Let’s just start by saying that the idea that Google is going to buy Twitter any time soon is ludicrous.
Apparently, there were some rumors floating around yesterday that such a deal might be in the works, and Twitter’s stock got a nice little bump out of it.
Here’s the reality. Twitter’s stock may be down to $39.07 from its 52-week high of $62.07. But the company is still valued at a steep $24.43 billion. Google’s largest acquisition to date was Motorola for $12.4 billion, and it promptly sold that company to Lenovo less than two years later.
To get its hands on Twitter, Google would likely have to offer at least $35 billion to start a serious conversation and probably go above $40 billion to make a deal happen.
For Twitter? That would be nuts.
Yes, I know we live in a world where Facebook bought WhatsApp for $22 billion. In that case, Facebook paid $4.59 billion in cash plus 178 million shares of its stock and 46 million of grants in restricted stock units for WhatsApp employees. That was its own form of crazy.
And sure, Google could afford Twitter. It has $60 billion in cash, though keep in mind, $35 billion is overseas, so not available for a Twitter deal without paying big taxes on repatriating it. Google could issue some stock, or raise some debt.
But again, for Twitter?
WhatsApp has 700 million active users and is still growing like crazy. Twitter has 284 million monthly active users, a number that is growing more slowly as time goes by, and a base that the company is still trying to figure out how to monetize.
If Google paid even just Twitter’s market value, the price would surpass the WhatsApp deal to become the second-largest tech acquisition in history. (After AOL-TimeWarner, of course.)
So, as much as Twitter is hurting at the moment, its stock is going to have to come way down before Google would make a serious run.
The fact that such rumors are even floating is just another small sign of growing impatience among investors, particularly with Twitter chief executive Dick Costolo. After he overhauled much of the company’s top ranks last year, there aren’t many heads left to roll besides his own.
I have to believe Twitter’s board believes it’s worth letting at least one more seasoned CEO see if they can fix the company’s struggles to develop products that will drive user growth and engagement, and of course more revenue.
As a Twitter fan and user, I still find it remarkable that many of the most interesting product developments and use cases come from users. For instance, the use of so-called “tweetstorms” to express longer ideas. Or the growing use of images of words to extend the amount of text contained in a tweet.
Users have mixed feelings about these adaptations, but still, users are still inventing their own new Twitter products that seem to get as much, if not more, traction than things Twitter does itself.
Of course, these twists have a downside: They probably only complicate Twitter for new users. Twitter has long tried to simplify the on-boarding process for new users, with mixed results.
Still, if Twitter can’t figure this all out, Google will still be waiting. And if the price does come down enough, there are plenty of reasons a deal could make sense. Twitter’s real-time search can only help Google. And without the pressure to profit directly from it, the social data Twitter accumulates would be a powerful asset for Google.
Just don’t expect this to happen in 2015. Twitter has much further to fall before it must look for the loving embrace of a protective suitor like Google.