Public markets are craving Internet IPOs

Top-rated Internet analyst Mark Mahaney says there's demand for Zynga, Facebook, LinkedIn, Twitter

When the ducks are quacking. Feed them.

It seems 2010 may be shaping up to be the start of an Internet IPO craze, as public-market investors begin to make noise about their interest in newly-minted shares. After a gloomy start to last year turned around and ended on an upbeat note – Google shares soared 102%, Amazon rose 162%, Expedia spiked 212% - it's not surprising that investors are craving for more momentum and upside. 

"Facebook, in our Citi conference earlier this year was the single most-mentioned company,” said Mark Mahaney, Internet analyst at Citi Investment Research. “The buzz behind that [name] is similar to and reminds me of the buzz we heard and was built up around Google when they went public.”

Of course, all the enthusiasm could die out, depending on Facebook's real numbers.

You may recall, Google went public back in 2004, when it had quarterly revenue of about $400 million, which is probably more than what Facebook is generating. Google's valuation was bandied about between $23 billion and $30 billion, mainly because it was soaring like a rocket ship, when others were flying at low altitudes.

Soon enough Google soared to $150 billion in market cap. And, getting that kind of growth isn't likely for any publicly-traded stocks these days.

To that end, the one place to find that type of hyper-growth is in private sector, where young companies – like two-year-old Zynga are growing like weeds. Zynga, the leading social gaming site, is expected to generate $400 million in revenue this year, according to Citi Investment Research. That’s impressive growth from a company that was born in 2008, and makes Google and eBay look like old hags. Google and eBay saw revenue grow 10% land 1%, respectively last year.

In this interview, Mark, rated the No. 1 Internet analyst for two years in a row by Institutional Investor, talks about the enormous appetite for fresh growth, something lacking in the public markets today.  He also talks about his outlook for Internet stocks and what that means for Internet companies in the private sector.

Companies like Hulu, LinkedIn, Zynga, Demand Media, Glam, and of course Twitter are the companies public market investors are talking about, said Mark. Many of them are "generating new revenue streams we haven’t seen in public markets before or are just massively taking share in their core niches, and I think public markets, which have not seen major IPOs in two years [Ancestry.com and OpenTable went public last year, but were well under $1 billion IPO)… I think public markets would be very interested in new Internet stocks, secular growth thesis, market share gainers, looking for leaders in their categories, there’s appetite.”

Watch this interview and see what public market investors are looking for and why the demand might open the floodgates for exits.