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According to sources quoted in a The Wall Street Journal story published late Wednesday night, Twitter has been having what the paper called "low-level" discussions about a possible acquisition by either Google or Facebook, at a valuation of $8 billion to $10 billion. Obviously the company's financial backers—which include VC firms such as Kleiner Perkins Caulfield Byers—are looking forward to a potential exit and a hefty return on their investment. And both Google and Facebook could probably make use of Twitter in some form or other. But would an acquisition by either Web giant be good for the messaging service, or its users?
It's worth noting that The Wall Street Journal's report is filled with the sort of caveats that suggest Twitter investors shouldn't start banking their Google shares or buying Facebook hoodies just yet. In addition to calling the talks "low level" (although it's not exactly clear what that means), the newspaper report says the talks have so far "gone nowhere" and that both companies have expressed what the WSJ called only "latent interest," another phrase whose meaning is unclear at best.The general tone is that no deal is coming soon, and the Journal spends most of the piece talking about whether the valuation of the company implies there is a bubble in Silicon Valley.Some observers, including Valley legend Bob Metcalfe, saw the piece as a marketing effort by Twitter.
Nevertheless, would Google or Facebook be interested, theoretically, in buying Twitter? That seems like an obvious yes in both cases. Although Twitter is substantially larger than any of Facebook's past acquisitions, and a number of observers have argued that this makes the social network unlikely to be an acquirer, the idea is not really that far-fetched.Facebook bought FriendFeed in part because it wanted to get Bret Taylor, who is now the chief technology officer and the brains behind the network's open graph API and other offerings, but it also clearly wanted to build the kind of real-time conversational elements of FriendFeed into Facebook—which it has done with its unified social inbox and the recent rollout of real-time commenting.
Twitter would arguably fit perfectly into that strategy. But Facebook's biggest problem is the valuation—the company doesn't have the cash to buy something for $8 billion to $10 billion. To this point the social network has done primarily small cash deals (although it reportedly also issued stock to FriendFeed and others as part of those acquisitions), in part because it doesn't want to push the company over the 500-shareholder mark and trigger public reporting of its financial results.
Google, meanwhile, desperately needs an injection of social features, as we have written a number of times, since it has completely failed to get much going in that area with such ventures as Google Wave and Google Buzz.Buying Twitter (which it could easily afford to do) would give it a massive boost in real-time social communication.But the search giant's acquisition history isn't likely to fill anyone with confidence about how Twitter might fare under the Google umbrella. Twitter founder Evan Williams knows that better than anyone, since he sold Blogger to the Web giant, and CEO Dick Costolo knows a bit about it too, since he sold Feedburner to Google before he joined Twitter.
For every acquisition that has paid off, such as YouTube or Keyhole (which became Google Earth), Google has made a whole series of purchases that have gone absolutely nowhere. In at least three of those cases, it bought interesting social applications that could have easily become something huge—Dodgeball, the company that Dennis Crowley started before he founded Foursquare, the Twitter-style microblogging service Jaiku, and question-and-answer service Aardvark—and did nothing with them. Twitter is obviously a lot larger than any of these, but that's still no guarantee that Twitter wouldn't be smothered by the Google-plex and gradually lose momentum.
One of the best things about Twitter, despite all the problems it has had in the not-too-distant past with reliability and other issues, is that it is 100 percent focused on being a real-time communications network. Being bought by either Google or Facebook might bring a big payoff and substantial financial and operational resources, but it would almost certainly dilute that focus—simply because it would be a small part of a much larger company—and that would be a shame just when the service is starting to show its real potential.
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