Reports from market analysis firm Briefing.com indicated Twitter had hired Goldman Sachs to fend off two possible takeover attempts, including one from Google. The unconfirmed rumours, on which Twitter declined to comment, led to a 4% rise in its stock.
A similar situation arose in January after unsubstantiated speculation of an acquisition by Google led to a 3.3% rise in Twitter’s stock. And that wasn’t the first time Google had been rumoured to be interested in snapping up the 140-character platform either.
In February 2011, long before Twitter’s floating on the stock exchange in November 2013, unconfirmed rumours circulated that Google, Facebook and several others had held takeover talks with Twitter for around $10bn.
And in 2009 Google was apparently in late stage negotiations to acquire Twitter for around $250m, having just turned down Facebook’s advances, but nothing came of it.
Twitter’s worth $34bn and Google has over $60bn in the bank
The situation today would involve much larger sums of money. Twitter is currently valued in the region of $33 to $34bn. The company now generates revenues of over $1bn and its reported 288 million monthly active users send 500m tweets a day with 80% of users active on mobile devices – a potentially lucrative advertising opportunity.
For Google to buy Twitter now it would have to pay a healthy premium over and above the current market value, which would put it in the region of $50bn. Google has a sizeable cash stockpile of over $60bn, but it’s not in the same league as Apple’s $178bn and is less than Microsoft’s $90bn. As with most other US technology companies, some of that stockpile is situated outside of America in European, Asian and other countries in which it operates.
Buying Twitter would require Google to repatriate a chunk of that cash and therefore pay tax on it, which would eat into its maximum cash buying power. But Google isn’t limited to just buying with cash.
Like Facebook’s recent acquisitions, Google could buy Twitter with a mixture of cash and stock. The search company is currently valued at over $360bn.
Twitters founders have sold to Google before
Twitter’s cofounders also have history with Google. In 2003 Evan Williams and Biz Stone sold their blogging platform, Blogger, to Google for an undisclosed sum.
A Google acquisition of Twitter is possible, but whether it is likely is unknown. Google has dropped its emphasis on social networking, reducing its push for Google+ which reached its peak as as the second biggest social network in 2013. It has also started to separate products such as Google Photos from it and has dropped its authorship profiles from search, which was the driving force behind journalists using Google+.
Does Google really need another social network to contend with Facebook?
This article was written by Samuel Gibbs, for theguardian.com on Wednesday 8th April 2015 10.35 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010