How Did I Do On My 2012 Predictions?

2012: The Year Ahead

Photo: Mike Licht, NotionsCapital.com

From my Forbes.com blog The New Persuaders:

It’s that time of year: time to reflect on the past year, time to get wasted and watch a glass ball smash into the ground, time for people like me who foolishly offered predictions for the past year to face the music. So here’s how I did on my 2012 predictions:

* Facebook goes public, but won’t start an IPO landslide: Bingo! Indeed, Facebook’s ill-received IPO led to a months-long drought in IPOs as investors realized they were not a sure route to riches. The situation may be improving, but mostly for enterprise more than consumer companies.

* Facebook’s ad business booms–but not at Google’s expense: Bingo! While Facebook’s revenues slowed even before its IPO as it continued to experiment with new ad formats and scrambled to provide mobile ad units, ad revenues have since accelerated, up 36% in the third quarter over last year. At the same time, while Google’s revenue growth disappointed investors in the third quarter, it was mostly thanks to the impact of its Motorola acquisition, not a shortfall in its core ad business.

* Image ads finally find a home on the Web: Half-right. YouTube proved there’s a real market for TV-like video ads if you give viewers the choice to view them or not, as its revenues were expected to hit $3.6 billion in 2012, according to Citibank. But Facebook’s struggles to attract brand advertising despite a TV-scale audience, while partially successful, show that no one has yet come up with brand ad formats that work consistently and at large scale online. Or at least brands, which still spend most of their money on TV ads, don’t believe it yet. And they write the checks.

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What’s Coming on the Internet in 2011 (Or Not)

I know I shouldn’t do it–predictions too often are either obvious or wrong–but I can’t help it. If I have to think about what’s coming in 2011, and I do, I might as well inflict those thoughts on the rest of the world. Isn’t that what blogging is all about? Anyway, here’s what I expect to see this year:

* There will be at least one monster initial public offering in tech. Take your pick (in more or less descending order of likelihood): SkypeGroupon, ZyngaDemand MediaLinkedIn, Twitter, Facebook (only if it has to). But despite many stories that will call this event a bellwether,  the IPO won’t bring back anything like the bubble days of the late 1990s (and thank goodness for that) because there are still only a few marquee names that can net multibillion-dollar valuations. UPDATE: Well, so much for that descending order. LinkedIn apparently will be the first to file–though whether it will be a “monster” IPO is another question. UPDATE 2: Well, here’s that monster IPO–since it’s hard to believe Facebook won’t go public if it has to disclose financials anyway. But it likely won’t happen until early 2012. Update 3: Now Groupon appears to be leading the IPO derby. Update 4, 1/20/11: Now it looks like Demand Media will be the first out. Again, not sure that’s the monster one, but if it’s successful, more will come.

* App fever will cool. Good apps that encapsulate a useful task or bit of entertainment–Angry Birds, AroundMe, Google Voice–will continue to do well. But those apps that do little more than apply a pretty layer atop Web content won’t get much traction–and moneymaking opportunities are uncertain in any case. The bigger issue: Once HTML5 becomes the widespread standard for creating Web services, enabling much more interactive Web services right from the browser, I wonder whether the need for separate apps will gradually fade. Continue reading

To IPO or Not to IPO: Live at TechCrunch Disrupt

IPOs traditionally are the grease that keeps Silicon Valley’s gears turning. There’s no lack of startups today, but the big question is whether initial public stock offerings will ever become a viable way for investors, founders, and employees to get a return on their money and work. When even the likes of Facebook and Zynga haven’t gone public yet, the prospects for IPOs look almost as bleak as ever. This morning at the TechCrunch Disrupt conference, Benchmark Capital partner Bill Gurley and Michael Grimes, managing director of global technology for Morgan Stanley, will be discussing what we can expect in coming years with TechCrunch editor Erick Schonfeld.

Grimes says there are new ways for companies to get larger sums of money and to help the founders get some liquidity, such as second markets for private stock. There’s a belief that the IPO market is closed. It’s not, but it’s more discriminating. There’s a bit of a supply issue, but there’s also a bit of a demand issue.

Gurley says there won’t be one IPO that will change the IPO market after it. There are 14 companies that IPO’d in the last few (one?) year, but no one writes about it because not as many are happening in Silicon Valley.

So why aren’t Silicon Valley companies going public as much? Grimes says investors think there’s too much of a leap of faith to believing the apparently ready companies are profitable enough. Gurley says companies must be profitable or convince investment groups they will be. That’s tougher now.

Why aren’t the obvious companies such as Facebook, LinkedIn, etc. going public now? Gurley can do whatever they want. LinkedIn has hired a public-company finance guy, they’re getting ready most likely.

Should Facebook go public? Gurley: They get to do whatever they want, they’re extremely successful. The argument that Facebook doesn’t want the scrutiny of being a public company doesn’t hold up. You don’t hear Salesforce’s Marc Benioff or Amazon’s Jeff Bezos saying that.

But they say they’re still experimenting and don’t want to be limited by the need to show quarterly results. Gurley: And Bezos isn’t? But a company as successful as Facebook can raise whatever they want from private sources.

Of the 40 (or is it 14?) or so companies that have gone public in the past year at $1 billion-plus valuations, why are they not very well-known? Gurley: 75% of the deal value is not from Silicon Valley. So people here have blinders on.

So why should Facebook go public at all? Gurley: To get liquidity for shareholders and employees. To do acquisitions. Grimes: The employee liquidity can keep the team motivated to work late nights.

What are the prospects for tech IPOs this year and next? Grimes: Could be 40 or 50 next year, compared with 30 this year. Gurley: I would predict you’ll see Skype and LinkedIn go public.

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