Renewed chatter that search engine giant Google Inc. (NASDAQ: GOOG) is once again looking at acquiring Twitter Inc. (NYSE: TWTR) pushed shares of the short-form messaging company to an intra-day high on Thursday.
If memory serves, the first time this idea came up was nearly five years ago, before Twitter became a publicly traded company. At least once a year (it seems) the story gets another burst of energy before petering out.
Could it be for real this time? At the end of the third quarter of 2014, Google was collecting about a third of the $140 billion digital advertising market. Meanwhile, Facebook Inc. (NASDAQ: FB) had doubled its share to 8% in the prior two years.
In the mobile advertising sector, Google claimed 44.6% global market share, compared with 20% for Facebook. But Google’s share was down slightly over the prior two years while Facebook’s had more than tripled.
On its own Twitter has been passed by Facebook’s Instagram in number of active users and a new challenger, SnapChat, is attacking Twitter’s user count from below.
Google’s share of the mobile ad market may be shrinking as well, even in its stronghold of mobile search advertising. The culprit is in-app searching that allows users to avoid using a Web browser. Google’s own search app may slow the decline but may be unable stop it.
How can Twitter help Google? Well, at a market cap of around $24 billion, whatever help Twitter could offer to Google is probably too expensive. Twitter’s primary attraction for Google would likely be its 270 million or so active users, and the company’s advertising revenues have grown nicely, up 83% year-over-year in the third quarter of 2014, for example. Still, total revenue of around $450 million a quarter hardly justifies a price tag north of $25 billion, especially when the user numbers appear to be stagnating.
Google had cash, equivalents and short-term investments of more than $50 billion at the end of the third quarter and long-term debt of just $3.2 billion.
Our take? It’s just chatter on a day when everyone’s run out of stuff to say about quantitative easing in Europe.
But Twitter’s shares are up more than 3% on no other news, and traded at $39.12 in a 52-week range of $29.51 to $67.24. Google shares are up 2% as well.