At pretty much every recent dinner party, tech gathering and social shindig where we have run into the digital elite, everyone seems to have the same question: What's going to happen to Twitter?
The travails of the San Francisco-based social communications company have been an ongoing soap opera for a long time now, one that has gotten Google-sized attention despite its relatively small size and tech impact.
Like the slow-moving train wreck of Yahoo, to which Twitter is increasingly compared, it's partly due to the media fascination with the company. And there is no doubt that the app's social impact is immeasurable, especially in the way it holds a perpetual mirror in front of all the narcissists in the world (Trump! Kanye! Various and sundry VCs on Sand Hill Road!).
Or, as former Twitter board member Mike McCue told us recently: "Twitter is a huge phenomenon more than it is a company."
Ouch.
But perhaps that's the truth, even as CEO Jack Dorsey and his top execs seek to bring growth and value back to the company he founded. It raises the question: What is going to happen to Twitter? At a projected $18 billion price tag, the options can be tough to imagine. Luckily, we did all the hard work for you!
There is a caveat: So far, the company's top brass has not wanted to sell and has indicated that the hope is to remain independent. But because it's Twitter, that did not stop Dorsey's co-founder and director Evan Williams from setting off a ruckus after he was asked about the possible sale. Williams no-commented and then noted that the board would "consider the right options." No surprise, the non-answer caused the stock to pop.
There is a caveat: So far, the company's top brass has not wanted to sell and has indicated that the hope is to remain independent. But because it's Twitter, that did not stop Dorsey's co-founder and director Evan Williams from setting off a ruckus after he was asked about the possible sale. Williams no-commented and then noted that the board would "consider the right options." No surprise, the non-answer caused the stock to pop.
It's down again, though, and the question now becomes whether anyone thinks there are actual buyers for the company.
It's down again, though, and the question now becomes whether anyone thinks there are actual buyers for the company.
As one former exec there told us recently, sotto voce: "Twitter is the most invaluable company that no one really wants to buy.
Double ouch.
That's not exactly true, which is why we put on our green-shade visors and did some investment banking of our own. While we may lack the gumption of the ever-wily Frank Quattrone, we make up for it in energetic guessing, larded with a lot of actual reporting.
So here's the case for and against all the possible Twitter suitors that keep cropping up.
The case for Google (Kurt): There's a good reason Google's name always tops this list: It makes the most sense! Google has the money — Alphabet generated more revenue last quarter alone ($21 billion) than Twitter is actually worth. And while the company has tried its hand at social media before (I think we can all now agree that Google+ has been a minus), Twitter would give it a legitimate social platform to tie in with YouTube, which is now feeling heat from Facebook and Snapchat, which are very social. Could Google make good use of Twitter properties like Vine and Periscope by coupling them in some kind of media hybrid offering with YouTube? Maybe!
Google already understands the advertising business, so no problems there. Then imagine Twitter's livestreaming pitch to the NFL and other major rights holders with Google's backing on distribution. Google could essentially bring Twitter private, and allow it to fix whatever user and product problems it has away from the investor criticism that comes when you're a public company. There's a lot to like here!
Haters like to point out that Alphabet CEO Larry Page doesn't give a rip about social media, but he's no longer running Google. Sundar Pichai is. Couple that with former Google exec Omid Kordestani now chairing Twitter's board, and the whole Larry hates social argument may no longer mean much.
The case against Google (Kara): Kurt, Kurt, Kurt. Larry no longer runs Google? When pigs fly perhaps, but today making a nearly $20 billion purchase is something the testy and robotic founder will most definitely need to weigh in on. And he does have disdain for social, for reasons that include the fact that no one at Google is social or understands the paradigm.
But Google lost to Facebook a long time ago on that score, and Page seems to have decided that the company's future is not in this direction. Rather, his recent hire of Diane Greene to compete with Amazon and others in the cloud and his artificial intelligence plays are the kind of all-in investments that make the most sense.
