We already know that Twitter raised almost $2B with its IPO. At $26 a share, the stock went on to zoom close to fifty dollars. It basically brought back memories of web 1.0 and pleasant memories of buying a stock at twenty and waking up a millionaire the next day because the stock hit a hundred to a hundred twenty. It brings back so many memories but it also brings back many fears. Be that as it may, another piece of good news that comes out from all these developments is that Twitter has a lot of money to play with. When this happens, Twitter has a lot of money to buy companies.
Why is this a big deal? We all know that Twitter isn’t making any money. In fact, the rate which burns through money is increasing and not decreasing. Normally, this would be a bad news to investors and financial analysts. The bright spot is that with the amount of money that Twitter raised, again that’s close to $2B, Twitter can (if it choose to and if it is smart) acquire its way into a profitable business model. A lot of analysts going through the Twitter business proposition before it went IPO have banged the drum on this, that maybe the way to go is to acquire its way into profitability. Now it has the money to do it.
There are many smaller companies out there, even startups that really have compelling plans at different stages of development. What Twitter needs to do is to look at companies that have successfully monetized either the ad platform that Twitter is using or has an ad platform that would be a natural fit to Twitter’s business and operational models so that it can transform the huge amount of traffic volume and activity on Twitter into cold hard cash.
If I was a member of Twitter’s Board of Directors, I would be pushing really hard to go this direction. Time is running out and the stock market is not dumb. The stock market is running on fumes and these sky high valuations probably will not last. Twitter needs to move and needs to move quickly. If it’s really smart, it should do only all stock acquisitions. I am skeptical if many companies would fall for it but these valuations are still sky-high and there may be some companies that agree to be acquired in exchange of stock. Twitter needs to make a move now.