Why we talk about a Twitter acquisition

The microblogging service is discussed as an acquisition candidate because it has yet to prove it can make money; once it does, it won't need to be bought anymore.

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.

About the author

    Matt Asay is chief operating officer at Canonical, the company behind the Ubuntu Linux operating system. Prior to Canonical, Matt was general manager of the Americas division and vice president of business development at Alfresco, an open-source applications company. Matt brings a decade of in-the-trenches open-source business and legal experience to The Open Road, with an emphasis on emerging open-source business strategies and opportunities. He is a member of the CNET Blog Network and is not an employee of CNET. You can follow Matt on Twitter @mjasay.

     

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