
Twitter Shares Slump After Report Says Google Won’t Make a Bid - JumpCrisscross
https://www.bloomberg.com/news/articles/2016-10-05/twitter-shares-slump-after-report-says-google-won-t-make-a-bid
======
nikcub
I don't see this deal happening. The board are going to want a premium on a
price that is already inflated because of the speculation and I can't see
Disney going to $25-30B nor Salesforce being able to construct a deal around
stock

Salesforce: in exchange for ~50% of market cap would be adding $2B of Twitter
revenue growing at ~5% to their $6B of revenue growing at 25%+

Disney: for 16% of their market cap Twitter's revenue is half of what Disney's
top-line has been growing each year - and again not much growth

Can't see a case where either would unlock user or revenue growth

Not sure what is next for Twitter, but it looks like another year of plodding
along trying different things.

~~~
hardtke
Twitter revenue is growing at 20% y/y as of last quarter, not 5%.

~~~
sthommes
Underlying driver here is that users are migrating en masse to Facebook now
for their professional updates and post streams. Twitter is most impacted, but
LinkedIn too. That's why TWTR selling, LNKD sold. The market for users
attention, not just the market for their stocks is moving against them. FB is
like the wandering Jupiter of our early solar system- the 'grand tack' is
sweeping up the smaller bodies in the solar system. Good to be Jupiter..

~~~
new299
Do you have a source for this?

I just use (or avoid using) facebook for totally different reasons than I use
twitter.

On twitter I mostly communicate with people I've never met and have little
association with apart from shared interests. It's a great way of meeting new
people.

Facebook is for communicating with people I already know, many of who are
actively searching for alternatives but because "everybody uses it" are locked
in.

------
uptown
It's amazing to me that a product with so much free promotion on TV, in print,
and other venues, and that seemingly has overcome many of the early technical
hurdles, finds itself in a position where the only viable path forward seems
to be an acquisition.

~~~
hueving
Employee bloat can take down a company of any size. They employ nearly 4,000
people. That's 1/3rd the size of Facebook, yet they have 1/6th the users and
the users are of lower value due to shorter engagement times and the smaller
amount of data they have to target ads.

~~~
thesmallestcat
Not sure why you're downvoted (you've since added to your sentence; it was
just fine alone though). Twitter's has way too many people on payroll. I
personally know some buffoons they hired in the past year or so, and I doubt
I'm alone.

~~~
EnderMB
They always seem to be hiring people for sales and advertising. I've known
some people go to them, and from what they've said their ads team is huge.

~~~
aedron
Hence why they have so much "free" advertising - they likely have a massive
department swarming every major media outlet to create and maintain
partnerships, i.e. the little Twitter mentions that you see on TV.

I don't know if these kinds of deals cost Twitter money directly (I wouldn't
be surprised), but I'm sure their marketing department is the most expensive
operation they have.

~~~
bushiwo
I personally know a few people on their media team, the ones responsible for
these relationships, and it sounds like they have 1-3 people per genre (tv,
music, government), at least in the US. The amount of media they get on
television alone is likely worth multiples of that if you think how expensive
it is to buy tv spots, even if you try to normalize for the "Twitter shout
outs." Maybe a lot of resources, but nothing compared to the engineering.

------
cyanbane
Disney paid $4B for Marvel which had an easy path to profit because of
Disney's background. Disney paid $4B for Lucasfilm which had an easy path to
profit because of Disney's background. As a shareholder I would be offended if
they made an offer even half those prices for Twitter which has a product that
isn't even in Disney's wheelhouse. I am confused why Disney is even in this
conversation at this point.

~~~
jasode
_> Twitter which has a product that isn't even in Disney's wheelhouse. I am
confused why Disney is even in this conversation at this point._

One can view the Twitter business in multiple ways.

If one sees Twitter as a _technology platform_ that builds on what IRC/XMPP
did before, the Disney connection makes zero sense. (E.g. Disney is not a tech
company and they wouldn't be the kind of company that would bring back a
developer API.)

However, one can also see Twitter as a _media entertainment_ business and the
technology platform behind the scenes as an irrelevant detail. Disney does
already own the ABC Broadcasting network and ESPN.

Looking at Twitter via the lense of "media outlet" isn't that strange if you
look at the top-100 Twitter profiles:

[http://twittercounter.com/pages/100](http://twittercounter.com/pages/100)

One will notice it's mostly entertainment celebrities including singers Katy
Perry (93M), Justin Bieber (88M), Taylor Swift (81M), etc. The list also
includes media channels such as Youtube, CNN, ESPN, BBC, etc.

Sure, many people have touted the social ideals of Twitter and its empowerment
of user-driven bottom-up journalism. It's a "global consciousness" for news.
However, it's interesting to note the relatively low number of followers for
famous journalists compared to the entertainment celebrities: Christiane
Amanpour (1.8M), Louis Theroux (1.5M), Glenn Greenwald (743k), Malcolm
Gladwell (422k), Bob Woodward (15.9k), etc.

If you see Twitter as a media/broadcast business, an acquisition by
Google/Apple doesn't make any sense.

If you see Twitter as a technology platform to sell more digital ads, an
acquisition by Disney makes no sense.

All that said, we've seen one media company (Rupert Murdoch) buy a web company
(MySpace) and that didn't turn out so well for a variety of reasons.

