Media

As LinkedIn Finds a Buyer, Twitter Goes Hopelessly Hungry

Thinkstock

Twitter Inc. (NASDAQ: TWTR) has not found a buyer, despite a drop in its stock price from $55 in October 2014 to $14 recently. Its weakness as a buyout target worsened as LinkedIn Corp. (NYSE: LNKD) was sold to Microsoft Corp. (NASDAQ: MSFT) for $26 billion, a 50% premium to the closing price the day before the deal was announced. The pessimism about Twitter grew in just one day.

LinkedIn and Twitter have two things in common. Each is known as a social network, under the industry umbrella controlled almost completely by Facebook Inc. (NASDAQ: FB). And LinkedIn’s share price was $275 in February 2015. It dropped to under $100 recently.

Experts would argue that because LinkedIn has a multifaceted business model, which includes a large paying subscriber base, its prospects are better than Twitter’s. LinkedIn also brings in revenue from advertising. However, that is only one of several ways it makes money. Twitter’s model relies almost exclusively on advertising alone.

The Microsoft purchase of LinkedIn has been described as a play to increase the huge software company’s presence in cloud computing. LinkedIn products can be cross-sold with Microsoft Office and other Microsoft services that have as their targets business users. Is the potential success of the model worth the $26 billion purchase price? It is not based on LinkedIn’s $3 billion revenue last year. Microsoft’s revenue was $93 billion in its last fiscal

The lack of a buyer for Twitter raises the quandary that has troubled a number of large social media companies, which include, at least, Zynga Inc. (NASDAQ: ZNGA). Does Wall Street care about these firms at all if they have only one line of revenue that has a difficult future? Are their subscriber bases worth much at all? Twitter has over 300 million.

Twitter has been for sale for a long time now. Not that the management has hung out a “for sale” sign. In light of that, LinkedIn and Microsoft have set a combination that says that size matters in social media. But so does business model. Big tech companies looked at their M&A strategies as the LinkedIn deal hit the news. Did any of them even seriously think about Twitter as a target? There only needs to be one. The next few weeks will tell whether the tech world believes Twitter has any significant “synergy” value at all.

Get Ready To Retire (Sponsored)

Start by taking a quick retirement quiz from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes, or less.

Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.

Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future

Get started right here.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.