Circlejerk: a pejorative slang term referring to a positive feedback loop which occurs when an idea, belief or meme that is already customary within an online community becomes re-iterated and rewarded in a perpetual cycle.

Know Your Meme

It’s a matter of record that microblogging come messaging service Twitter, Inc. isn’t having a good time of late.

Since going public in an initial public offering (IPO) on November 7, 2013 at $26.00 a share, stock in Twitter has been on a roller coaster ride, surging initially 73 percent on its open day of trade to a first-day high of $50.09; it later hit a 52 month peak of $55.99, but the stock is nowhere close to that today, and hasn’t been for a significant period of time.

As of the close of trading August 4, the listed price on the New York Stock Exchange for stocks in TWTR was $29.34, with a market cap of $19.7 billion; a small premium to be sure on its float price, but for those investors and traders who piled into the company with expectations of bigger and better things, there’s no question that Twitter stock has been a gross disappointment.

Enter a new meme that has emerged as Twitter has wallowed at 52 month lows: a circlejerk (see explanation above) that Twitter is now ripe for a takeover, with Google being the leading candidate of most sites to do so.

Putting aside that say a $22-25 billion takeover price for Twitter is excessive (that’s presuming a premium offer on their current market cap), what most pundits seem to ignore is: why would anyone want to buy Twitter to begin with?

Why would anyone want to buy Twitter?

I’d note that I personally love Twitter, rely on it for many things including keeping in touch with friends, sharing stories, having debates, and direct messages when I need to contact people. I love Twitter so much that when my partner of 10 years ran off with another guy five years ago, once I got back on the dating bandwagon, where others today might user Tinder, everyone I dated were people I knew on Twitter; sure, it didn’t always work out great, but it was Twitter, as I moved states, and even countries, that allowed me to meet people and make new friends where I was living at the time, start relationships, get invited to social functions (around 2007-08 Twitter meetups were all the rage). So I do truly love the service, and I would hate nothing more in the world than for it to fail.

That doesn’t mean I can’t step away and look at it as the poorly run, dud investment in a pure business and financial sense.

Having spilled my guts about why I love Twitter, it would be of no surprise that I’ve always believed the general concept to be a great one.

The problem, though, as with way too many Silicon Valley and San Francisco startups, is there was zero thought from the get-go as to how to make money from the service; it was always the utopian, idealistic, lets smoke a bong, build it and they will come model and we’ll sort out the money situation later.

Having realized, sometime before their IPO, but obviously taken more seriously post IPO when their investors are expecting results, in August 2015 Twitter still hasn’t fully worked out the income side of the business.

The reality of the situation is that Twitter struggles to even make a profit, and in its most recent quarter it at least got one figure into positive territory: non-GAAP net income of $49 million but adjusted to GAAP it was still a loss of $137 million.

If you were an optimist you could look at those figures positively vs Q1 2015 where the GAAP adjusted loss came in at $162 million, but what the market is seeing is not a positive trend, as between the lines one fundamental problem Twitter is now having is a serious decrease in growth, with the company reporting only two million new users in Q2.

Sure, they’ve purchased various complementary and supplementary services (in a not dissimilar fashion to Facebook, Inc.) but there’s zero indication whether apps like Vine are doing anything at all to their bottom line.

The Google equation

The lovies in the tech media who like nothing more than a good yarn about a speculative takeover nominated Google as taking an interest in acquiring Twitter, and given a takeover price today is going to be somewhere in the vicinity (as previously mentioned) of $22-25 billion there’s not many companies around that could afford that price, which naturally narrows the pool of possible buyers.

The other argument is that Google needs a serious social play given they’re finally starting to wind down yet another failed social network in the form of Google+.

If anyone would acquire Twitter, Google would, and arguably, as a Twitter user, Google could be possibly a preferred buyer, or as I mentioned in a discussion on Facebook:

It’s hard to see Google running out and buying Twitter just because the price is down, and on the basis it continues to have a gaping hole in its portfolio in terms of success social network, at least successful in terms of user numbers like Twitter is, versus successful in terms of making money.

That said, it does make for a beautiful circlejerk of positive speculation in the tech press around Twitter and Google, and it’s doubtful that speculation will end anytime soon.

It’s not beyond the realms of possibility that Twitter may be acquired by someone, at some stage in the future, and if its share price continues to drop as it has, maybe in 6-12 months it could become a serious takeover target, but it’s unlikely to be Google, and it’s unlikely to be anytime soon.

Although many in the tech journalism space will vehemently disagree with me when I say this, if Twitter eventually gets acquired (and again, there’s no reason why anyone would want to buy it in its current state,) the buyer will more than likely be Facebook, Inc., who has the ad growth, and complimentary services, to build Twitter into a better, and more importantly profitable service.

Image credit: tashmahal/Flickr/CC by 2.0