Unsurprisingly, the discussion of Google buying Twitter has come up again. This time, the conversation was started by Dave McClure and built upon by the Business Insider. People have been talking about this for what feels like forever, but the timing now is a little more interesting. Business Insider lists 7 reasons why Google should buy Twitter, but their reasons are not very solid.
John Battelle thinks that Google won’t buy Twitter. This is not because Google won’t try, but more because Twitter won’t sell:
In short, they’re not in it for the money. They’re in it for the immortality. And that’s a much, much bigger deal.
John is onto something here. Google could write an obnoxiously large check, and has purchased companies from ex-employees before. However, I am here to tell you that Google should not buy Twitter.
Why? Well, there are probably a bunch of reasons, but this is what I came up with.
Twitter would require an obnoxiously large amount
Twitter has a ridiculous valuation right now without really having the revenue to show for it. In order to purchase Twitter, Google would probably need to write a check for $5 Billion at the minimum. If you think about the idea of the purchase price being 10X revenue, that you mean that Twitter would need $500 Million in revenue. I don’t think anyone has heard of any revenue estimates for 2010 anywhere near that number.
Twitter has not proven to be stable
Twitter continues to be unstable over the long term. Does Google really want to deal with those problems? If Twitter could be more reliable over the long term, they would not need Google’s help. So stability is more of a catch-22.
Twitter’s revenue plans are not in line with Google’s
Twitter revenue has been in promoted trends and promoted tweets so far. This is basically just fancy advertising so it would seem to be in the same arena as Google’s revenue. However, Google’s properties make a point of the advertising not being in the content.
Twitter’s infrastructure is nothing like Google’s
Supposedly, Google likes their acquisitions to port their code to the Google infrastructure. I am not sure how much of this is true, but Twitter has been known to use Java, Ruby, Scala, and almost anything else that will work at the time.
Just because they have the cash
I have seen the reason that Google should buy Twitter because Google has enough cash to do it. That is like saying I should buy a new car because I have the cash to do it. Do I need the car? Why would I buy something, just because I have the money to do it.
Just to compete with Facebook
The other reason that seems to be popular is that Google needs to compete with Facebook somehow, so buying Twitter is the best option. How does Twitter help you fight Facebook? Twitter does not know how to fight Facebook, and even tries to avoid comparisons to Facebook.
Buying Facebook is a better idea
If you are really looking to make a big purchase, why not buy what really makes sense. Buy Facebook for $30 billion. You really do not want to compete with Facebook, but their revenue, estimated to be over $1 Billion in 2010, would be a great addition. You can leave Facebook completely alone to run their business, and just reap the long term benefits.
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Your items about valuation and buying Facebook instead are based on the false premise that Google would buy either of them solely for revenue. Citrix acquired Xen at something like 50x — with revenue of $10M or so, obviously not for the revenue at all.
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Andrew,
Valuations are a tough thing to play with. In the case of Xen, that was a big technology buy as virtualization was a huge gain for Citrix. I am not sure about the revenue for Xen at the time, though I think $10M might be low. For something like that purchase, you do pay a premium to get leading-edge technology. They were also paying a premium based on the valuation of VMWare.
The difference here is that there is limited technology that Google would gain from either purchase. So, at that point you are buying the customers and potential revenue. That is why I went with valuation and revenue. Of course, you can still disagree with me 🙂
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I definitely subscribe to the “just because they could, doesn’t mean they should” argument.
As I posted myself, with social layers Google spears to wanted to move away from establishing just another social network in favour of building a social platform to support the content created in, or uploaded to, its other services.
So, it’s not just the revenue generation that it’s not aligned but also the philosophy behind what they are trying to achieve.
Buying something just to compete with Facebook is a distraction that Google can do without and they should concentrate on doing things their way but actually making a good job of it this time.
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Colin
Competition with Facebook is something that Google is already in, especially with Orkut, but also with Buzz. If you subscribe to the email as original social network, then GMail and Buzz are definitely in the same arena as Facebook. Twitter really does not help them in this case though, outside of being popular and a tech press darling. I do agree that buying Twitter to compete with Facebook would be a huge distraction for Google.
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Even if Google decides to buy Twitter and/or Facebook, these guys won’t sell themselves off. They have reached a point of popularity that they won’t negotiate, no matter what their valuation is.
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jDesai
I would agree that it is highly unlikely that Twitter or Facebook would sell to Google. I brought up Facebook mainly because it probably would be a better acquisition if at all possible.
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Twitter would require an obnoxiously large amount.
CORRECT $10BN.
