the largest e-commerce business in Japan, and this venture could lead to diverse opportunities for both companies.
Tagged, which is also among the top ten social networking sites in various rankings, is gaining new investments. It was able to acquire a $15 million investment from Lighthouse Capital Partners and Comercia Bank. In a bid to expand, Tagged has previously bought setups like hi5, Digsby, TopicMarks, and WeGame. The revenue in 2011 was $43 million.
The Chinese version of Pinterest, Mogujie, is also attracting investments at a projected $200 million valuation. The website attracts 2.2 million daily visitors and is rapidly making social shopping a hot trend in China.
Another deal in the social media that has had interesting after effects has been Facebook’s Instagram acquisition. The company bought the photo sharing and editing platform in a $1 billion buyout, pre-IPO. At the time, this seemed like a great opportunity. Instagram is still popular, but with the falling of Facebook Inc (NASDAQ:FB)’s stock, Instagram’s valuation is down to $740 million.
For now it seems like it is much safer for social networks to stay in the private niche, rather than jumping on the public bandwagon, where another tech bubble burst is expected in the near future.