Salesforce.com still deliberating whether it should make an offer for Twitter
Online social networking and micro-blogging site Twitter Inc. (NYSE: TWTR), which has been the subject of numerous takeover and acquisition speculations over the last few months, is now confronted with the need to rely more heavily on its live video streaming strategy, as reported by Bloomberg on October 8th, 2016. This fresh development comes after top potential bidders were said to have lost interest in making buyout offers amid pressure from their investors.
Our earlier coverage had highlighted that the possible suitors for Twitter are said to include cloud computing pioneer Salesforce.com Inc. (NYSE: CRM), Alphabet Inc.’s (NASDAQ: GOOGL) Google, Apple Inc. (NASDAQ: AAPL), Microsoft Corp. (NASDAQ: MSFT) and even media mogul Rupert Murdoch, either via 21st Century Fox (NASDAQ: FOZA) or News Corp. (NASDAQ GS: NWS), and more recently, The Walt Disney Company (NYSE: DIS) and Verizon Communications Inc. (NYSE: VZ). Twitter even hired Goldman Sachs Group Inc. (NYSE: GS) and Allen & Co. to pursue a sale in September 2016. CEO Jack Dorsey opposed a sale, while co-founder and board member Evan Williams, supported a deal.
Twitter’s search for buyers began after several quarters in which sales and user growth slowed. Twitter, which has consistently disappointed the market with its poor user growth, added just 3 million net users in Q2 FY16, reaching 313 million MAUs. It also reported a GAAP net loss of $107 million during the second quarter, while its Q3 FY16 guidance portrays that the company is not doing well. Twitter has been facing angry investors for its inability to add users at a rapid pace. With around 140 million daily active users (DAUs), Twitter has been struggling to add users compared to other social media sites like Facebook Inc. (NASDAQ: FB), Instagram, and Snapchat. It is a worrying fact that Twitter’s MAUs has stagnated for the past year, compared to its rivals.
Twitter’s board was also considering selling units like MoPub or Vine or Fabric that do not directly impact its bottom-line or stock price, to emerge a more leaner and focused company, adding to the possibility of finding a suitable buyer. While Twitter is trying to improve its performance and cut costs through layoffs, the Company has been facing major challenges related to safety and tools to combat user abuse.
Live video strategy
After several potential buyers backed out of takeover talks, Twitter is trying its best to appeal to a diverse audience and gain traction in social networking through a new strategy that emphasizes live video feeds. Twitter’s recent push into news and sports on mobile devices could spark an interest among potential acquirers. Twitter has been entering into several partnerships for sports, politics, and entertainment content such as the National Football League’s Thursday night games, which it can stream alongside tweets related to the video. This is seen to better entice users without Twitter accounts to use the service, while allowing it to share revenue on the video ads.
Salesforce still said to be in buyout talks
Salesforce.com, which is seen as a forerunner in the race to acquire Twitter, is still deliberating whether it should make an offer for Twitter in the face of resistance from shareholders over the strategic merits and valuation of such a deal. Salesforce.com is focused on cloud-based sales and marketing software, and its main product is aimed at business users, not consumers. That being said, Twitter could become a corporate tool used to power sentiment analysis and nurture customer relationships if taken over by Salesforce.com.
Investors have questioned why Salesforce would need to buy Twitter, when it already licenses the Twitter “firehose” for its new artificial intelligence platform, Einstein. On the other hand, Salesforce could benefit from the huge trove of data generated by Twitter’s social network of 313 million monthly users. Increasingly, messaging services like Twitter are being used to communicate directly with companies and with the public about customer service. Buying Twitter could keep that company’s data out of the hands of Microsoft and other Salesforce rivals, including Oracle Corp. (NYSE: ORCL) and International Business Machines Corp. (NYSE: IBM).
Despite its many problems, Twitter is still considered to be an attractive asset. Apart from being an invaluable tool for news gatherers, celebrities, world leaders, activists, and marketers, it has a huge amount of untapped data, which could appeal to companies like Google and Salesforce. CEO Jack Dorsey has defined one of the company’s missions as being the “people’s news network,” according to an internal memo seen on Monday, October 10th, 2016.
Even with its relatively small base of active users, Twitter undeniably wields some amount of power and influence among social media startups. However, the micro-blogging site has been weighed down by growing concerns about harassment and abuse on the site. Combined with its dismal user growth, Twitter’s stock has declined 35% in the past 12 months, falling to $18.00 on October 11th, 2016, much below the $26 price from its November 2013 IPO.
Amid the uncertainty relating to its possible acquisition, employee morale has plunged to an all-time low, given that the company laid off 8% of its employees and closed down its India-based engineering unit. Employees have criticized management for the way it handled the layoffs, some of whom found out when they were unexpectedly locked out of their company email accounts.
On October 10th, 2016, Twitter launched a new ad campaign around New York City, placing colorful Twitter-themed signage in some of the city’s numerous subway stations. While the ads do not explain much about what Twitter does or how it is used, Twitter says that it is an extension of its “What’s happening?” digital campaign it launched in July 2016 to reflect and highlight the biggest stories unfolding on Twitter.
The focus now shifts to Twitter’s Q3 FY16 earnings report to be announced on October 27th, 2016, when the Company hopes to conclude deliberations about selling itself and chart out its future growth path.
Twitter’s stock ended the day at $18.00, gaining 2.51%, at the close on Tuesday, October 11th, 2016, having vacillated between an intraday high of $18.20 and a low of $17.65 during the session. The stock’s trading volume was at 48,950,618 for the day. The Company’s market cap was at $12.75 billion as of Tuesday’s close.