~~~
ebbv
This is a good explanation of why people think it made sense for Disney to buy
Twitter, but I don't buy it. The problem with this approach is that Twitter
doesn't own any of those big celebrities or have any way of enforcing them
staying on the platform.

When you buy the record label that Katy Perry has a deal with, you're buying
it because Katy Perry has a deal in place to make N more records for that
label.

When you buy Twitter because Katy Perry is on it, you're not getting anything.
She could shut down her Twitter tomorrow and tell all her followers she's only
on Instagram.

~~~
dottrap
And in addition, why should Disney pay (especially at a premium) for what they
are getting for free?

------
1024core
My hunch is that a bunch of people have been pumping TWTR up with all sorts of
rumors so they can dump it before it craters.

~~~
caio1982
Your hunch is sane because this is basically how the stock market works most
of the time :-)

~~~
hueving
No, it's important to emphasize (in case someone is not familiar), you can be
arrested for pumping up a stock while you hold it if you don't disclose your
position in every statement about the company you make.

~~~
erichocean
And I'd be remiss to not mention that disclosing said conflict of interest
_actually makes people trust you more_ —even though they shouldn't.

So not only does that regulation not accomplish what it is supposed to
accomplish, _it actually causes the reverse_.

~~~
hueving
Interesting. Do you have a link to a study about this? I personally ignore any
research from people in stock positions.

~~~
erichocean
Yes, lots of social science studies have been done on it.

The book _Influence: The Psychology of Persuasion_ by Dr. Robert Cialdini
covers this (and similar) phenomenons in detail. Huge eye opener.

> _I personally ignore any research from people in stock positions._

I (and everyone, if asked) agree that's the rational thing to do. But most
people don't behave that way in practice, unfortunately.

I don't have a good solution, the law benefits people like you and I who will
act correctly on the information, but hurts people who are vulnerable—those
who acts incorrectly on the information.

~~~
alttab
There is a proxy between believing that the person who purchased the stock and
disclosed the position as honest enough to put skin in the game for the
company they believe in, and mistaking it for simply this person's confidence
of their ability to fool others.

------
danso
Too bad. While Google has a rep for dropping product lines (have they ever
killed a product-via-acquisition of _significant_ size, vs. things like
Reader/Buzz?), Twitter seems like it could easily add to Google's core data
and revenue work, even without Google doing much additional work. I'm assuming
Google's current access to the Twitter firehose is already being used or at
least studied for a SERP signal. Twitter's social network provides additional
ways for Google to facet and classify data. It also seems possible that Google
could improve advertising on Twitter enough so that it's not just a money pit.

I don't know enough about Salesforce beyond a few of its products to imagine
scenarios where Twitter has comparably low-friction integrations. Unless
Disney makes a concerted effort to give Twitter autonomy...can't see how they
could leverage it into something that's not just a loss-leader for
entertainment. Maybe additional branding opportunities for ESPN and athletes,
as well as another way to broadcast events?

edit: Any reason why Amazon isn't in the mix? Other than the obvious reason
that they haven't made noise about it? Would an acquisition of Twitter's size
be too unwieldy for Amazon?

~~~
soperj
Orkut. Which was a social media site with 300 million users. Same number as
twitter.

~~~
danso
The userbases are definitely comparable, even if the impact and potential
revenue differs -- Orkut did not have the same reach in the U.S. as Twitter
currently does. Also, AFAIK, Orkut was always a part of Google? I was thinking
along the lines of, has Google shut down something that they paid billions to
acquire? In terms of pure dollar amount, assuming that Twitter will go for at
least a billion, only YouTube, DoubleClick, and Nest are in that neighborhood.

Too soon to make a verdict on Nest, but YT and DC seem to be the kind of
acquisitions that Google paid a lot for, and from which Google advanced its
bottom line and reach. FeedBurner ($100M), on the other hand...$100M is not
nothing, but not as major as a Twitter acquisition would presumably be.

(AFAIK, Feedburner is still alive, but the APis have been deprecated a few
years ago)

~~~
andrioni
Orkut was always part of Google, it was created by a Google employee (Orkut
Büyükkökten) as his 20% project.

