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Going public: how the IPO could change Twitter

Going public: how the IPO could change Twitter


A new look, new products, and new ads will accompany the social network's public debut

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Seven years ago, as the podcasting startup that he worked at was flailing, Jack Dorsey decided to try a side project: Twitter. Today the company is preparing for an initial public offering of its stock, bringing it a higher profile, a significant cash hoard, and more time to realize its vision as a global, real-time news and entertainment network. Going public also brings the specter of quarterly earnings, shareholder pressure, and activist investors. To see what those can do to a company, look no further than Facebook — another unproven social network that spent a year sweating as it worked to persuade investors of its long-term value.

The IPO is expected to arrive sometime in the next few months. After the new millionaires are minted, and more fully vested early employees head for the exits, what will Twitter look like for those who don’t hold a financial stake in the company? The company declined to comment. But in the past several months, Twitter has already started to transform, rolling out fundamental changes to its core experience that will shape the product for years to come. Interviews with analysts and others familiar with the company’s thinking suggest that those changes will only accelerate in the months leading up to and following its public debut.

Beyond the timeline

If there’s one lesson to be drawn from high-profile tech IPOs in recent years, it’s that going public often spurs companies to invest in new product lines. Google is perhaps the most expansive example, having used its search business to finance forays into maps, email, and operating systems. Facebook’s friend graph has led the company into messaging, photos, calendars, and search.

New products are coming

Twitter already has some experience in branching out, having released Vine and Twitter #Music this year. They won’t be the last expansions of the company’s product line, says Brian Blau, an analyst at Gartner. "I think we’re going to see more of those complementary apps and services, built around the fact that they’re going after real-time news and information."

Already, the company is running experiments around local discovery, surfacing tweets in the user’s immediate surroundings. Blau imagines Twitter products for live events, local businesses, and others that pair well with real-time advertising. "Twitter has to come up with new business lines that engage users outside the [core product]," he said.

Designing for the mainstream

Like any social network, Twitter’s top priorities include increasing its number of active users and — just as importantly — increasing the time they spend using the network. The company has more than 200 million active users, but has reportedly grown more slowly than executives hoped. One possible reason is that Twitter remains overwhelming for some users, particularly those new to the service. To fix that, Twitter’s product teams are revamping the company’s mobile applications to make it easier to discover interesting people, tweets, and trends.

The latest version of Twitter for Android, which emerged in beta last week, divided the contents of the former Discover tab into three places: people, activity, and trends. For the first time, users can navigate to different sections of Twitter by swiping left or right from anywhere inside the app. The effect is to diminish the importance of Twitter’s core feature — the timeline of tweets — while making other sections more prominent.

Twitter Android Beta

The diminishing importance of the timeline

More than any other version to date, the new look plays down the importance of the original Twitter timeline. Users can quickly swipe from tab to tab from any place in the app, bringing them closer to tweets and trends that are easy to overlook in the service's existing apps. The new navigation system marks the second recent change to the core experience, after the introduction of the new conversation view that upends the chronology of the Twitter timeline by grouping tweets with their replies via blue lines, regardless of when they were tweeted.

Meanwhile, the company will continue its push into television, where it hopes to crack the $80 billion TV advertising market by becoming the default second-screen experience for live programming. This year has seen Twitter acquire two TV analytics startups while signing big deals with networks to include instant replays and other clips inside tweets, bolstering video content on the service while also giving programmers another place to put ads.

If the plan works, Twitter should see users following, favoriting, and retweeting more than ever. An improved user experience will also burnish Twitter’s own brand, helping it to acquire new users. But what’s good for Twitter here is likely to be good for advertisers as well: a more interactive stream is a stream that is easier to monetize. And as a public company, Twitter will be working aggressively to show that its users will click on ads.

An ambitious ad play

One reason Twitter can comfortably go public now is that more investors are convinced that ad-supported social networks can generate meaningful revenue from their mobile products. After its rocky debut on the public markets, Facebook essentially reinvented its advertising business for smartphones and tablets — and its stock is now trading at all-time highs. Twitter, which has long made more than half of its revenue from mobile products, never faced the skepticism that Facebook did. But as it morphs into a public company, Twitter’s ad business will have to transform along with it.

Today, Twitter makes the majority of its revenue by selling promoted tweets and trends. This month the company unveiled a broader vision, which hinges on its $350 million purchase of the San Francisco startup MoPub. MoPub helps publishers manage their digital advertising inventory, and in the short term, acquiring the company will increase the number of advertisers on Twitter. Over the long term, though, MoPub is expected to sell ads on other mobile applications, targeted using Twitter’s data on identity, demographics, and interests.

Going head to head with Facebook

Twitter has been adamant that users will not see a sharp increase of ads in their streams, either as a result of the IPO or of the MoPub acquisition. But you may see Twitter ads elsewhere on your mobile devices, for this reason: MoPub isn’t only a complement to the promoted tweet. It’s also a hedge against the promoted tweet, opening up ad inventory for Twitter inside apps and on websites outside the Twitter timeline. Facebook’s version of this product, FBX, has gotten off to a slow start. As a public company, Twitter will seek to move faster.

An emerging shape

Of course, not everyone will find Twitter’s changes to be for the better. A focus on new business lines could distract the company from the product that brought everyone to Twitter in the first place. Continued changes to the timeline could alienate the user base. And the company’s plans to rule the mobile advertising world could be swatted aside by Google, Facebook, or another competitor.

There’s also the looming question of what becomes of Twitter’s third-party clients, like Twitteriffic and Twittelator. The apps run without advertising, making them free riders on Twitter’s ecosystem, and are widely viewed as an endangered species. Going public may add pressure on Twitter to eliminate apps whose own view of the service increasingly differs from its own. (Third-party developers contacted by The Verge declined to comment.)

The true shape of a post-IPO Twitter won’t be known for some time. But it’s not hard to guess what it will look like: the next version of the service has been coming into focus for some time now. The steps Twitter has taken to prepare for its IPO are already translating into changes in the product — and if recent months are any indication, there are many more to come.