Twitter, which was once a darling of the tech industry and went public almost three years ago in an eye-popping IPO, appears to be up for sale.
We’ve seen this story with an internet company before.
In fact, the parallels between Twitter and Yahoo are rather striking:
A rotating cast of CEOs and executives with little direction; A powerful platform once seen as the future of the internet struggling with an identity crisis; Questionable strategies for growth.
If it doesn’t sell soon, Twitter risks setting itself up for Yahoo’s same fate: a decade-long stagnation in which no progress is made, and company focus and morale are slowly drained by never-ending takeover talks. The story ends with a desperate sale for a tiny fraction of its peak valuation.
Right now, Twitter seems to think it can fetch as much as $30 billion in a sale, about double its market cap as of Friday, Kara Swisher of Recode reports. Yahoo, which once had a market cap of about $125 billion, agreed to sell to Verizon for $4.8 billion this year. That was 8 years after Microsoft offered to buy Yahoo for $42 billion — an offer that Yahoo’s leadership stubbornly rebuffed.
If CEO Jack Dorsey and the Twitter board pull a Yahoo from 2008, they’re setting themselves up for a drama vortex like the one Yahoo went through.
Looking for a miracle
Twitter would also be taking a gamble if it doesn’t sell and tries to make it on its own. As The New York Times reported, one option the company is considering other than a sale is a restructuring that could include layoffs. But we’ve seen Twitter go through that before, and it hasn’t helped solve its user growth problems. As the saying goes — and as Yahoo proved through many rounds of layoffs and endless restructurings — you can’t cut your way to growth.
Despite its many problems, Twitter is still an attractive asset. It’s an invaluable tool for news gatherers, celebrities, world leaders, activists and marketers. It has a treasure trove of untapped data, which probably looks pretty tasty to companies like Google and Salesforce. Twitter was the platform that a reality TV star/real-estate tycoon used to promote himself all the way to the GOP nomination for the presidency. No one can deny the power and influence Twitter wields, even with its relatively small base of active users.
But Twitter’s company culture has always prided itself on being fiercely independent. The company turned down an offer from Facebook in its early days.
And while cofounder Dorsey doesn’t control a majority of Twitter’s voting shares (as Facebook’s Mark Zuckerberg and Google’s Larry Page and Sergey Brin do), it’s not clear how amenable Dorsey might be to selling out — or how vigorously he might try to oppose a deal.
Depending on who the buyer is, an acquisition might not be at odds with Twitter’s mission. Unlike Yahoo, which seems destined to be stripped-mined for valuable resources and left unrecognizable once Verizon gains jurisdiction over it, Twitter’s service could actually flourish under a parent company that provides additional resources and leeway.
Unless Twitter has some miracle up its sleeve that the company is confident will supercharge growth to Facebook-scale, it won’t be able to get a sweeter deal down the road than the one it can get now. Yahoo’s “lost decade” could be Twitter’s future.
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