Why we talk about a Twitter acquisition

Caroline McCarthy rightly rebuts all the "so-and-so will buy Twitter!" nonsense, but there's a very good reason for this nonsense:

The microblogging service still makes little to no money, and the assumption is that it will continue to fail to do so, absent a big-brother type that can turn its community (that word again!) into cash.

As Google discovered with YouTube, however, big community doesn't necessarily equal big cash. The same is likely true of Twitter.

Some communities simply aren't designed to be monetized directly. Unfortunately, advertising isn't the panacea we once supposed, either, so Twitter can't just fall back on that tired Web 2.0 fix-all.

Hence the need for a big brother. Silicon Alley Insider insists that Microsoft should buy Twitter, MyStoreCredit's CEO suggests that Amazon.com should, while Valleywag's noncommittal declaration is that Apple "could" buy Twitter.

Of course it could, but it almost certainly won't, as McCarthy points out.

And yet, we continue to prognosticate about who will buy Twitter when. Twitter has no business, and so it must be rescued by someone that can gift it a business model.

Unfortunately, this is the very reason that would-be buyers remain on the sidelines: perhaps they don't know how to monetize Twitter, either. Twitter has a rich community of users but a poor community of payers. Back in the dot-com days, that seemed like a winning combination. In the recession, it's a recipe for failure.

So, here's my prediction: the minute that Twitter demonstrates an ability to make money, it will become ripe for an acquisition. Guess what? That's the same minute it won't need one, which is why if it does get bought, its valuation will be stratospheric.

Funny how that works.

Follow me on Twitter @mjasay.

[compbry15]

Twitter has access to their API (obviously) in whatever way they want .. above and beyond what normal developers have access to. If they could think of something *substantial* that they can provide in a desktop application over other free applications, they might be able to charge a small premium for using that application.

I don't know if that would be enough to provide lasting income though.

[Geoff_W]

MTV Networks just proposed a new show where users interact with the host via things like Facebook and Twitter (there's a music-video centric site too but its name escapes me) and the show plans to share revenues with those services.

The best potential buyer for the service right now would be someone that could take the huge amount of user data and buzz and apply it to services that either integrate part of Twitter or dole out trends and market observances.

[TPLDrew]

Matt,
Great post. I've been working on a New Media Life Cycle Analysis and I've been focusing a lot on Twitter these days. At the top of the escalation phase for any new media platform there is a call for monetization. You're absolutely right, in my opinion, Twitter must start offering up ideas on how they plan to monetize the platform if they are to evolve into the next phase of the life cycle. At the height of escalation even platforms like Laconi.ca will start to evaluate the monetization model. Whoever wins the monetization battle will win the top rung of the micro-blogging universe.
Anyway, take a look at my Twitter Life Cycle Analysis if you have a chance...
http://blog.tippingpointlabs.com/2009/03/twitter-founder-at-ted-charts-adoption-gestation-milestones/