Darren Herman

Let’s assume the Internet started mainstream adoption in 1990 when Prodigy had approximately 465,000 subscribers and CompuServe had 600,000 (fact check here).  While those numbers in themselves aren’t mainstream to a country of 300MM+ people, they do signify a large group of people who were early adopters and started to spread the love about this thing we called/call the World Wide Web.

Throughout the decade of 1990s and within the technology sector, there were quite a few companies who attained liquidity thru going public (IPO).   Others raised quite a bit of private equity and venture capital and some are still around today, others are not.

IPOs of significance to this post:  Lycos (1996), Yahoo! (1996), eBay (1998), Akamai (1999), Razorfish (1999)

During the 90s, there was lots of hype and hoopla surrounding many of the IPOs which led them to appear much larger and significant than they really were.  The major reason for this was the promise of the Internet and implied valuations and multiples for what the Internet “will be” in years to come.  These multiples made up for the revenue traction (or non-traction) that the companies had.  The companies who had revenue traction then are more likely to be around today as they had solid foundations.

Fast forward to today.  There is starting to be some talk on the various mainstream and niche news sites about the forthcoming IPO marketplace for Internet related companies such as Facebook, Groupon, LinkedIn, Twitter, amongst many others.  In talking with many investors, journalists, and entrepreneurs, they are a bit hesitant of this IPO landscape which is the opposite of my thinking.  Maybe I’m the contrarian here.

I’m excited for some of the forthcoming IPOs.  Let me explain why but before I do, lets remove any external factors outside of this blog post about the US economy, worldwide economies, etc.   Let this solely be around the Internet.

• Internet Adoption:  In it’s most simplest sense, there are more people using the Internet today than there were in the 1990s; here in the US and in the world.  By more people using the web, there is inherently more demand for innovation.  Instead of introducing home PCs to people, we’re now introducing tablets and smartphones.  Access to the web isn’t “if” or even “when” now, it’s more about “how much” access thru multiple devices.
• Internet Understanding:  It’s 20 years post 1990 or 11 years (an entire decade+) since 2000 and the mainstream public now knows how to use a computer and browse/surf/dabble across the web.  500 million people have logged onto Facebook and created a profile.  This was not the case 10 years ago.  Fundamental understanding and most important, comfort, with the Internet is here and more people are discovering, transacting, communicating, and planning each day online.
• Advertising Dollars:  For the past 20 years, dollars have been allocated to the digital channel.  Search, display, rich media, video, mobile, etc all have helped grow the digital advertising pot. Currently as it stands according to eMarketer, online ad spending is roughly 15.3% (2010) of total ad spending resulting in approximately $25.8B.  This number is going to grow and help bolster digital tv, radio, print, and OOH (all of those channels will have digital backbones eventually).

So why I’m particularly excited about the idea of the Internet IPO resurgence is because there is a strong foundation for these companies to grow on top of in terms of Internet users, comfort level, and ad & product spending online.  The previous companies had very little to build atop which is very different now.  The landscape is a bit more mature which should allow for companies to go big and have a higher rate of success.

(note, I’m not bullish on all of the companies listed in this post -just using them as examples)

Related articles

• Are Internet Company IPOs Coming Back? (theatlantic.com)
• 2011 May be the Year of the IPO for Social Media (startupprofessionals.com)
• Facebook appears on path toward IPO, possibly next year (usatoday.com)
• More Companies Seek IPOs (online.wsj.com)