For sale: Social network, hardly used

For sale: Social network, hardly used

Twitter's board appears to have bowed to the inevitable and is now looking for a buyer for the social media company.

But who might buy it and how much are they willing to pay?

The share price spiked 21 percent after CNBC reported that Google and Salesforce are both potential buyers.

Friday's closing price of US$22 a share would give Twitter a valuation of US$16 billion (NZ$22 billion).

A buyer would presumably have to pay a premium - perhaps US$26 a share, which is the price Twitter traded for when it decided to list on the share market.

But is it worth that much?

Potential buyers might want Twitter for its user base of 313 million people. It sounds impressive, but Facebook has around 1.65 billion users and Instagram has about 500 million monthly users.

Snapchat also looks like it has overtaken Twitter. It now has around 150 million daily users. Twitter does not reveal its daily user numbers, but analysts estimate the figure is around 140 million.

The user numbers would not be such a big problem for Twitter if they were growing rapidly. But they are stuck at around 310 million.

A lack of growth is a big problem when you are supposed to be a growth company. The revenue that Twitter earns from those users has not been enough for the company to make a profit.

But other companies might believe they can unlock the profits that have so far eluded chief executive Jack Dorsey and his team.

Google has been unsuccessful in its own attempts to develop a social media platform. Buying Twitter would give it instant access to a sizeable user base. Some analysts say this is a reason why someone like Apple might be interested as well.

But it's not just the earnings that Twitter generates from users that could appeal to potential buyers. It is also the data that is generated by Twitter - that is why Salesforce is reportedly interested.

Salesforce is a global cloud computing company that provides business software on a subscription basis. It tried unsuccessfully to buy LinkedIn this year, losing out to Microsoft.

Salesforce's 'chief digital evangelist' Vala Afshar tweeted at the weekend some reasons why people would be interested in buying Twitter:

He then tweeted that this was his personal opinion and he was not speaking on behalf of Salesforce. The company has not officially said anything.

Other potential buyers include Facebook, Orcale, Microsoft, telco Verizon and media companies like Disney (owner of ESPN and ABC).

Facebook seems unlikely because most of Twitter's users are presumably already on Facebook.

Twitter has been experimenting with livestreaming of sports events. That could appeal to a media company like Disney or a telco like Verizon.

Ultimately it wlil come down to price. Some analysts believe that a US$22 a share the price is already too high. The Twitter board would presumably also want a premium.

Investors might be relieved to get US$26, considering that from a high of $74 in 2013 Twitter's share price fell to as low as $14 in May.

But the pressure is on the Twitter board. The share price could quickly head south when the initial excitement about a takeover wears off.

Analysts say Twitter will want to get a deal done before the next earnings report comes out. That is because if the user numbers are in decline it will well and truly dent Twitter's image as a growth company.

Newshub.