Twitter Inc (NYSE:TWTR) was not the hot social platform that it once was and it’s high time that the company starts considering a buyout, this according to its own ex-CEO and co-founder Evan Williams. In a Bloomberg interview, Williams offered a measured response on the issue, “We’re in a strong position now, and as a board member we have to consider the right options,” he said.
After the company’s disappointing user and sales growth as well as two years of executive upheaval, a buyout would be in Twitter’s best interests.
Analysts believe that in the absence of a turnaround, and the stock’s 72% nosedive since January 2014, the decision is a wise one, given the interest Twitter is getting from potential buyers.
“There is a valuable idea inside Twitter. But Twitter won’t be the company that realizes it,” tweeted venture capitalist Paul Graham two weeks ago.
Rumors of a buyout swirled after the Microsoft Corporation (NASDAQ:MSFT) and LinkedIn deal was announced in June. Twitter’s market share rose to 4.5% on Wednesday and up 1.1% yesterday after CNBC revealed a set board meeting for next Thursday, likely to discuss “the growth rate of the company, and future options if growth continues to be anemic.”
On Twitter, CNBC disclosed that the social media platform is “attracting activists,” which is hardly surprising given the company’s financial underperformance. Analysts believe that Twitter’s second-quarter results and third-quarter guidance could be swaying the board’s thinking.
Twitter’s annual sales growth has slowed down significantly to 20% in the 2Q16 from 36% in Q1 and 48% in Q415. Its sales growth is expected to drop to a range of 4% to 7% in Q316. Although Twitter’s active users increased by 4% in Q2, which is about 313 million, it’s a disappointing improvement when compared to Facebook’s 15% (1.71 billion) active users in the same period.
The company’s second-quarter shareholder letter suggests that the stiff competition for social media ad budgets and the platform’s high ad prices are two reasons why Twitter is unable to keep up with competition. Remarks were also made to the social network’s traffic troubles.
Business insiders believe that brain drain is another reason why Twitter is going through poor financial health. 15 months since Jack Dorsey returned to Twitter as CEO, analysts are wondering if the executive has what it takes to turn things around.
What Twitter needs to focus on at this point is attracting new users, maintaining old ones and boosting user engagement. Twitter remains as a highly valuable social media property, mostly thanks to its huge celebrity following. As the company transitions into a source of real-time news and commentary, the interest it has gotten from several tech names shouldn’t come as a surprise.
At the moment, Alphabet Inc (NASDAQ:GOOGL) is a logical acquirer of Twitter. As its biggest rival, Google has the resources and machinery to optimize Twitter’s features and improve the company’s monetization. Even better, the search engine giant can also integrate Twitter with its other social media platforms, including YouTube to engage users.
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