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Twitter (NASDAQ: TWTR) finally got a permanent CEO earlier this month.
But how does that factor into the potential buyout by Google (NASDAQ: GOOGL)? Earlier this year, I noted that with Google’s failure in social media and the gradual shutdown of Google+, it could be looking to buy its way into the social media space.
A buyout of Twitter would only put a minor dent into Google’s $68 billion cash hoard.
But the new Twitter CEO, Jack Dorsey, throws a wrench into the Google buyout speculation.
Dorsey, a Twitter co-founder who was fired from the company in 2008 and had been serving as its interim CEO since June, is now running two companies: Twitter and the IPO-ready Square Inc.
The worry is that he’ll be splitting his focus and won’t be any better than his predecessor. Dorsey replaces Dick Costolo, who was brought into the fold in 2010 to help take the company public. He ultimately failed to figure out how to monetize the Twitter product.
A More Certain Future
On one hand, the new CEO move ends a lot of uncertainty for Twitter, which had been looking for a chief executive for three months. And now Dorsey will have a chance to bring a fresh perspective to the company for generating user growth and growing monetization.
It hasn’t taken Dorsey long to get to work either. Last week, he started making the hard decisions to turn Twitter around, starting with company-wide layoffs. Twitter has more than 4,000 employees, a number that’s doubled in the last two years. The focus going forward will be a more efficient and leaner organization.
The Twitter platform is complementary to media and traditional content, with a large audience that can create buzz around sporting events, award shows and political events. Discussing these events in real time has proven to be an impressive business for growing its user base.
Growth-wise, Twitter still has a few growth opportunities, including Periscope. Twitter bought the video streaming app to tap into the fast-growing live streaming market.
Leaner and Meaner
With Dorsey at the helm, look for Twitter to increase product launches – all in an effort to figure out how to attract more advertising dollars by accelerating user growth and increasing engagement.
Just over the last couple weeks, Twitter has announced new products, including the curation tool Moments. It also plans to monetize video with its Amplify media-sharing service. If these don’t prove successful, look for Twitter to cut its losses relatively quickly and move on.
As a vote of confidence, Saudi Prince Alwaleed bin Talal doubled his stake in Twitter and now owns over 5% of the company. The hope is that this will generate some support and stability among institutional investors.
Pleasing Wall Street won’t be easy, however. The path to monetization is taking longer than expected and investors have now pushed the stock down 40% for the last six months. Twitter shares are down 58% from their all-time highs in 2014. The stock is now trading at just around 6 times next year’s sales estimates. That’s below Google and less than half where Facebook (NASDAQ: FB) trades.
With the Google buyout looking less likely, Dorsey’s influence could be just what Twitter needs. It has a huge user base and strong Internet brand that just needs some focused guidance.
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