Rumors have circulated for a couple of weeks that Twitter is considering an IPO. First it put out hiring requests for accountants and financial managers who specialize in the intricacies of public-company finance; company executives have also reportedly met with Wall Street firms in an “informal” capacity to talk public offerings.
“By reading between the lines, you can see this IPO is coming fast,” Pat Healy, CEO of Issuer Advisory Group, told the New York Post.
An IPO would flood Twitter’s coffers with sweet cash that it could use to bolster its infrastructure and services, allowing it to compete more effectively in an increasingly crowded (and feature-rich) social-networking market. However, a public Twitter would also need to produce strong results on a quarter-by-quarter basis in order to satisfy Wall Street investors—and that could present a couple of wrinkles on the user-data and advertising side of the equation, especially given how much Twitter depends on ads for revenue.
For one thing, pressure to deliver those strong quarterly results could drive Twitter to mine more and more of its user data in increasingly granular ways, which could set up the company for the sort of privacy-related crisis that grips Facebook from time to time. It may end up offering advertisers more powerful tools for reaching very specific demographics of Twitter users, which could translate into solid revenue—but would force Twitter’s executives to make decisions about how much advertising and marketing they want on their Website.
Twitter has already expanded its services over the past several months: in June, for example, it opened up its analytics dashboard—previously reserved for advertisers—so that all account-holders can view analytics related to their timeline activity and followers. It also acquired Spindle, a mapping-and-social startup, which many outside analysts interpreted as a move against Foursquare. Finally, its forays into video (with Vine), music, and other consumer-y areas are easily interpreted as a counter to Facebook and the other social networks. In sum, Twitter is building out or inheriting a lot of services that will grant it a whole lot more personal data; the question is whether an IPO would compel it to leverage that data in especially deep ways for profit.