Social Media News: Who’s About To Purchase Twitter?

There has been rumours around the acquisition of Twitter in the past, which ultimately came to nothing. Things feel a little different this time around however, as Google, Microsoft and Facebook are all rumoured to be interested in purchasing the hugely popular social media platform.

According to an article in the Wall Street Journal, executives from Facebook, Google and Microsoft have all held talks with representatives of Twitter in the last couple of months, with a view to discussing the possible acquisition of the social messaging service (although reports suggest these talks have so far produced nothing).

What’s particularly notable is the valuations of Twitter that have been mentioned by those close to the company – between $8-10 billion. So is Twitter really worth this amount of money? According to a recent article by Greg Sterling, Twitter was valued at around $4 billion in December 2010, representing a huge jump in value over the last 60 days.

Twitter had a revenue in 2010 of around $45 million, and a forecasted revenue of around $100 million for 2011. Now, I’m no economist, but that makes Twitter’s valuation of between $8 and $10 billion reasonably hard to justify.

So what makes Twitter worth so much? For me, it’s all about data. Twitter (like Facebook) holds a huge amount of user data and makes the principle of highly targeted advertising far more feasible. The market values this data extremely highly at the moment, as we can see from other recent acquisitions and valuations ($6 billion valuation for Groupon, $50 billion valuation of Facebook, AOL’s acquisition of the Huffington Post, etc).

So who might be willing to part with that amount of cash to purchase the highly popular social media platform? Or, perhaps more pertinently, who would be able to spend that amount?

Facebook simply can’t afford to pay that amount in cash, without having to offer stock or some other form of leverage as part of the deal. Neither Google nor Microsoft would be put off by the price tag however, and both would (I imagine) be keen to add a successful social media platform to their plethora of services.

It’s not hard to see why either company would want Twitter – Microsoft tried to buy Facebook at one point and they would undoubtedly love to add the messaging service to their other widely used platforms, such as MSN Messenger and Hotmail. Not only this, but Microsoft will be well aware that Google will be enticed by the potential acquisition, making it all the more appealing for Bill Gates and his team.
As far as Google goes, they were happy to offer $6 billion for Groupon and considering their ongoing rivalry with Facebook, the addition of the Twitter network to their widely popular services would be a tantalising option.

Who ends up buying Twitter (if it gets sold at all) is anybody’s guess, but if I had to put my neck on the line and pick what I’d consider to be the most likely outcome, I’d suggest that Google will be proudly announcing their acquisition of Twitter by the end of 2011.


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