Nicholas Van Zandt – Blog 6
On October 14, Salesforce announced that it was backing out of their bid to buy Twitter in what became a significant blow to the social media company that has seen declining stock and was reported to be desperate for an acquisition. This announcement was not met well with Twitter’s stock price, which experienced a seven percent drop immediately following the news.
Twitter experienced remarkable growth following its founding in 2006 as it successfully positioned itself in the social media space with a unique offering. However, behind the scenes the company experienced significant problems with managerial turmoil and many have criticized the company for having a lack of product innovation.
In addition to Twitter’s share sizable drop in price, their total users count has been declining precipitously year-over-year. As the company’s success is largely determined by their number of users the reasons behind their mutual declines are nearly identical. As eMarketer reports, their declining share of the social media market has largely been attributed to the rise of competing platforms to include Facebook, Snapchat and Instragram.
Since Salesforce walked away from the deal, Twitter’s CEO Jack Dorsey is now back at the drawing board to identify a plan for what to do with a rapidly declining company that nobody wants to buy. In addition to Salesforce, Google, Disney and Microsoft were initially showing interest but ultimately decided such a purchase for them would not be a good fit.
These companies in deciding against the purchase asked the same questions as many of Twitters former shareholders: What is Twitter’s unique value proposition and does it offer an attractive return to advertisers that will monetize the platform. These advertisers were charged a premium but did not see a viable enough ROI as compared to competing platforms like Facebook. As a result Twitter’s share price plunged over 80 percent just a few quarters after its IPO and now Dorsey is left with some very difficult choices as his last best hope of salvaging his company has evaporated with the Salesforce bid departure.
Sources:
Liana Baker and Jim Finkle, “Twitter Charts Solo Path as Salesforce Rules out Takeover,” Reuters, October 14, 2016.
Matthew Ingram, “Here’s Who May Want Twitter Now that Salesforce Says it Doesn’t,” Fortune, October 14, 2016.
Seth Fiegerman, “Twitter Stock Tanks as Salesforce Backs out of Bidding,” CNN Money, October 14, 2016.
“Twitter’s Share of US Social Network Users is Dropping,” eMarketer, August 15, 2016.