from left, facebook, twitter

If the IPO market for social media companies were a three-act play, Act One would be LinkedIn, Facebook would represent the distressing second act and the Twitter IPO – announced by the company today on its own service – would be Act Three, an act that looks to be set up for a very happy ending.

Unless some economic or financial shock sends the broader stock market lower in coming months, Twitter will be sailing into public waters under conditions far more felicitous than Facebook did in May 2012. Even though Twitter is likely to debut with smaller revenue and far fewer global users, it’s poised to be the anti-Facebook of IPOs.

Much of this has to do with how the stock market’s view of Web IPOs has changed. In the months before Facebook went public, many of the earlier Web IPOs had been trading sideways or lower as investors looked in vain for evidence that mobile advertising would be able to deliver on its promise.

In the past three months, however, that has changed. Facebook has risen 88 percent amid clear evidence it’s gaining traction in mobile advertising. With less fanfare, others showing progress in mobile ads have followed: Pandora is up 59 percent, Groupon up 69 percent, Zillow up 92 percent and Yelp is up 117 percent. After years of getting a cold shoulder from Wall Street, Web stocks are being seen as worthwhile investments.

Credit Facebook for much of this turnaround. One of the reasons Facebook’s IPO stumbled out of the gate was a late amendment to its prospectus warning that mobile users were growing faster than mobile ads. The confidential nature of Twitter’s IPO will conceal a lot of these amendments from public scrutiny. But more importantly, Facebook has since shown it can monetize its growing mobile users by selling ads on the platform without driving users away.

The confidential nature of the IPO, however, is also sure to exacerbate speculation about what the market value of Twitter will be once it enters the public market, and then inflame debate over whether that valuation is deserved or overpriced. Earlier this year, Twitter’s valuation was seen at around $10 billion. Today, GigaOm reported Twitter is drawing bids from hedge funds that value the company at $14 billion, a number at once unsurprising and yet irrational given Twitter’s revenue is below $1 billion.

Even so, speculation of Twitter’s valuation may see back-of-the-envelope rationalizations for $15 billion, $20 billion, or higher. These are unlikely to be reasonable calculations. But that’s just the nature of speculation when a company’s financials remain enshrouded behind a curtain.

Observers and would-be Twitter investors will be watching Facebook, Twitter’s biggest rival, to extrapolate possible financials for the company. Many commentators are already talking about how the bulk of the company’s revenue must come from mobile ads, given how similar tweeting is to texting and therefore ideally suited to mobile devices. Each week, Twitter and Facebook seem to look more like each other, adopting features and advertising strategies that the other developed. So Facebook’s success in coming quarters may well translate into a successful IPO for Twitter.

Twitter can also learn from Facebook’s missteps before its IPO – and it seems like it may already have. The company chose Goldman Sachs as lead underwriter over Morgan Stanley (which led the Facebook IPO), and it may be wise to list on NYSE rather than Nasdaq. It’s also been careful about employee stock sales on secondary markets – a tactic that ended up sating a lot of institutional appetite for Facebook shares even before its IPO.

Before Facebook went public, optimists predicted that its long-awaited IPO would be the one to light a fire under Web IPOs. As we all know, that didn’t happen – at least at first. But in a way, it’s starting to happen now. If Twitter isn’t grossly overvalued when it enters the public stock markets, it could be the spark that belatedly lights that fire.

If that happens, though, Twitter will have its rival Facebook to thank. Twitter may have the anti-Facebook IPO in the sense that it could sail into the markets without a hitch. Such good fortune would come in part because Facebook set the stage for the kind of warm welcome that Wall Street denied it.