------
baccheion
I still don't really understand why Twitter's growth slowed. It was their's to
not mess up, but then straight down they've gone. How annoying.

In any event, based on their current projected growth rate (27.51%), full year
2015 revenue ($2,218,032,000), and 2015 profit margin (25.15%) (which is
likely BS, as they seem to be losing money), it seems they are worth about _$8
or $12 billion_.

One way to determine valuation is to divide growth rate by 10, add 1, then
multiply in yearly revenue (27.51 / 10 + 1 = 3.751; 3.751 * $2,218,032,000 =
__$8,319,838,032 __). Or, as seems to be the trend recently, one could divide
growth rate by 10, double it, then multiply in yearly revenue (27.51 / 10 * 2
= 5.502; 5.502 * $2,218,032,000 = _$12,203,612,064_ ).

These estimates usually assume 30% profit margin, so one can factor that out
(as Twitter's seems to be ~25%) by applying the scaled multiple to "profit"
(27.51 / 10 + 1 = 3.751; 3.751 / .3 = 12.5; 12.5 * $557,807,000 =
_$6,972,587,500_ ) (27.51 / 10 * 2 = 5.502; 5.502 / .3 = 18.34; 18.34 *
$557,807,000 = _$10,230,180,380_ ). One would then add in Twitter's estimated
net assets (~$4.556 billion) to get a final estimated worth.

That is, Twitter is worth either _$11.53 billion_ , or _$14.79 billion_
(depending on how you look at it). As their market cap is $17.25 billion, and
the media is suggesting offers are in the range of $25-30 billion, it's likely
any acquirer will pay much much more than Twitter is worth, or all potential
bidders will bow out, as Twitter's asking price is too high.

Also, no matter how you look at it, Twitter's employee count seems to be ~2x
what it should be. So, either there'll be a large number of layoffs, or
they'll have to stop hiring completely and "ride the wave" until their
revenue/potential increases to be inline with their employee count.

Even just looking at what Twitter does, it's hard to see why 4,000 employees
are needed. WTF are they doing? It's just another sign they are likely being
thoroughly mismanaged. This is further supported by the abysmal senior
management rating (3.2, versus a target of 4.0 or 4.2) they received on
Glassdoor.

------
ftrflyr
Does anyone else think Amazon will come sweeping in at the last moment and
make an offer? Bezos already owns WP and Twitter has a significant user base
of media outlets.

~~~
jmknoll
It's actually not a terrible fit for Amazon. Twitter is basically where
breaking news happens already, and it's not terribly difficult to imagine an
integration between WaPo and Twitter. Gives them a presence in San Francisco
as well, and access to Twitter considerable UX/frontend talent, which they can
put to use on making AWS more intuitive to use.

I guess there is the issue of WaPo being owned by Bezos directly though, not
Amazon.

~~~
ktRolster
_and access to Twitter considerable UX /frontend talent_

I don't want to insult anyone or anything, but is Twitter frontend that
impressive really?

~~~
hackaflocka
I think it used to be impressive when they created Bootstrap.

Twitter's website currently is not Responsive. The web interface looks
different on every platform (mobile, tablet, desktop). And on mobile, the
website is terribly slow.

~~~
spiderfarmer
Plus, it doesn't highlight a much used feature: search

Right now it's hidden behind a magnifying glass.

I don't find the clickbaity trends they highlight on the homepage very
interesting. The content is mostly the same as the MSN homepage.

Just let me search for things I find interesting.

Plus, search can be monitized way better, because you know for sure what the
user is looking for.

~~~
hackaflocka
Sadly, their search doesn't work very well:
[https://news.ycombinator.com/item?id=12646580](https://news.ycombinator.com/item?id=12646580)

------
efuquen
Disney is out too:

[http://www.recode.net/2016/10/5/13181704/disney-twitter-
buy-...](http://www.recode.net/2016/10/5/13181704/disney-twitter-buy-iger-
dorsey)

Tomorrow is going to be an interesting day for TWTR.

------
rrggrr
Twitter brings a lot of political heat in countries where Google does
business. At first I was baffled by Google's unwillingness to bid. But now I
suspect owning Twitter may be bad for business and they don't want the
headache.

------
vassy
Why would they buy Twitter when they can easily create a new product, called
Google++ that everybody can use and love?

