Reports last week have suggested that Twitter is up for sale, with bids to potentially arrive by the end of the year.
The social media company is believed to have been working with Goldman Sachs in discussing the potential sale of the company, according to the Financial Times.
This summer LinkedIn was acquired for $26 billion and Verizon agreed to buy Yahoo for $4.8 billion (although this may be in jeopardy following Yahoo’s data leak reported last week) could be followed by the acquisition of Twitter for a speculated $15-$20 billion.
“Twitter is not the first major Silicon Valley business which has failed to monetise its site traffic. LinkedIn and Yahoo! have followed a similar path after failed turnaround strategies were put in place. Both achieved high prices despite a lack of clarity as to how buyers Microsoft and Verizon would succeed where the original management had failed,” said John Colley, professor of practice in strategy & leadership at Warwick Business School.
Indeed, Twitter has been disappointing in terms of sales, and the company announced losses of $106 million in July – its second quarter of losses.
A potential sale could value Twitter at $22 a share, according to Morningstar, and with the rumoured takeover the social media’s shares rose 21%, the biggest rise in two years.
The two organisations linked most heavily to this potential deal are Google and Salesforce ($48.7 billion US-listed tech giant).
Morningstar analyst, Ali Mogharabi, said any deal would be more beneficial for Google: “From a strategic standpoint, we think from it would be more beneficial for [Google] Alphabet as opposed to Salesforce,” because Google has yet to successfully navigate the social media market.
With Google’s ambition to enter the social media market, this rumoured move seems clear. But why would Salesforce be interested?
How could a news-messaging cloud service augment the Salesforce core business of customer-relationship management, asks Chris Preimesberger, Editor of Features and Analysis at eWEEK.
“A couple of things come to mind,” Pund-IT Principal Analyst Charles King told eWEEK. “First, [Salesforce CEO and founder] Marc Benioff has been clear that he intends to expand SF into new markets, particularly efforts he can jump-start with significant acquisitions. Twitter certainly qualifies, especially given recent efforts like promoting real-time news events, live-streaming NFL games and the upcoming presidential debates and then piggybacking on related advertising opportunities.”
“But SF has also expanded its traditional offerings to include online marketing and advertising services, so there are natural affinities between those efforts and owning one of the market’s premiere social media sites.”
>See also: Twitter: what’s changed for businesses?
Vala Afshar, whose title is listed as Salesforce’s chief digital evangelist on a verified Twitter account, offered what he later called personal feeling about why a company like Salesforce would want to by Twitter, in a tweet: personal learning network, the best real time, context rich news, democratise intelligence, and a great place to promote others.
The task to rejuvenate Twitter will not be easy. Even while not factoring in the enormous potential cost, coming up with innovative ways to use the software to re-engage customers and sponsors will be a challenge.
Colley suggests it is “difficult finding successful major acquisitions in the technology sector as Microsoft and Hewlett Packard can attest. Hewlett Packard recently bundled up a minimum of $18Bn of failed software business acquisitions, mostly written off, and sold them to First Software for $2.5Bn cash plus half the shares.”