Google should buy Twitter

At present Jack Dorsey, new CEO of Twitter, is facing a real up hill struggle to get people to see things his way. He rejoined Twitter October 2015 as CEO and since then he’s been sacking people left, right and centre trying to reduce that 3,800 unnecessary headcount (Think the ego has gone to his head a bit with the long shot comparisons to him and Steve Jobs). He’s been culling hundreds (more than 700) of jobs to cut costs at the over inflated Stock Market listed company. At present Twitters stock is a in a dive (and so is Square, Dorsey’s other Stock Market listed start-up), so much so that he’s now gone from Billionaire status to just multi, multi milionaire decreasing from $2.2b to little more than $800m. Tough time for Dorsey (I think not ;-)).

In my opinion Dorsey doesn’t have a problem with product, even though at present they keep trying to change the layout and features, which recently caused the hashtag #RIPTwitter. His problem is the fact that Twitter has no real source of income. Even though the company has never made a profit, never showed any real return to shareholders it still managed to list for Billions, yes BILLIONS in valuation (more than $33b), with the preconceive notion that it will one day make billions from advertising like Facebook. The reality has been extremely different with still no profits and no real way to advertise.

Google on the other hand has now admitted what a pointless endeavour Google+ has been. Although they have 2.2b registrations, which they basically cheated to get if you had a googlemail email, only 9% post on a regular basis. That’s only 198m posting on a monthly basis, which sounds a lot, but when you compare that to Facebook, which generates 4.5b likes with 300m pictures added per day and Twitter generating more than 320m monthly users and more than 1b unique visits monthly to sites with embedded Tweets, the 198m doesn’t sound very much any more.

Google usual purchases are around the $1b mark. As of December 13, 2013, Twitter had “a market capitalization of $32.76 billion” so buying Twitter would be a little out of their comfort zone. If a deal were to happen, it would be the second-biggest ever acquisition in technology, well ahead of Facebook’s $19bn (£13bn) purchase of WhatsApp in 2013 and behind only the $106bn AOL-Time Warner merger of January 2000.

Google has around $60bn in the bank, though a lot of that is stashed overseas to avoid taxes on repatriation; a share- or debt-funded acquisition might be simpler. Eric Schmidt, Google’s chairman (and chief executive through its fast-growth years), told Bloomberg in December 2014 that “the biggest mistake that I made was not anticipating the rise of the social networking phenomenon”. He added: “It’s not a mistake we’re going to make again. In our defence, we were working on many other things, but we should have been in that area, and I take responsibility for that.”

Some think Google’s problem with “social” is that its data-driven culture tends to be blind to the tweaks that make people love social networks. As mobile use is now dominant, social networks offer the most valuable advertising space. In the fourth quarter, 69% of Facebook’s advertising revenue came from mobile ads, up from 53% a year before; and revenues were up 49%.

Google, by contrast, has seen its cost-per-click (what advertisers pay when someone clicks on an ad) decline by 30% over the past four years as mobile use has grown, limiting its potential for revenue growth. Google, of course, relies on advertising for 90% of its revenues, and perhaps more of its income.

With social dominance, social data and everything in our lives becoming social from taking a picture with instagram and sending money with my new start-up Cendit Google has to do something to make sure these social giants don’t chip away too much of its market share to the point where it becomes a scary future for Google. This is a protection exercise more than money generating. Below are 5 things I think each party brings to each other, which would enable them to match or even surpass Facebook.

What Google brings to Twitter:
1) huge number of advertisers already using Google AdWords and AdSense
2) global reach
3) potential inclusion by default in Android mobile software
4) integration with YouTube for short and long video
5) resilient systems

What Twitter brings to Google:
1) highly engaged social network
2) users’ instant “sentiment data”
3) different dimension to “search”
4) mobile-optimised platform for advertising
5) positive reputation on privacy

I believe Google has made three attempts, thus far, to buy Twitter so they obviously see something there for them. I personally am a huge fan of both Twitter and Google. I use Twitter more than Facebook and use Google search a lot more than Bing at present. Having been lucky enough to have been around both campuses and know/met various ‘high ups’ at the companies they have a lot in common with their cultures, unless Dorsey has set about changing that as well. I believe Google would be a wonderful fit for the unprofitable Twitter and think the shareholders should embrace the opportunity should it arise seriously. Otherwise the question is: Will Twitter be here in 5 years time????