~~~
UweSchmidt
Creating a new product that everyone will use and love is not so easy, even
for Google.

~~~
gotofritz
It's not like Google Wave Or Google+ took the world by storm...

------
xmdgngsnsgn
This is how the web and app bubble pops. First Yahoo went under, now Twitter,
and I suspect Uber will be next. It turns out that, yes, you really do need a
profitable product, and no, you can't just hand-wave that away with
"expectations of future earnings."

~~~
jamisteven
Uhhh, UBER next? Maybe you need to read their financials and get back to us.
UBER is one of the most profitable companies ever to exist. 12 billion in
revenue, 2 bil of that is profit.

~~~
xmdgngsnsgnn
You need to check your sources. Uber is hemorrhaging money and lost 1.2
_billion_ dollars in the first half of this year alone.

[https://www.bloomberg.com/news/articles/2016-08-25/uber-
lose...](https://www.bloomberg.com/news/articles/2016-08-25/uber-loses-at-
least-1-2-billion-in-first-half-of-2016)

~~~
jamisteven
^ This is completely irrelevant and as the article you have referenced clearly
explains, this loss will not be a problem come the 2nd quarter. This loss was
due to the struggle in China, which now has a solution.

------
jhou2
Only a few months ago, shares were at $14 plus change. Not much hope of
significant profit in the near future. Perhaps some Chinese investors flush
with capital might entertain an offer. Tencent?

~~~
SixSigma
Right now it is around $25, the highest it has been for a year.

Where is the "plummet" on this 5d chart ?

[https://uk.finance.yahoo.com/echarts?s=TWTR#symbol=TWTR;rang...](https://uk.finance.yahoo.com/echarts?s=TWTR#symbol=TWTR;range=6m)

~~~
unreal37
Look again.

Stock market opens at 9:30am.

~~~
SixSigma
oh right, thanks. damn

------
Waterluvian
If nobody buys Twitter the stock will take a dive, right? Is this possibly
that reality check on the true value?

~~~
fleitz
Kinda, the price will decline until someone makes an offer to take them out,
that might be Google. Why make a bid until the price floor is established?

------
skaber
If I were to open a market position on TWTR, is the stock price still hyped
and would it be a good time to short to stock? Looks like the stock could
reverse it's uptrend from the previous months and reach the 10-15 range again.

~~~
shostack
Respectfully, if you are asking that question you probably don't have enough
info to warrant doing this unless you like to and can afford to gamble.

~~~
skaber
At this point yes, it would be pure gamble. I thought there might be objective
information that could have come out of this post :) Then, I would take a
rational decision.

~~~
vinay427
If there is a rational decision based on publicly available information, it
has almost certainly been priced in already. Honest advice: always be aware
that it's gambling (and it seems you are). Look to index funds or similar for
relatively stable growth.

------
seesomesense
Pichai Sundararajan has brought some much needed discipline to Google's M&A
spree. Good to see that he is not plowing more money into ego driven
acquisitions.

------
borplk
Interesting. I'm a bit surprised I'd imagine they'd be interested in taking it
over. What do others think?

~~~
adrenalinelol
How would they generate ROI on the investment? Google has no track record with
social media, if anything they lack creativity more than Twitter does. There
is also no argument for a supplementary role to their other product lines.

Twitter just has to be allowed to be Twitter and not some amalgamation that
competes with Facebook in usage metrics when it's an entirely different
experience. I know, whatever was on those slides promising the world to early
investors are going to make for a hard pill to swallow, but Twitter is
reasonably successful imo.

~~~
GreenPlastic
Seems like all they'd have to do is add value to advertisers using the
existing ad-word engine. The plan is always the same for any internet holding
- build up user base, then invest heavily in the advertising engine to add
value for the true customer, advertisers. If you listen to FB conference
calls, it's always "we want to build the service to over a billion users, then
we'll work hard to create the ad engine to get advertisers as much value as we
can."

~~~
GreenPlastic
Why does everyone assume they need growth? I'd be plenty happy to have a
company with a 2B revenue stream, call options on other assets in Fabric and
Periscope and there's like 0 secular decline.

~~~
JumpCrisscross
> _I 'd be plenty happy to have a company with a 2B revenue stream_

They're losing $500MM a year...

