Capital Market Laboratories suggests Google could be preparing to buy Twitter. Twitter’s market cap is around $9 billion ex-cash. Google integration could make this deal a winner.
Earlier this week, I read an interesting article that suggested Google (NASDAQ:GOOG) (NASDAQ:GOOGL) could be preparing to buy Twitter (NYSE:TWTR). While I have had mixed feelings on a potential deal in the past, suddenly it doesn’t seem so crazy. Google could certainly use Twitter to jump into social, while Twitter can save some face by getting shareholders out at a much higher than current price.
The above-linked article discusses multiple strategic initiatives over the past year between Google and Twitter, focusing on user and advertiser improvements. This will allow Twitter to be more successful on the advertising front, while Google gets its foot in a market projected to have almost 2.5 billion users by 2018. Google needs to look more to the future. Social is the one area where Google can improve (see Google Plus), so why not buy one of the established businesses in the space? It’s probably a better idea than trying to build your own platform from scratch, or trying to make a smaller name work and then fail, like Yahoo (NASDAQ:YHOO) did with Tumblr.
Perhaps the most interesting aspect of a deal would be in regards to Periscope. Twitter CEO Jack Dorsey discussed on the Q4 conference call trying to scale the service, while Google has an established video platform already in YouTube. While Twitter monthly active users have hit a speed bump, Periscope users continue to soar. Given the growth in the live video platform, you could make a case that Periscope itself could be worth in the billions over the next couple of years.