And then there are the regulatory issues that come with any big Google purchase. Will the politicians in D.C. like Google owning all of search and the still-influential social platform upon which the recent election has been playing out? No, they will not. Ask the first Twitter presidential candidate, Donald Trump, if he'd like the Democratic-leaning Google to own his fave platform and he would blow a very large raspberry on the podium.
Vanity aside, it's not an acquisition that even the roll-over regulators of the various U.S. agencies will swallow easily. As for the hair-trigger Europeans? Nein! Non! Or, as persistent Google foe and European Competition Commissioner Margrethe Vestager would surely declare: Ingen!
Hand in glove with the many antitrust issues, there is the mass of publicity that comes with owning Twitter. It is watched by the media like no other company (largely because reporters love to talk about nothing more than themselves, even if no one else cares). While Google gets a lot of attention, the kind that Twitter gets is not the same and not welcome to the secretive nature of the search giant.
And then there are the ugly controversies around abuse. While Google perhaps has the tech chops to help improve the tools to fix the ongoing debacle in this arena, it would take a massive PR effort that is simply not in the company's wheelhouse. Google is all the algorithm and Twitter is all about humanity. You see the disconnect here.
Perhaps most simply, Google already has Twitter on its platform via search. Whether it needs more than that for that much money is a very good question.
The case for Facebook (Kurt): Facebook does a lot of things really well. One of those things is selling and delivering mobile advertising, which, coincidentally, is how Twitter makes money. Facebook is also great at user growth — it has three separate billion-user products, plus Instagram, which has more than 500 million users. Twitter has been stuck right around 300 million monthly users for over a year and needs a serious distribution jolt. Facebook also does a lot of things well that Twitter wants to do, like video distribution and messaging.
What Facebook doesn't do well is what Twitter does best: Distributing breaking and real-time news. Facebook CEO Mark Zuckerberg talked a lot on the company's last earnings call about live video and immediacy around the news, but Facebook hasn't figured it out, as evidenced by its trending topics nightmare that doesn't seem to go away. Buying Twitter could help solve that problem and, at the very least, ensure the company doesn't fall into a competitor's hands (see: Google).
The case against Facebook (Kara): Yes, the real-time news argument is a good one. But is solving it worth a $20 billion check? Or could Facebook just use the same tactics as it has in its complete lift of Snapchat Stories using its Instagram unit? It would be much harder, obviously, as replicating Twitter as a global news platform is not the same as copying hot software. But it is certain that Facebook probably has a lot of cheaper innovations to beating Twitter at news than the trouble it might buy with Twitter.
Most central to that trouble is all the grief that would come with Twitter's massive basket of deplorables. And we do mean deplorables here, and we're not apologizing for saying so, because it is a cesspool of abuse and ugliness far too often. All those anonymous users spewing all that hatred is most definitely not amenable to Facebook's walled-garden approach to social, which has been a huge success for it. And Facebook itself has been pretty bad about dealing with similar controversies over what it bans (see the recent mistake over the "napalm girl" photo). More complexity seems to be something that the company is incapable of dealing with, even if it introduces better tools.
And as good as they are, neither Zuckerberg nor COO Sheryl Sandberg are equipped to handle the mass of controversy that Twitter brings with it. Plus, as with Google, there would be regulatory issues that would be tough to overcome. (Sorry, Elliot Schrage — you're good, but not that good!)
Facebook tried to buy Twitter a long time ago for $500 million. That was then.
Microsoft
The case for Microsoft (Kara): There is no real case, because what kind of problem does Twitter solve for Microsoft? None! The company is turning very clearly into an enterprise company, after many — so many — debacles in the consumer space.
But okay, I'll try. It would be nice for Microsoft to have some traction in social, in mobile and in ads. Maybe Twitter could be integrated in with LinkedIn, for which the software giant recently paid $26 billion, bringing in a savvy media-focused exec in its CEO Jeff Weiner. He'd surely have some ideas for it.
But that's all I got.
The case against Microsoft (Kurt): Kara pretty much nailed it up top.
