Want to Know About Twitter’s IPO? Look at Its Acquisitions

The social network's buys in engineering, advertising and television-related firms preview its forthcoming roadshow for investors

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Fred Tanneau / AFP / Getty Images

Update, 9/12: Twitter announced—via tweet—on Thursday that it has submitted filings to the Securities and Exchange Commission to begin the process for an initial public offering. The filing is confidential because of a provision in the JOBS Act that allows companies with less than $1 billion in revenue to submit financial information to regulators privately. Analysts predict that the Twitter IPO could come as early as December.

Ever since Facebook went public in May 2012, investors have been eyeing Twitter as the next major social-media initial public offering. The microblogging site, which early on struggled through technology failures and management reshuffles, now boasts more than 200 million active users. The company’s estimated value is about $10 billion. And its business is growing quickly — eMarketer projects that Twitter will bring in more than $500 million in advertising revenue in 2013 and almost $1 billion in 2014.

Recent moves signaled that a Twitter IPO was in the works. The company has spent the summer quietly talking with banks about handling a public offering, according to Bloomberg. A recently posted job listing on LinkedIn for a financial reporting manager to handle regulatory filings tipped the company’s hand further. Perhaps more telling, Twitter has also been buying up tech startups in a variety of fields, including a big purchase announced Monday to boost the company’s advertising business. Here’s a breakdown of four key sectors Twitter is trying to bolster before pitching itself to Wall Street.

Advertising

Recent acquisition: MoPub (September 2013)

How it helps: Like with most social networks, the vast majority of Twitter’s revenue comes from advertising. Mobile-ad company MoPub, reportedly acquired for more than $300 million, will give Twitter the ability to offer real-time bidding on promoted tweets, thereby sending users more valuable, targeted ads and driving up the price Twitter is able to charge for them. Google uses similar technology through its DoubleClick Ad Exchange service to sell display ads across the Web. Twitter says MoPub will continue working with other clients to distribute ads on a variety of mobile platforms, perhaps signaling that Twitter wants to battle against Google directly for ad supremacy in the mobile-advertising space.

(MORE: Twitter Plans to Become a Shopping Destination)

Television

Recent acquisitions: Trendrr (August 2013) and Bluefin Labs (February 2013)

How it helps: Twitter has long billed itself as the watercooler of the Web, offering a place where people can discuss events happening on television in real time. The acquisition of social-media analytics companies Trendrr and Bluefin Labs strengthens Twitter’s claim. Bluefin’s technology serves as the backbone of a new Twitter ad product that lets marketers identify users who are tweeting about a specific TV program, then send them promoted tweets tied to the commercials airing during that show. Just as important as boosting Twitter’s social TV repertoire, these buys deplete the capabilities of rivals like Facebook. Just a month before being bought out, Trendrr had completed a study showing that Facebook generates much more social activity around TV shows than Twitter — it’s doubtful we’ll hear anymore about that study anytime soon. By opening its pocketbook, Twitter is reducing the number of independent analytics companies that might reveal data that runs counter to Twitter’s image as the leader in social TV.

Engineering 

Recent acquisitions: Marakana (August 2013) and Ubalo (May 2013)

How it helps: Google and Facebook became two of world’s most important Internet companies by aggressively recruiting the most skilled computer engineers. Twitter, whose fail whale was a notorious signal in its early days of its limited technical capacity, is making efforts to expand its employees’ skill sets. The company acquired Marakana, an online education platform, to head up Twitter University, a new initiative to provide Twitter engineers more comprehensive technical training in various computer languages. Another acquisition, the small startup Ubalo, seemed to be aimed at improving the efficiency of Twitter’s back-end infrastructure.

(MORE: Man Spends More Than $1,000 to Call Out British Airways on Twitter)

Multimedia

Recent acquisitions: Vine (October 2012) and We Are Hunted (fall 2012)

How it helps: Despite its text-based beginnings, Twitter clearly has a multimedia future. The microvideo social network Vine was actually developed initially by an independent company that Twitter acquired last fall. Now Vine has more than 40 million registered users and seems like an obvious candidate to eventually be monetized through promoted posts. Twitter also acquired music-discovery platform We Are Hunted in the past year in preparation for the April launch of Twitter Music, which allows users to stream songs from popular and upcoming artists. With audio and video now being part of the Twitter experience, the company clearly has broad aspirations to become a media enterprise and not just a communication tool.

As Twitter’s IPO draws near, expect the acquisitions to keep coming. The company will no doubt go to great lengths to prove to investors that its stock won’t fall flat like Facebook’s. Buying out companies that lay out a clear path to increased revenues is an effective way to do that.

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