That question is top of mind among investors as technology executives gather in Sun Valley, Idaho for Allen & Co.'s annual media conference, which will bring together Facebook chief executive Mark Zuckerberg and Twitter (TWTR) interim CEO Jack Dorsey, according to the New York Post.
Facebook (FB), with a market capitalization of $242 billion, has been hunting for smaller tech companies, gobbling up both well-known brands such as WhatsApp as well as smaller tech companies like the speech recognition firm Wit.ai. With recent turmoil at Twitter, which earlier this month parted ways with former CEO Dick Costolo after disappointing financial results, speculation has been on the rise that the social media company could be a target.
"When they stumbled last quarter and had a CEO transition, people thought it made it more vulnerable, and someone could swoop in," said Robert Peck, an analyst with SunTrust Robinson Humphries, who has a "neutral" rating on Twitter's stock and a $40 price target. On top of that, the convergence of tech and media CEOs at Sun Valley boosting talk about an acquisition, he noted.
Still, Peck said he doesn't believe a deal is imminent for Twitter, especially given its current CEO transition. Longer term, however, a bigger tech company might be interested in Twitter, including search giant Google (GOOG). That's because Twitter "is the best real-time search platform, and that isn't lost on them," Peck said.
Whatever happens, it's likely that any acquirer might hold off on showing their hand any time soon, in the hope that Twitter's market value could continue to drop and provide the buyer with a better bargain. The stock has declined one-third since April, following disappointing financial results.
Facebook, for its part, has focused on faster-growing businesses such as WhatsApp, and advanced technologies, such as virtual reality specialist Oculus VR. If Twitter can get its business ramped up again, it might boost its appeal to Facebook or other big tech companies.
Below are five reasons why Twitter might appeal to Facebook:
302 million. That's the number of monthly active users on Twitter. While that's a fraction of the 1.2 billion monthly active users on Facebook, the two social networking businesses attract a slightly different user base. Twitter users tend to be younger than Facebook's crowd, with the biggest slice of its user base coming from the 18-to-24 crowd. By comparison, Facebook's biggest demographic group is age 25-to-34.
Real-time search. Twitter's constant feed has a huge amount of data full of information about what people are doing and thinking right at that moment. That provides the chance to glean useful information as it happens, with Twitter using a combination of computer analytics and people to search for relevance and intent, according to The Verge.
Leveraging advertising. Facebook is a giant when it comes to online advertising, with Twitter falling behind in its efforts to engage users with direct-response ads. Still, Twitter is working on new strategies, such as using video in ads that allow consumers to directly download new mobile apps to their smartphones or tablets. While app-install ads were pioneered by Facebook, leveraging Twitter's 302 million monthly active users could only help.
Where news is king. For learning about the latest news, Twitter is still the king. Facebook is trying to copy the success of Twitter in this realm with its relatively new "Instant Articles" feature, which debuted earlier this year with nine media companies including The New York Times. Still, it's not clear whether Facebook will have the same success as Twitter on this front.
A mobile, international crowd. Facebook started out as a computer app, but it's migrating to mobile, something where Twitter is also strong, with 80 percent of its users on mobile devices. Mobile advertising is growing, making it an attractive place to expand. On top of that, more than three-quarters of Twitter's accounts are outside the U.S.. That's likely enticing for Facebook, given that it's focusing on fast-growing markets outside the U.S., such as India.
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