Twitter has not proven to be stable.
CORRECT. THAT IS WHY TWITTER NEEDS GOOGLE.
Twitter’s revenue plans are not in line with Google’s.
INCORRECT, ILL-INFORMED AND UTTER NONSENSE. IT’S THE VERY SAME MODEL AS GOOGLE.
Twitter’s infrastructure is nothing like Google’s.
CORRECT. THAT IS WHY TWITTER NEEDS GOOGLE.
Just because they have the cash.
INCORRECT. GOOGLE MUST USE THAT $30BN OR RETURN IT TO SHAREHOLDERS. GOOGLE HAVE 5% OF THE $500BN ADVERTISING MARKET. SHAREHOLDERS DEMAND MORE. I WANT MS MARKET SHARE FROM GOOGLE.
Just to compete with Facebook.
CORRECT. GOOGLE MUST STOP THE FACEBOOK ONSLAUGHT. STOP IT THEY WILL OR BE ANOTHER ARROGANT YAHOO.
Buying Facebook is a better idea.
INCORRECT. THIS IS NOT AN OPTION BECAUSE OF ANTI-TRUST.
These 7 are poor and I expect 7 better ones next time.
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Thomas
First, thanks for commenting, I don’t remember if this is the first time.
Twitter may need Google, but that does not mean that Google needs Twitter. Google should use their cash to do something, and even if they “must” use it, that still does not mean that purchasing Twitter is a good idea. I don’t get the anti-trust angle on the Facebook buy, but I may just be missing your context as I am sure there could be an issue with the general advertisement business.
As a last note, you may feel that these 7 are poor, but you agreed with 4 🙂
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Twitter is trying to leverage search into a viable revenue generating product. The problem is it doesn’t seem to be working out particularly well.
What Google might be interested in is how Tweets and micro-blogging can be integrated into their search algorithm. The link graph is broken and has been for some time – but it’s still the best way Google has in assigning trust and authority. If owning Twitter (making it stable and rolling out features that gave them greater insight) could be useful in making Google search better – then perhaps it makes sense.
That said, I think Google’s already tapped into the ‘real-time graph’ and found that it adds relatively little to their algorithm – so by that measure, I think Twitter is marooned on an island.
Facebook … they won’t sell because they’re ~18 months away (give or take IMO) from competing head on with Google.
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AJ
I know Twitter has been having problems with search, and it does not seem to be part of their real long term strategy. Search seems to be something that they know they need, but that is as far as they take it. Searching tweets is difficult for a few reasons. There are a ton of them and there is so little content in a tweet. There is also the potential missing context of the tweet which can cause problems as well. I am not sure what Google will do with real-time search, but eventually they may figure something out.
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1) Yes. It would be a ridiculous amount of money. Posterboy sites cost a lot.
2) Google is an engineering company that loves solving hard problems. I’m sure many of their engineers are drooling over the idea of solving Twitter’s scaling issues.
3) Not really. All of Google’s search ads are websites which is what their search results have as content. YouTube is also experimenting with sponsored videos.
4) Google uses tons of Java so a lot of Twitter’s backed will be fine. With #newtwitter their entire site is switching to JavaScript using their API so that will be easy to switch to anything Google would want.
5) Google does not need Twitter but it does need to step up it’s social properties. Twitter would help them do this.
6) The competition with Facebook is social communication and Twitter would add that feature to Google’s existing rich media properties.
7) Facebook’s properties overlap Google’s too much. In order to integrate the social of Facebook into Google all the Facebook users would have to have their content migrated to Picasa, YouTube, Groups, etc. This would pretty much kill the user base.
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Abraham
I agree that Google has plenty of people that would love to scale Twitter, but that is not a reason to buy them. I do admit that I forgot that #newtwitter was all JavaScript/API driven, and that would make the integration easier, excellent point. I will continue to disagree on the “Google’s social efforts suck, so Twitter is a good buy” argument. Google’s social efforts have not been that good, but they would need to integrate Twitter in some unique way to really make something of it. Otherwise, it is just a property of Google and it really does not benefit anyone.
The Facebook idea is different. That is the one case where you are buying revenue and Google would just need to leave them alone. Given their size, integrating Facebook properties into the equivalent Google properties would be a nightmare. Having two distinct companies that are just owned by one is way simpler.
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i think most of the points that you have mentioned are from google’s point of view on why it shouldnt go into twitter business. But as a user i hope that it doesnt happen simply because it would only further increase google’s dominance on the web which i dont think is a good idea. would like to know your views on this.
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