Don't Act Surprised by a 2013 Twitter IPO

 | Dec 29, 2012 | 4:00 PM EST
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There has been a lot of talk about the possibility of a Twitter initial public offering in 2013.

Could it happen? Sure.

If I were Twitter CEO Dick Costolo, I would be strongly considering it. Facebook's (FB) did have a somewhat unsuccessful IPO this past year from a personal relations/optics perspective. However, you would have to concede that the company is now public with $10 billion more in cash in the bank, many of their early investors cashed out and happy and with an inflated stock price that they can use to make acquisitions.

Twitter has none of those things, and is at a disadvantage because of it. The main reason Facebook snatched away Instagram from Twitter this year was its coming IPO and, due to this, an ability to pay several times what Twitter was willing to do. It didn't matter that Instagram CEO Kevin Systrom had once interned for Twitter's Jack Dorsey and was good friends with him. At the end of the day, all Systrom and his investors cared about was cold hard cash and stock.

It was a major lesson for Twitter, and probably a big reason why the company will want to IPO next year.

Whenever the next Instagram emerges -- that hot, new mobile start-up that shows a lot of promise to one day eclipse either Facebook or Twitter in popularity -- Twitter knows that Facebook will swoop in and make a play for it.

Sometimes Facebook will kill the momentum behind the start-up with the acquisition, but sometimes the acquisition will greatly benefit Facebook -- the jury is still out on what's going to happen with Instagram. Twitter just can't remain in the shadows talking about how great it is that they don't have the pressure to report their numbers quarterly.

Twitter also has a great product that is well-suited to the new mobile world. It's been doing a great job so far at selling mobile ads on their platform.

I suspect that, if Twitter were to IPO in 2013, it would get a valuation of between $10 billion and $20 billion, depending on how the markets are doing. It certainly wouldn't be as big as Facebook, but that type of valuation would allow the company to go after some of the hot new start-ups and make its existing investors happy with a great exit.

I continue to think Twitter would be better served if it were to agree to an Apple (AAPL) acquisition. I have no idea if Apple is interested -- but it should be, in my view. The combination of Apple and Twitter could be very powerful, and would truly allow them to compete with Facebook on an even level. Twitter could also certainly teach Apple about building competitive mobile services in the next 10 years.

But, whatever happens, something big will happen to Twitter. It won't end the year as a private company.



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