Will Twitter’s IPO Flop Like Facebook’s?

Twitter announced, via what else?  Twitter, last week that it has begun the paperwork process for an initial public offering, making it one of the highest-profile IPOs since rival Facebook went public in May 2012.

Goldman Sachs has been tapped as the lead underwriter for the deal. Twitter is reportedly valued at U.S. $9 billion, which, compared to Facebook’s U.S. $100 billion valuation, is minuscule, The Wall Street Journal said.

“Twitter must prove that it can truly generate revenue from its ad business,” notes Yankee Group Research Director Sheryl Kingstone. “Facebook learned that hard lesson last year, as it was tripped up with a belated disclosure.”

Kingstone also said that Twitter has a “less favorable” brand impression than Facebook, at 31 percent, compared to Facebook’s 51 percent. But since Twitter acquired MoPub and the social site’s DNA is mainly in mobile, this IPO is strictly about revenue potential.

“Mobile ad revenue will become an increasing larger part of the overall digital ad market, growing to roughly 20 percent of overall spending by 2017,” Kingstone added. “The potential to grow even faster is not out of the realm of possibility because of mobile’s ability to deliver contextually relevant ads incorporating location and time, which increases the potential to return on the investment through better closing rates.”

It isn’t always how you start, however. Facebook watched its stock price fall from $38 to $17 in its first three months of trading, but has since rebounded, breaking the $45 mark for the first time this week.

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