With Twitter’s recent announcement (by way of a tweet, naturally) that we should expect an IPO from the social media superstar, the buzz has been mostly positive. But the elephant in the room is a giant like button. As in, how can Twitter avoid the “ipocalypse” that Facebook nose-dived into when it first went public? Of course, Facebook’s true friends were rewarded when the company’s stock market climbed back into profitability. In fact, Facebook’s surprising rebound is probably one reason why Twitter is moving forward with what is still a relatively risky proposition.
Twitter is using two strategies that any up and coming company ought to closely examine. There’s a measure of irony in the fact that they run somewhat counter to Twitter’s raison d’etre, the dissemination. Instead, Twitter is taking the stealth approach. The idea is to fend off the hype that led to the wild speculation around Facebook. They also want to avoid releasing dispiriting data like Groupon did that stunned seasoned investors who still managed to confuse company popularity with profitability.
So Twitter publicized their IPO filing with only a single tweet. More stealthily yet, they are taking advantage of a special government clause that allows promising start-ups – companies with an annual revenue not exceeding $1 billion – to proceed with their IPO in a confidential manner. Basically, the JOBS act specifies that Twitter won’t need to disclose its earnings until a much later date, one closer to it effectively going public. In effect, Twitter doesn’t want people to speculate on the company’s prospects based on its current revenues. Why? It could be that Twitter is insecure about its actual earning potential. But it could also be that they know quite well that we still don’t understand the precise economic mechanics of social media. On the other hand, Twitter does know a thing or two about crowd psychology: don’t encourage the twittering cognoscenti to create panic when none is needed or helpful.