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Is Twitter now under more pressure to sell - perhaps to Google?


Twitter stock jumped on the news that Microsoft is to acquire LinkedIn as investors reconsidered longtime rumours that Alphabet, the parent company of Google, might now acquire Twitter. TWTR shares were up 6% at the time of writing.

Most people think Google looked at Twitter a long time ago and decided it did not like it. ("Larry doesn't give a f--k about Twtr," is the famous quote from Amir Efrati of The Information regarding Alphabet CEO Larry Page's attitude toward Twitter.)

But hold that thought.

Investors clearly think that Microsoft's acquisition of LinkedIn shows the way. LNKD holders will get a 49% premium on their stock from Microsoft. Ever since Jack Dorsey became the CEO of Twitter again, TWTR has been in the doldrums. The stock has been on a long downward trajectory since 2014. (Disclosure: I've owned some Twitter shares for a long time.) Apparently, the prospect of being acquired moves TWTR stock more than Dorsey's leadership.

So who might buy Twitter? The rumoured companies are:

Google: Saxo Bank head of equity Peter Garnry thinks Google is one of very few companies big enough to take over Twitter. He noted this morning that despite Twitter's stagnant user metrics, its cashflow position has improved recently, making it more appetising.
Comcast: Kurt Wagner at Recode wrote this today: "Who might save Twitter? It could still be Google, or perhaps a bigger media player like Comcast. But we talk with smart people close to Twitter often, and the growing feeling is that Twitter's best option is to finally sell to someone with deep pockets."
News Corp.: Twitter has previously been the subject of rumours - denied - that News Corp. might want it.
And then there is the existing deal that Twitter has in place with Google.

Google has given Twitter's tweets greater prominence in its search results. And Twitter's advertisers can now use Google's DoubleClick Bid Manager and DoubleClick Campaign Manager to buy and measure campaigns on Twitter. The deal doesn't come into full fruition until Q3, Adam Bain told analysts on the last earnings call, but when it does it will let both Twitter and Google identify shoppers whether they are on mobile or desktop computers. Accurate cross-device measurement is a huge push for all the major tech companies right now, because they want to be able to follow you when you ditch your phone for your laptop.

Now, assume this joint venture goes well - Twitter and Google both get more ad revenue and, importantly, more user data. At that point, Twitter's stagnant user-base looks like less of a weakness. Despite its faults, Twitter is still the best place for breaking news and finding out what is happening right now. It is still better than Facebook for that "instant news" aspect (although Facebook is catching up). And, crucially, Google is nowhere in social.

Now Google is looking at a platform it can monetise, with 300 million active users, which could benefit from being boosted on Google's other platforms, and whose stock is very, very cheap.

It also offers Dorsey and his board an end to their yearslong struggle to get Twitter to the next level.

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