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The Twitter Endgame

A subject that often seems to come up in conversation, either in the Valley or out, is Twitter’s end-game. When I’m asked this question, I usually stop and recite these points, usually in bullet-point form, much to the dislike of my audience:

  • Twitter is an absolutely amazingly incredible company that is a huge force in the world. We still yet don’t know the full uses of the product, and there are still so many more people to get onto Twitter, even in the United States — heck, even in the Bay Area.
  • Twitter’s foundation is so wide and deep that it has the capacity to be a wholly independent company that could be as big, if not, bigger than Google.
  • The real question is — however — will the team and the investors double-down on more huge investments in order to harvest the profits from Twitter? If yes, it would require perhaps an injection of $0.5-1b new dollars into the company, so that the staff can grow from 400 (200 technical, 200 other) and so that they can stabilize the technology and hire more people away from Google and other technology companies.
  • Personally, I believe that investors won’t have the patience to do this. It will take too long. They love Twitter, but there’s one company that’s perfectly positioned to “harvest” those profits in the shortest period of time. That company is Google.
  • Facebook will not acquire Twitter. Their approach is more likely to drive up the final price for Google.
  • Therefore, when will Google buy Twitter and for how much?
  • I believe Google will buy Twitter in the first half of 2012. Twitter will be low on cash, and Facebook will be on verge of IPO, so Google will have no choice but to pony up and knock on John Doerr’s door — BTW, he will make his 5-6x multiple 🙂
  • The price will be around ~$20b. Google will justify that purchase price because it has the cash on hand, it needs access to the social/interest graph, it can fix Twitter’s search, and their army of technical and business talent know precisely how to extract profits from Twitter usage, primarily in ads, location, sentiment, and a host of other categories.