GoPro's IPO isn't about selling cameras, it's about creating a media empire

It was 2001, more than a decade before GoPro would announce its intentions to go public, and its CEO Nick Woodman was facing a very expensive failure. In just two years, he'd lost nearly $4 million of investors' money, building a social gaming startup that never took off. Unfortunately for him, he'd arrived at that particular party a little too early, and by his own admission Funbug (as it was called) was "before its time." With fingers burnt, Woodman decided to get away for a little surfing, and to figure out what he was going to do next. The answer would come during preparations for that trip. He came up with the idea for a waterproof stills camera that he could use to take close-ups of himself and his friends right in the middle of the action. The years that followed would see that humble idea spawn something of an empire.

Nearly 10 years later, and GoPro is still growing. Not only has it recently expanded into Europe, with new offices in Germany, but it also plans to make an initial public offering. So far, the company has been coy about sharing its sales figures, but Woodman has given us some hints. He told 60 Minutes that annual revenues in 2012 had reached more than $500 million; a number he claims doubled each year, and a trend he expected to continue. The question being: Can it continue by selling cameras (and accessories) alone? GoPro's choice to follow in Twitter's footsteps and take advantage of the JOBS Act means actual sales numbers will remain a secret for a little while longer, as it shows its books to the Securities and Exchange Commission in private. One thing we can divine, however, is that GoPro didn't officially reach a billion dollars in revenue as predicted in 2013, as companies with revenue above that amount can't take advantage of the JOBS Act.

For the uninitiated, Woodman (and his team) makes action cameras. The GoPro is that small silver box you often see attached to a snowboarder's helmets, a dirt biker's handlebars and, these days, almost anything you can imagine (even BASE-jumping fashionistas, as above). It's even become a popular tool in the broadcast industry. GoPro's first camera was a far cry from the current flagship product though. It was a 35mm camera that used real film. The devices that came after made the switch to digital media and incorporated video functionality. GoPros are designed to withstand all weather conditions, take knocks and blows, survive the most extreme environments (through a protective housing) and (as technology has developed) deliver increasingly high-quality video footage in a very small device. A successful formula for Woodman that hasn't gone unnoticed.

Where there is success, competition is sure to follow, and GoPro isn't short of competitors. There are a great many alternatives if you are looking for an action camera; everything from major players like Sony, innovative independents like Drift, older hands like Polaroid and, of course, myriad cheap imitations. What makes the GoPro success so interesting is just how dominant it is in the market despite all that competition. In fact, its brand dominance is so strong that if it hasn't become synonymous with "action camera" already (like Kleenex or Xerox have with their respective industries), it can't be far off.

In an interview late last year, we asked Woodman about why his firm is so far out ahead of the pack, and his answer was self-assured: "It would seem that we built a better product, that we built a better value proposition for our customers. The value proposition that we're trying to deliver to our customers is to remove all of the pain points in capturing and sharing immersive and engaging personal content that other people actually want to watch."

Whether it's that simple or not, he's also wise enough to acknowledge that GoPro has been somewhat fortuitous in the marketing department.

"It's a snowball of consumer's enthusiasm, and word of mouth via their viral videos," Woodman said. "Millions of people around the world capture and share really interesting life experiences, and the result is really interesting content; that becomes a difficult thing for anybody to compete with." As Woodman points out, the brand has had a far-reaching impact with its Facebook page and other social media channels -- including those of individual GoPro owners. These not only continually promote the brand, but also help keep it in the collective consciousness like a steadily burning fire of free publicity.

A popular product, good revenue and an enthusiastic customer base don't mean there won't be anything on the negative pile when the traders get their calculators out this summer. Current success is one thing, but for a company to be truly investable, it needs to have a long-term future. GoPro has a massive following now, but how many of those will buy a new camera every year? Will there even be a new camera every year? Technology has a habit of catching up with itself once the initial rapid developments are made (think about how smartphones evolved between 2007 and 2010, compared to 2011 and 2013). Given that most of the competition has access to the same Ambarella chipsets (the engine room in the camera), GoPro needs to keep laser-like focus on maintaining its strong brand loyalty, and smart use of the most engaging content.

Put another way, as much as GoPro sells cameras and an ever-growing portfolio of accessories, it also sells a lifestyle. Or as Woodman explains, "It's not awesome just because it's brilliant hardware, or a brilliant device. It's awesome because of what it has enabled this person to do, and how it has made them feel. Then they think about how they did this, and think, 'God I love my GoPro.'" This part of the business -- the lifestyle aspiration, further fueled by user content -- is the next well to tap. As it becomes a challenge to differentiate at a hardware level, GoPro has an option not available to its competition: become a platform as well as a product.

As anyone who's flown Virgin America recently knows, GoPro has already entered the content game with the launch of its in-flight TV channel. We learned at CES that the channel is already set to expand, thanks to a deal with Microsoft that will bring it to Xbox One and Xbox 360 owners around summer -- just in time for that IPO. It's not hard to imagine that GoPro is already exploring other distribution routes. Woodman himself knows only too well that the content opportunities are nearly endless, potentially free and ripe to be put to use. "People have so much of their footage stored on SD cards that they never share," he said. "We could make the argument that less than 5 or 10 percent of GoPro content is actually shared."

At the moment, GoPro curates everything on its channel -- but it's clearly aware of the large, untapped store of media out there. Not to mention the apparently tireless appetite for it (reportedly at least one video per minute is uploaded to YouTube from one of Woodman's cameras). Red Bull, a brand that rubs shoulders with GoPro in terms of audience, has been in the media game for a long time with magazines, events, cross-platform video and more. It's been so lucrative for the drink-maker that it's actually developed a whole separate business -- Red Bull Media House -- to focus on it. Woodman's advantage? There's not much of a market to buy an energy drink through your browser, TV or app.

The big question today, however, is: Will all of Woodman's hard work (and that of his team, shown above accepting an Emmy) pay off when it floats on the market this summer? You can never predict with complete accuracy, but there are certainly many things in its favor. First, and most importantly, the company is already making money, something that puts it way ahead of Twitter, which announced its IPO in September last year. Second, GoPro makes a real-world product. Facebook, that other social powerhouse, and its intangible product famously had something of a stuttered start when it went public. Lastly, it's got all the hallmarks of a burgeoning media company, which is no panacea, but it's certainly an area that sets the stage for ongoing expansion. If, somehow, it doesn't work out, though, we hear there might finally be some money to be made in social gaming.