Microsoft already broke the bank this year for an unprofitable social network in LinkedIn, so buying another one would be foolish. Microsoft hasn't hit any home runs with other social and communication acquisitions, such as Yammer and Skype (does anyone actually use Skype on mobile?), and there's nothing here to imply a Microsoft-owned Twitter would be any different.
Plus, if Twitter is serious about getting into TV-style livestreaming, it would be better selling to a company with actual media experience. Plus plus, Microsoft is basically out of the online advertising industry. Its business is primarily driven by enterprise tools and services, not consumer brands, and making a splashy consumer play would be more distracting than anything.
Apple
The case for Apple (Kara): This is an interesting question, given how beloved Apple is to Twitter's Dorsey. He's a longtime Steve Jobs fanboy and also has a lot of respect for the company today. A sale to Apple is one that you can see the recalcitrant Dorsey saying "yes" to more easily.
Here's what Twitter will help Apple with: A real-time news offering (Apple News is just awful); a livestreaming opportunity that it could tout on iPhones; a decent social presence and worldwide platform (remember Ping? I do, but only me!); an ad business that Apple can actually succeed with; a still-cool mobile app.
It's not hard to see how Apple could integrate Twitter with a lot of its services and make them instantly better. Still, Apple simply does not have a social media culture, and it would need Dorsey there to lead the efforts. And he has another job over at Square, as you might have heard.
The case against Apple (Kurt): So, so wrong, Kara. Twitter doesn't have a single thing Apple might want. Twitter is an advertising business, and Apple is not good at advertising. Twitter doesn't have any hardware products, and owns virtually nothing when it comes to the kind of high-quality content Apple currently distributes, such as music, movies and television. Apple already offers a superior messaging product to Twitter, and has its own curated news app. And the abuse issues — not the Apple image at all.
Maybe Twitter could make Apple a little cooler? But it would be cheaper to just buy something hip, like Carpool Karaoke (Oh wait).
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Big Pipes: Verizon or Comcast
The case for Big Pipes (Kara): One major thing: Mobile streaming! It's a thing, in case ya didn't know!
Let's start with Verizon, which has so many billions of dollars of cash on its balance sheet and no idea what to do with it. Well, it did use about $10 billion of that to buy stumbling Internet brands AOL and Yahoo, and so far the market has not punished them for it. Why not double down with Twitter and make it a trifecta? Also, Verizon has the management that could actually coordinate it all, especially AOL CEO Tim Armstrong. He'd be helped if he could get Twitter execs like COO Adam Bain and CFO Anthony Noto to stay.
Comcast is run by smart people (Disclaimer: NBCUniversal has a huge investment in Recode owner Vox Media) who like to buy value and, if not growth. That's not Twitter these days, but one reason for them to buy it is that they have a lot of content and other stuff that would be great on the platform. Plus, regulators would let them buy the property, as opposed to video and TV companies, which Comcast can't do much of. Twitter is not a video company, because wishing you are a video company does not make it so. Could it be someday? Maybe.
While I think Verizon is a more likely buyer than Comcast, these would be big stretches for both, and therefore probably more trouble than it is worth.
The case against Big Pipes (Kurt): For all the news Twitter has made around its livestreaming efforts, it's a very minor player in world of live video distribution. It doesn't own any significant rights for any significant portion of time, and it isn't creating new programming. The NFL broadcasts it's distributing aren't even produced by Twitter — NBC and CBS handle that. Twitter is simply the platform for everyone else's content, and we have no idea how large or how valuable Twitter's audience actually is. When Yahoo streamed an NFL game back in 2015, the viewership numbers were terrible by NFL standards. There isn't much reason (yet) to believe Twitter's streams will fare any better.
Add in the fact that Verizon has paid a combined $10 billion for Yahoo and AOL in the past 18 months. It could probably afford Twitter, too, but what a lineup of troubled companies that would be to fix.
Big Media: News Corp/ 21st Century Fox, Disney
The case for Big Media (Kara): The case for big media buying Twitter? Because they are still old media, no matter how hard they try to pretend otherwise. When it comes to appealing to younger audiences (also known as digital audiences), even growth-starved Twitter beats them.
