May 24, 2009

Microsoft Must Buy Twitter (MSFT)

May. 5, 2009 - Nicholas Carlson

 

Microsoft (MSFT) is about to finally consummate a search deal with Yahoo -- and that's great. But if Redmond really wants to carve into's Google search business over the next 10 years, it needs to offer whatever it takes -- $800 million? $1 billion? more? -- to buy Twitter right now.

 

Here are our five main reasons:

 

We believe Twitter is the first startup since Google to have created a new and popular way for people to use the Internet to discover content and research products they want to buy.  It's created a new kind of search.

 

Microsoft obviously hasn't been able to build a competitive search product on its own. The Yahoo deal helps, but it won't grow like Twitter will. Yahoo's sales force will, however, help Microsoft sell against Twitter. Indexing Twitter into Live Search won't do it. Microsoft needs a place people go to search. As soon as Twitter taps this potential in any meaningful way, it will become much more expensive.

 

The good news is that Microsoft might already know how important Twitter is. Kara Swisher says Microsoft's business development team "has been busy formulating a valuation" of Twitter. Doubters will likely offer the following objections:

 

Objection: Twitter is just like AIM or Facebook, full of traffic you can't monetize.

 

The big difference between Twitter and these two very popular services is that Twitter users know their messages are public and permanent. This makes these messages searchable. Facebook, a much larger service, is working on making its service more open and "real-time." But it's not there yet.

 

Objection: OK, Twitter messages are searchable, but nobody actually searches Twitter.

 

Wrong. Twitter search, like Twitter, is growing like crazy. Hitwise tells us U.S. visits to Twitter Search have increased 514% from January to April. Here's what that looks like:


 


Objection: OK, but Twitter searches aren't commercial, so no one can make money selling ads next to them.

 

Ridiculous. One reason people search Twitter so much is that it's a great way to find quick, 140-character reviews of products like restaurants, movies, and gadgets. These are search queries that advertisers are already spending money on. For example, do a quick Google search for the top trending terms on Twitter right now and see what ads come up. Right now we're seeing a History.com ad for "Cinco De Mayo," a 1-800-FLOWERS ad for "Mother's Day," and an ad from Whole Foods "Swine Flu." Either way, (By the way, if we're Twitter or Google, we sell an ad to Corona for the Cinco De Mayo searches -- duh.)

 

Objection: OK, Twitter Search can make money, but $1+ billion is too much.

 

Microsoft is going to have to "overpay" for Twitter because Google -- which knows a search goldmine when it sees it -- will top any reasonable or close to reasonable bid. The good news that even as much as $1.5 billion is pocket change for Microsoft.

 

Photo: aussiegall

 

Source: http://www.businessinsider.com/microsoft-must-buy-twitter-2009-5

Posted via web from Global Business News

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