Google to buy Twitter? – I really hope not

By April 3, 2009 5 Comments

Yesterday’s hot rumour as reported by Mike Arrington on Techcrunch is that Google is in early stage discussions to acquire Twitter.

As Mike points out the obvious logic for Google is based on realtime being the next frontier for search and Twitter being the lead company in that space.  Their $1.7bn YouTube acquisition is now thought of in exactly this way – see this Feb post where John Battelle argues that YouTube is best thought of as a ‘massive search asset’, reminds us that YouTube now gets more searches than Yahoo, and points out the parallels with Twitter.

So at a strategic level a Google-Twitter deal is obvious.

At a financial level less so – Google still loses money on YouTube and there are questions as to whether it will ever generate meaningful profits there – and the same point can be argued for Twitter.  Gawker puts it thus:

Twitter, which lets users post short updates about whatever thought crosses their minds, is being hailed by the Valley’s groupthinking bloggers as a revolution in “real-time search.” Much as a stopped clock is right twice a day, occasionally one finds some bit of timely news posted by a Twitter user. (It’s hardly a threat to established newsgathering operations, because more often than not, what’s posted on Twitter is just a link to some page on or

The venture capitalists who sank tens of millions of dollars into Twitter, despite its lack of any sincere interest in making money, have cleverly talked up this “real-time” angle among journalists eager for a trend story. The notion of real-time anything is inherently appealing to the Ritalin addicts of the tech and media worlds, for whom instant gratification both takes too long and wastes 15 percent of a 140-character message. And that has gotten Google worried that it might be letting a rival grow in its own backyard.

My strong feeling is that Twitter search is in for massive growth and will be monetisable, plus the cost of delivering the service is much less than YouTube (which now accounts for 10% of the internet’s bandwidth) – but to be fair I would probably have said something similar about YouTube back in 2006 when Google closed that deal.

Putting that all together I would suggest there is a price at which a Google-Twitter deal makes sense, but it isn’t much above the $250m valuation at which they raised money back in January, and I can’t see the new VCs selling out this quickly unless they were getting a significant profit – which implies that if the talks are serious they would be at a valuation north of $500m, possibly (probably?) well north.

I said in the title of this post that I really hope Google doesn’t buy Twitter because for the health of the ecosystem and sanity of everyone working in the web2.0 world I would love to see a few of our ‘success stories’ get to the point of generating significant profits.  That would encourage more entrepreneurs into the sector, give companies more confidence in holding out for longer when Google et al come knocking, bring more money into the system at the venture level and give traditional media companies more confidence in making big ticket acquisitions – and these are all things we need.

Plus we could all do with Google’s stranglehold on this market weakening rather than strengthening.

As an amusing aside you might want to check out this interview with Twitter founder Biz Stone in which he talks about their focus on building ‘value rather than revenue’ right now and says Twitter will experiment with revenue models this year (video courtesy of Gawker).

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