Twitter continues to inch its way to a sale process, and the latest developments come in the form of alleged bids from potential buyers. Today CNBC is reporting, and we have also independently heard, that both Google and Salesforce are interested in buying the company. We have additionally heard that Microsoft and Verizon have also been knocking, although right now Verizon (which also owns AOL, which owns us), may have a little too much on its plate.
Twitter currently has a market cap of $13.3 billion, and it opened for trading today with a jump of nearly 22%, in response to all these whispers.
Google, Microsoft and Verizon have also been reported as potential suitors in the past (one recent article here), and what we’re hearing about the Microsoft interest is that it, in part, is an attempt by the company to drive the price up to keep it out of Salesforce’s hands.
“At this moment Microsoft has nothing to share,” a spokesperson said when reached for comment. But that begs another point, though: Of the four companies that we’ve heard about, the one that might be most surprising as a suitor is Salesforce.
Salesforce currently has around half of the current market cap of Twitter in its own cash reserves, meaning that if it acquired the company, it would need to raise the remainder elsewhere if it’s an all-cash deal, or it would need to make the rest of the purchase in shares. It would be the highest-ever acquisition by the very acquisitive Salesforce, which has already spent more than $4 billion on acquisitions in the first six months of this year.
Then again, it tried, but missed out, on buying LinkedIn (which Microsoft is picking up for $26.2 billion), so expensive purchases are not out of its sights completely.
There are reasons you might be skeptical of a Salesforce acquisition of Twitter. Twitter is fundamentally a consumer-facing product, currently with a very strong focus on repositioning itself as a media business (content + ads around that content). Salesforce ambition (and some would say achievement) is becoming the ultimate purveyor of cloud-based enterprise services. Maybe there is a place where Salesforce could leverage Twitter’s consumer media play in its own larger platform, but today it seems like a step too far to the side.
On the other hand, there are several reason why this could also make sense. Salesforce could use Twitter to expand significantly into a much different business area, and business model. For example it could help it really light a fire under its new Einstein big data platform with a vast infusion of real-time data.
Data is the big currency for today’s large tech companies, used for advertising but also making the wheels spin for all kinds of business intelligence and insight modelling. Today Salesforce lacks as many ingestion engines for this as others. Twitter, of course, is a mine of real-time data from its 313 million monthly active users, although on its own the company has had a lot of challenges in growing its user numbers, and also figuring out the best ways of effectively monetising them.
Meanwhile, there are other aspects of Twitter that fit into Salesforce’ business. Specifically, there is some potential around customer service (an area that Twitter is pushing via the division that joined it via Gnip).
And there is the fact that Salesforce already offers products around social media interaction and management between businesses and their customers/potential customers/wider public. Personally, I’m not sure if buying a single platform to enable this is what Salesforce would do, considering that today Salesforce manages across multiple platforms and in actuality Twitter is not that big in the greater scheme of things compared to Facebook and the aggregate of other platforms where “conversations” are happening.
There are other, smaller crossovers between the two companies that you shouldn’t overlook. For example, Bret Taylor, who has joined Salesforce via the acquisition of his cloud-based word processing startup Quip, is also on the board of Twitter. Salesforce and Twitter also happen to use the same M&A law firm, Wilson Sonsini (which is, admittedly, used by a lot of tech companies).
For the record, Salesforce declined to respond for this article. “We don’t comment on rumors,” Salesforce’s VP of corporate communications, Chi Hea Cho.
As for the other two companies we’ve heard about, Google as a suitor makes a lot more obvious sense for Twitter, if perhaps a little more pedestrian and predictable. For starters, there is the financial aspect: Google has a lot of cash on hand to finance the acquisition — $73.1 billion, by one estimate earlier this year.
Then there is social: Google has forever been looking for a stronger foothold in this year, which it has failed to achieve on its own over the years with its own efforts. YouTube is currently perhaps the company’s biggest hope in this space, but while there is some “conversation” on YouTube alongside the vast amount of traffic and consumption of videos, it’s nothing like the almost pure-play conversation that happens on Twitter.
Twitter potentially would hold a lot of promise for a company like Google both to expand its advertising business on desktop and mobile, tapping into a stream of consumers of social media who are slowly being lured away from Google by another huge social media platform, Facebook.
Verizon, lastly, has made no secret of its interest in buying into media properties to add a new wave of business to its traditional roots as a telecoms carrier.
That is an effort that it has filled out so far with its acquisition of AOL, and now Yahoo. Twitter in the mix makes an easy fit, and it would potentially keep Twitter running as it has done (which is the approach Verizon has taken with AOL properties).
On the other side, if Verizon is successful in building out a place for itself as a “third-pillar” for advertising online alongside Google and Facebook, that would theoretically leave little room for an independent Twitter — meaning that it could be a logical place for Twitter to land.
However, although we have heard that Verizon was interested in Twitter a while ago, Verizon tells us that a recent report in the New York Post on making a standing offer for the company was inaccurate. (You can also read that as a narrow and precise denial. Standing offer: no; but what about something else?)
It looks like bids could start to come in soon as Twitter’s board is eager to get things going, although CNBC says there may not be any news before the end of this year. One thing is for certain, however: if Twitter is a bird, its egg has now been cracked and we’re all now watching to see what will come out of it.
We are reaching out to all companies for their response, and will update as we learn more.
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