Twitter raised $2.09 billion in its IPO a few weeks ago. In terms of money raised, that makes it the second biggest IPO of an American Internet company in history, surpassed only by Facebook's volatile $16 billion IPO last year. With that much cash in the bank, analysts predict, Twitter's bound for a buying spree.
"Whenever a tech company's got to expand or break into new markets, they have a choice: either build it or buy it," says Brian Blau, a consumer technology analyst for Gartner. "Twitter needs help in lots and lots of areas. They're a growing company. They want to expand their business and it's difficult to grow organically."
But what types of companies should be on the shopping list? Here are a few areas in which Twitter has the most opportunity to grow by acquisition:
Twitter has already made a number of acquisitions in its quest to be the real-time news feed for TV addicts and to attract TV advertising dollars. As CEO Dick Costolo told Forbes in October, "TV has always been social and conversation-driven. It's just that in the past, the reach of that conversation was limited by the number of people in a room or who you could talk to on the phone or the next day at the water cooler. Broadcasters have come to understand that Twitter is a force multiplier for the media they've created."
In February, Twitter snatched up Bluefin Labs, which measures TV viewer engagement based on social media content. Twitter acquired another similar start-up called Trendrr in August.
With its new cash infusion, Blau says, Twitter will likely invest in even more analytics and TV tracking technology. It's also possible, given how entrenched the TV industry and its advertisers are, that Twitter will acquire companies explicitly for their existing media relationships.
Companies to watch: Companies that focus on the second screen experience, including Mass Relevance, which partners with brands like Pepsi and American Express and media companies like CBS and MTV to create socially-driven marketing for the Web. This month, the Austin-based start-up hired USA Network's digital head to be its chief strategy officer.
Twitter reportedly spent upwards of $300 million to acquire the mobile ad network MoPub this September. The technology will not only allow Twitter advertisers to bid in real time on ads for key demographics, but it will also give them the ability to target Twitter users when they're using other mobile applications.
That will open up a major new revenue stream for Twitter, which the newly public company needs. Blau expects the company will now continue to invest in multi-platform advertising. "If you look at other advertisers like Google and Yahoo, these companies have technology that allows them to advertise on virtually any platform," he says. "That's the direction I imagine Twitter will go in. They probably want to reach users wherever they are, even if they're not using Twitter at the time."
Companies to watch: With the MoPub acquisition covering the mobile ad network space, Twitter may look to Internet ad networks and media buying software companies, like RadiumOne, which analyzes 25 billion impressions a day across the Web and social media to target audiences for advertisers.
In order to woo brand advertisers and media companies, two of Twitter's top priorities, the company has to prove the effectiveness of its campaigns. Various acquisitions, including the 2011 purchase of BackType, have given Twitter plenty of in-house expertise for crunching the numbers. While Blau predicts Twitter may make a few acqui-hires to enhance its analytics offerings, he says the more pressing need for Twitter (and, indeed, most tech companies) is the ability to represent that data visually, so it can be understood by the average marketer.
Twitter has an awful lot of data, and they want to get that data into people's hands," he says. "Presenting that data is key to being able to use it. They need to give lay people tools to help them understand it."
Companies to watch: Twitter acquired Lucky Sort, a data visualization start-up in May. Now, it may want to look at companies like Zoomdata and Roambi, which make data visualizations interactive on mobile devices.
Earlier this year, Facebook acquired a mobile app developer tool called Parse, in a move that initially made many question Facebook's motives. Why, some wondered, would Facebook want to buy a cloud service that hosts mobile apps? It soon became clear, however, that this was Facebook's first big push to court the enterprise software sector. With Parse under its corporate umbrella, Facebook would be able to integrate with more mobile apps. "Twitter might also want to have a better relationship with enterprise," Blau predicts, "so they're probably not going to let that Parse acquisition go unanswered."
Companies to watch: This is murkier territory, since it would be so new to Twitter. After all, Facebook's acquisition of Parse was rather unexpected. Blau says it's unlikely Twitter will also go after a cloud developer tool, like Facebook did, however. Instead, Twitter may begin looking at data or analytics companies that offer it a connection to a whole new range of potential enterprise customers.