Greencrest Capital argues that the company's management changes, along with its valuation, strategic moves, and mobile revenue, all indicate it plans to go public next year.
Twitter is gearing up for an IPO in 2014, argued a New York analyst firm in a new report that cites the microblogging giant's recent management moves, its strategic partnerships, its growing mobile revenue, and other factors as evidence for the move.
In the report, titled "Twitter, Inc. on flight path to 2014 IPO (Summary, PDF)," Greencrest Capital laid out its theories for why the company might soon go public.
"Is Twitter positioning for an initial public offering (IPO) in 2014? The micro-blogging site has made a number of announcements since our last report, including management changes, site enhancements, global expansion, and new strategic alliances -- all supportive of a possible IPO in 2014. Furthermore, the company is seeing strong traction in its monetization platform and continued robust user metrics," wrote Greencrest analysts Santosh Rao and Max Wolff in the report. "Our core, positive thesis on Twitter is based on four growth opportunities ahead: (i) advertisement-based monetization features that are gaining traction; (ii) strategic alliances with leading companies and brands; (iii) strong mobile uptake of Twitter's service; and (iv) expanding international footprint."
Greencrest pegged Twitter's valuation at between $10.5 billion and $11 billion "by late 2013 or early 2014." That's lower than the valuation it offered in another report earlier this month in which Greencrest said that Twitter was likely worth more than $11 billion. It also predicted that Twitter's 2014 revenue would total $1.028 billion, up from estimates of $605 million in 2013 and $295 million in 2012. And it said that Twitter's forays into mobile advertising are paying off, with U.S. mobile ad revenue likely to hit $382.8 million in 2014, up from estimates of $248.9 million this year, and $134.9 million last year.
To support its argument for a 2014 IPO, Greencrest cited a shakeup in Twitter's management ranks that took place just prior to Christmas. Among those changes were Twitter's former CFO Ali Rowghani taking over the role of COO, and former Zynger Treasurer Mike Gupta being brought on as the new CFO. Those moves, along with Twitter's hire of former Newsvine CEO Mike Davidson as vice president of design "suggest the company is putting together a team of seasoned executives to guide it successfully through the IPO process," Greencrest wrote.
Twitter did not respond to a request for comment.
Partnership with Nielsen Media
Another Twitter move that Greencrest offered as evidence of its plans is the company's recent partnership with Nielsen Media on the so-called Nielsen Twitter TV Rating System. Under this initiative, "[b]oth parties hope to make the Nielsen Twitter Rating metric the new social television standard," Greencrest wrote. "We believe the partnership is a win-win for both firms. Twitter, in particular, is expected to use the data collected as a means to attract new advertisers and give existing marketers and brands better data in terms of reach and more strategic ad placement."
Greencrest also cited a recent Twitter partnership with Pinterest -- which it said will support Twitter cards -- as positive movement for the microblogging company. That arrangement "should play to Twitter's advantage due to Pinterest's high traffic referral rates, and the ability for users to tweet pinned photos to their feed," Rao and Wolff wrote.
The two analysts next lauded Twitter's recent service improvements, especially those that help make it easier for advertisers to work with. Rao and Wolff cited the launch of Twitter's new photo tools as a strong step forward in its increasingly bitter competition for users with Instagram. As well, they wrote that Twitter's promoted tweets advertising program "has become more focused, with promotions directed to users who are more likely to convert to sales (using keyword targeting)," and they praised Twitter's Certified Products Program, which aims to keep the quality of Twitter-related apps high and secure.
Boosted revenue opportunities
A big part of Greencrest's bullishness stems from the firm's evaluation of Twitter's advertising initiatives. Rao and Wolff said they felt that Twitter's promoted tweets, promoted trends, and promoted accounts were all "gaining traction," leading to improved revenue opportunities. Twitter has also been building out its self-service advertising efforts, especially for small businesses, and Greencrest called out American Express' making the system available to its cardholders as a boost for Twitter's bottom line.
Another big area of improvement for Twitter is mobile, Greencrest wrote. Twitter's increased mobile ad revenue is a reflection of that, and Rao and Wolff noted that Twitter has had faster growth on mobile (75 percent growth from 2010 to 2011) than rivals Facebook and LinkedIn. However, Twitter's mobile ad revenue numbers pale compared to those of Google, Facebook, and even Pandora.
Still, the analysts think that Twitter is "relatively early in its monetization potential," and that it should see significant growth in each of its major revenue generators.