M&A, Twitter

The Problem With a Twitter Acquisition

As I’ve said before, I’m both a heavy user of Twitter and a critic of the way it’s currently being run. The lack of growth and the slow pace of change to the product are closely intertwined, and neither is good for Twitter in the long run. (See here for all my past writing on Twitter.)

Because of the slow growth and diminishing expectations of Twitter’s eventual size as a business, the share price is tanking, and that’s raising the prospect of an acquisition (recently, of course, the very prospect of an acquisition has been fueling a rise in the stock price).

Recode had a nice piece a while back breaking down the potential acquirers and arguing for and against each of them, with Kara Swisher and Kurt Wagner taking it in turns to present the pros and cons of each. My summary of that piece was as follows:

There’s a fundamental problem with all the potential acquirers, and that’s that none of them seem likely to do anything meaningful to solve the product problem. Among the potential acquirers are several companies who could create substantial synergies with their own existing ad businesses, including Google and Verizon. Others could do interesting things with the data. But none of them have the kind of track record in consumer social products that gives me any kind of reassurance that they would do better in evolving Twitter as a product than the current management. Let’s review:

  • Google – famously inept at creating successful social products, more likely to acquire Twitter with the intent of finally fixing its own social challenges than to add meaningfully to Twitter’s abilities in this area. Decent ad synergies though.
  • Salesforce – literally no experience in consumer-facing products. Yes, it recently acquired Quip and with it founder Bret Taylor, but one executive isn’t enough. Again, some interesting synergies in other areas, but zero on the end user product side.
  • Verizon – another play for ad synergies, when taken together with AOL and Yahoo (assuming the latter goes through now that the hack has been exposed). But Verizon has no history with successful web or social products (and see Go90 for a recent example of a non-telecom product…).
  • Facebook is probably the only example among those frequently cited that obviously does get social, but it seems so much more likely to be successful in aping Twitter’s features than as an acquirer, not least because of possible regulatory barriers, that this just seems plain unlikely.
  • Microsoft and Apple also seem unlikely. The former has done some interesting things with small app acquisitions lately in the productivity space, but not in true consumer apps, and again has no social chops at all. The argument for an Apple acquisition also seems thin, while it vies with Google for the title of least socially adept consumer technology company.
  • Private equity buyers would have the advantage of doing the turnaround work in private without having to report to public shareholders quarterly. But that only makes me worry that there would be even less urgency about the product changes that need to take place.

In short, the prospects for an acquisition that would actually help solve the fundamental product problems seem very poor indeed. Add to that the inevitable turmoil and further delays in execution caused by the acquisition process itself, and I’m still more hopeful that Twitter will finally get its act together as an independent entity rather than be acquired. It’s just too hard to see things getting better rather than worse under an acquisition scenario.