The main reason for media companies to buy Twitter is that they don't want another media company to buy Twitter and, good God, not Google or Facebook either, because then all that's left is Snapchat (and Evan Spiegel is was selling, last time we checked).
There has been a lot more noise about Rupert Murdoch's Fox buying it than any other media giant, but that would be a big bet for him and his two sons. And while Disney has a taste for digital properties (Hello, Vice!) and while Dorsey is on the board of Disney, so is Facebook's Sandberg. Would I like to be a fly on the wall of that board meeting? Yes!
The case against Big Media (Kurt): How many traditional media companies can comfortably afford an $18 billion acquisition? Few. Twitter is likely too expensive for News Corp/Fox or Time Warner or Disney. Media organizations already get most of the benefits of Twitter's product — free content distribution— without the headache that comes with running it. Plus, Twitter is hungry for any and all high-quality video content, which means rights holders like Turner (Time Warner) can easily ink deals with Twitter if need be. No need to open the checkbook.
There's also this: Twitter is valuable because media companies see it as a neutral platform. Imagine this scenario that one source jokingly suggested: "The Arab Spring live on Twitter, brought to you by Rupert Murdoch and Fox News!" Yeah, not so much.
The Chinese Internet giants
The case for a Chinese buyer (Kurt): Chinese tech companies are all looking for a foot in the door when it comes to monetizing U.S. consumers. Twitter could be that giant toe as a big trophy property! Tencent-owned messaging app WeChat, which dominates in China, has tried unsuccessfully to build a U.S. audience in the past, and appears to have given up that plan. Momo, another Chinese messaging service, has a similar story. That might make a company like Twitter, which has 66 million U.S. users and lots of business partnerships with U.S. advertisers, an attractive option to Chinese tech giants like Tencent, Alibaba and Baidu.
The case against a Chinese buyer (Kara): Have you all heard about the Committee on Foreign Investment in the United States? Well, welcome to the committee that would say "no" to such a deal tout de suite. As it notes on its website, "CFIUS is an inter-agency committee authorized to review transactions that could result in control of a U.S. business by a foreign person ('covered transactions'), in order to determine the effect of such transactions on the national security of the United States."
In other words: The deal busters.
Simply put, the U.S. will not let Chinese interests own a global platform like Twitter. You think Trump is mean to the Mexicans? Imagine what he'd say about this sale. Same with Hillary Clinton and pretty much everyone else in D.C.
Salesforce
The case for Salesforce (Kurt): Well, Salesforce just bought Quip, whose CEO, Bret Taylor, recently joined Twitter's board. Some people think he'd be a good fit to run Twitter's core product, too, although he says he's not interested. Otherwise ... I got nothing. Kara?
The case against Salesforce (Kara): I got nothing. While CEO Marc Benioff likes to buy things, according to sources at Salesforce, these rumors about his interest in Twitter are just that, and such a purchase is unlikely. But it is a fun idea, because Benioff is fun!
Private Equity
The case for private equity (Kara): What a wonderful world it would be if Twitter could be run in a quiet place, instead of being perpetually naked in the middle of Times Square as it is now. It could cut costs, thin down, focus and maybe finally realize its very unrealized potential.
All gone would be the persistent detractors (Saccattack!), the shareholder activists (who are gathering even now for a new attack), the irksome media (I blame myself) and all the leaky board members, employees, ex-employees and sundry players.
Sounds dreamy? It is! Calling Silver Lake, stat!
The case against private equity (Kurt): I blame Kara, too! The biggest issue here is price. Twitter is just too expensive as it stands right now for most private equity firms to justify purchasing. These kinds of deals usually happen when a business actually makes money — investors want some kind of return on their investment — and Twitter is still losing money each quarter.
—By Kurt Wagner and Kara Swisher Re/code.net.
CNBC's parent NBCUniversal is an investor in Recode's parent Vox, and the companies have a content-sharing arrangement.