~~~
saretired
Yup. Plus they have negative 2 billion in retained earnings, a lot of long
term debt, about 20% of total assets are goodwill and intangibles, and if they
eventually have to do a stock offering to raise capital it will be a bloodbath
for current holders.

------
foobarqux
Recode reporting Disney is out as well.

------
jamisteven
Whoever ends up acquiring it, will do so as a proxy for Palantir or other
intel gathering endpoints. Twitters only true value is in the amount of
data/intelligence it can contribute to the puzzle that is linkability in the
intelligence communities.

------
SixSigma
Where "plummet" means "reaches 12 month high"

[https://uk.finance.yahoo.com/echarts?s=TWTR#symbol=TWTR;rang...](https://uk.finance.yahoo.com/echarts?s=TWTR#symbol=TWTR;range=6m)

~~~
unreal37
Down 18% at the open.

~~~
SixSigma
stupid yahoo :)

they should buy Twitter

------
intrasight
Advice to Twitter:

1\. give on on this acquisition thing for now

2\. fire half your staff - what do all those people do?

3\. you're a utility - charge for it. One penny per tweet would equal $2
Billion in annual revenue

4\. after #3, there's no reason not to invite 3rd party developers back to the
party

~~~
paulcole
> 3\. you're a utility - charge for it. One penny per tweet would equal $2
> Billion in annual revenue

Seeya. The biggest mistake Twitter could make is to "charge for it." They'll
realize in a hurry that they're expendable entertainment.

~~~
chetanahuja
They're a free marketing channel for celebrities (and businesses) with large
follower count. They monetize those users indirectly by showing them ads of
course. But a case can be made to charge some money from the celebrities
themselves for value add services (e.g., personal customer service, subtle
advantages in placement of tweets in user's streams etc. Lots of these
tweeple/tweepanies would be willing to pay, say $20 a month for value added
services leading to better engagement.

There's also a really interesting monetization model of users rewarding each
other for exceptional posts with virtual goods. Reddit gold seems to be a
successful example of this model. Twitter is a public square just like reddit.
They should try this model.

~~~
evgen
This is probably closer to a viable revenue model. Don't charge per-tweet,
rather charge people who have a large follower count to broadcast a tweet to
all of their followers. Free tweets go to the top X% or 1000 followers,
whichever is greater, and to truly broadcast to a million followers costs
money. Something similar to what FB does for posts from pages that you once,
in the distant past, liked; page owners complain about this to no end, but
they keep paying...

~~~
protomyth
That would break the followers expectations that when I follow someone I
expect to get their tweets. Facebook is already pulling this crud and it's
annoying.

~~~
chetanahuja
It doesn't even have to be a "not deliver" model. It can simply be a matter of
"deliver harder" for paying celebs/companies. Not as hard as a promoted tweet
but not as ignorable as just a regular tweet scrolling past the bottom edge of
the screen. There can be special pricing for highlighting tweets or "temporal
persistence" of tweets.

------
akhatri_aus
Is this shocking? Who would buy a company in a public auction, it seems
idiotic.

------
tiredwired
Maybe Samsung will buy them.

------
jliptzin
Maybe Donald Trump will buy it, he seems to be a fan of the service.

~~~
marcoperaza
A perfect example of Twitter's problem actually. It's a great platform for
witty famous people and their fans, but that does nothing to put money into
Twitter's pocket.

~~~
thesimpsons1022
never heard trump and witty in the same conversation

------
tarancato
This thread went from 2nd most voted to killed immediately. dang, what can you
tell us about this?
[https://news.ycombinator.com/item?id=12651429](https://news.ycombinator.com/item?id=12651429)
(you need showdead=yes in your profile to see it)

~~~
gjm11
Seems pretty obvious to me: a combination of (1) gratuitously political and
(2) gratuitously hysterical. ("Progressive-supremacist"? Really?)

~~~
cronjobber
It's only _moral_ supremacy, not sure that counts.

------
petepete
Twitter are missing out, they could have become the next Buzz!

------
hackaflocka
They said Google won't make a bid. But Alphabet ($GOOG) can absolutely make a
bid.

------
smegel
If Google is going to develop a crappy product, they will do it in-house
thank-you-very-much.

------
Mao_Zedang
[http://gab.ai/](http://gab.ai/) is bleeding users off as well.

------
DominikR
Maybe Saudi Arabia is going to help out Jack Dorsey. After all they seem to
align on freedom of speech issues.

Additional bonus for Saudi Arabia: They could make it an even better ISIS
recruitment tool than it already is.

