(Bloomberg) -- Salesforce.com Inc. and other companies eyeing Twitter Inc. may pay more than $16 billion to get their hands on the social-media company’s valuable data. But they’ll also inherit challenges, including management turmoil, lackluster growth and an unsolved identity crisis.
While it remains a destination for conversation among influential people, Twitter would be tough to digest. Chief Executive Officer and co-founder Jack Dorsey has another CEO job at Square Inc. and may not come along with an acquisition. The company put him in charge last year, after an extensive search that sparked executive departures. More strategic changes could mean more valuable employees leaving. Twitter’s product team has gone through at least five heads in six years.
Then there’s the lack of growth -- the reason the company is said to be considering a sale in the first place. Twitter’s user base has stagnated in the U.S. for six straight quarters. Advertisers aren’t spending as much as expected, mostly because they can’t justify buying more ads if the audience isn’t growing. “Twitter’s value proposition to advertisers could be waning,” RBC Capital Markets analyst Mark Mahaney wrote, after surveying advertisers recently.
The company is also in the midst of an identity makeover that would turn it into more of a media company than a technology player.
Twitter still has great potential -- elections run on streams of tweets, millions still follow stars like Kim Kardashian, and citizens still use the service to protest oppressive regimes around the world. But it hasn’t turned that into a broader audience, even as Facebook Inc., Instagram, Snapchat Inc. and others take on similar roles in society.
The company is trying to change that with a new, content-heavy strategy. It signed a deal with the National Football League to stream live video of Thursday night games alongside tweets about them, and is doing the same with other sports, political events and entertainment. Twitter sees this as way to attract new users, without the confusion of setting up an account and deciding who to follow. Any company that acquires Twitter will take on this strategy, with little evidence that it is reviving user growth.
"The company aspired to be something which it was never able to become -- namely, it wanted to be a ubiquitous utility that everybody used on a daily or more frequent basis," said Brian Wieser, an analyst at Pivotal Research Group. "The problem was that there was an assumption that everybody wanted what it offered -- and that was the mistake that they made."
Twitter hadn’t received official bids as of Friday, and there’s no assurance an acquisition will happen. However, Salesforce has already expressed enough interest that Twitter’s board hired Goldman Sachs and Allen & Co. to solicit other potential buyers, according to people familiar with the situation.
Internally, there are disagreements. Co-Founder and board member Ev Williams is interested in a sale, while Dorsey is not so keen, according to people familiar with the matter. Twitter and Salesforce declined to comment.
Based on Microsoft’s agreement to buy LinkedIn this year, Twitter is worth $16.7 billion, excluding cash, Bloomberg Intelligence estimated. Twitter share gains Friday left the company with a market value of $16 billion.
Salesforce.com would be buying a consumer-facing service with unique challenges -- such as monitoring hate speech and fighting state censorship -- that a corporate software company rarely handles. Despite that, Twitter may be attractive because it has data on the tweets, followers and other connections of influential professionals and corporate marketing departments.
Salesforce bid unsuccessfully for LinkedIn this year to get similar information, and businesses are already using Twitter to sell and provide customer service. In a 2014 , Salesforce encouraged salespeople to "focus on building strong Twitter relationships."
Still, some Salesforce analysts don’t want it to bid. Its shares fell 5.6 percent to a six-month low on Friday when news of its interest first emerged. Owning Twitter would change the focus of Salesforce, which already has a mixed track record with social, some said. The 2012 acquisition of Buddy Media, a social marketing company, was "pretty much a complete failure,” Kirk Materne, an enterprise software analyst at Evercore, wrote in a note to investors.
“Twitter would be an extremely risky deal,” Materne said. Analysts at Stifel wrote an open letter to Salesforce titled "You Don’t Need to Buy the Cow."
It’s unclear where else interest could come from, though people familiar with the situation said several companies have had informal talks. 21st Century Fox Inc., Comcast Corp., Time Warner Inc. and AT&T Inc. don’t want to buy Twitter, according to people familiar with those companies’ strategies.
For Alphabet Inc.’s Google division, Twitter would fill a social-networking hole left gaping when Google Plus, a rival to Facebook, failed. Google aspires to be the main provider of information, and the rise of social media in the form of Twitter and its rivals created a big source of new data that is often out of the reach of its search engine. There are also close ties between Google and Twitter. The former chief business officer of the internet search giant, Omid Kordestani, became executive chairman of Twitter last year.
Still, Google typically buys smaller, younger technology companies that are expanding fast. And Google already has access to a lot of Twitter’s data: The two struck a partnership last year to show tweets in Google search results as soon as they’re posted. A Google spokeswoman declined to comment on whether Google is interested in buying Twitter, or whether it has approached the social media company about an offer.
As long as it stays independent, Twitter will be compared unfavorably to other social media companies. Twitter has 313 million monthly active users. Facebook has more than a billion, and its WhatsApp and Messenger chat apps have also passed that milestone. Snapchat Inc. has more daily users than Twitter now too.
“Twitter has no choice but to explore multiple options,” said Forrester Research analyst Erna Alfred Liousas. “More brainstorming around the platform, more partnerships, and also, actually putting itself up for sale.”
--With assistance from Brian Womack
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