New Delhi: Twitter shares rose 4.8% on the New York Stock Exchange (NYSE) on Tuesday as rumours resurfaced that Google Inc. and Yahoo Inc. are interested in buying the social networking company.

According to a report in Mashable, Twitter’s shares spiked “amid gossip in the investment community that the company had hired advisors—reportedly including Goldman Sachs—to deal with takeover bids."

The report also added, “The stock was hovering at just shy of $53 per share as of publication, up more than 45% for the year-to-date and inching close to a 52-week high for the company."

Twitter’s current market capitalization stands at $33 billion. But that amount should not deter Google, given that the Mountain View-based Internet corporation reportedly has more than $60 billion in cash and short-term investments.

Google’s potential acquisition of Twitter could also mean acquiring a type of service they have struggled with recently, given the fall of social networking products such as Google Buzz, Google Wave, Google Plus and the death of Orkut.

Google has long been seen interested in Twitter with rumours gathering steam every now and then, most recently in January this year.

In 2011, there were reports about Twitter turning down a $10 billion offer from Google. However, Twitter CEO Dick Costolo shot down these reports, calling them “rumours". Reports also suggested that executives from both companies held talks that year.

Reports in the past had also claimed that Microsoft was considering a buyout of Twitter, though they never made an offer to further their interest. In the fall of 2008, Twitter turned down a $500 million buyout offer from Facebook, too, mostly in stock.

What’s in it for Google?

For a start, it gives Google access to Twitter’s vast user base (and therefore, data), which currently stands at 288 million. Google, in its bid to consolidate its position in the ad-share market, could turn to Twitter users, their connections and preferences (or interests), helping Google to target ads effectively. Twitter, thus, becomes an excellent source of data for Google, with the search giant making most of its money through analytics for advertising these days.

Secondly, since the arrival of Facebook, Google has struggled in the social networking space, with its offerings over the years — Google Wave, Google Buzz and Google Plus — not attracting the amount of users as other networks, including Twitter do.

Thirdly, and rather importantly, the looming threat of Facebook as the internet’s dashboard makes Twitter a worthy acquisition. Both Facebook and Google are competing for a share of the mobile advertising market, and indeed, the ever-growing user base. Google currently leads the mobile ad-share market with nearly 36%, while Facebook is second with less than half of the share at 16.68%. In a span of three years, Facebook’s revenue went from zero to $7 billion. The two companies have different approaches towards mobile advertising. While Facebook relies on its news feed for advertising (in the absence of search), largely through data mining, which reflect the user’s habits and preferences, Google’s primary source of ad revenue is mobile search, the platform it has come to dominate over the years.

What’s in it for Twitter?

From Twitter’s perspective, the acquisition (if it ever happens) might come in at a time, when its growth has not just plateaued, but shown signs of slowing down. Between the third and fourth quarters of 2014, Twitter’s user growth recorded an all-time low of 1.4%. It was also the first time Twitter’s user growth fell below that of Facebook, which posted a 3% growth around the same time.

The lack of excitement around the social networking site is also reflected in some of the projections about the mobile ad-share market, where Yahoo is set to topple Twitter as the No. 3 in 2015 (projected shares: Twitter — 3.69%, Yahoo — 3.72%).

Ever since its initial public offer (IPO) in November 2013, Twitter has attracted concerns from Wall Street, especially about its lack of user engagement, or worse, non-engagement. “There’s a large amount of non-engagement happening, and a smaller percentage of the user base engaging," analyst Brian Blau of Gartner was quoted as saying in an International Business Times (IBT) report.

The slowing of Twitter’s growth has also coincided with the rise of other social products like Instagram (which was purchased by Facebook in 2012 for $1bn) and Snapchat, the photo messaging app. Instagram, which boasted of 30 million users when it was acquired by Facebook, has grown to more than 300 million active users (as of December 2014), thus surpassing Twitter. While Snapchat may not have numbers yet, with its user base at 100 million users (and growing), it is among the fastest growing social networks, with constant interest from investors, with a recent round of funding, led by Alibaba, propeling it into the $15 billion league, third only to Xiaomi and Uber. Twitter, with its declining user growth, might have a lot to worry.

In February this year, Twitter announced a deal with Google, where it gave Google access to its firehose of tweets, thus making them more searchable. Google had access to Twitter’s data firehose till 2011, when tweets were indexed in search results. However, with Google launching its social networking site Google Plus, the searches only included profiles of Twitter users. The search deal for Twitter means an opportunity to monetise any user activity and also, lure new users to non-users.

Should a takeover happen, Twitter could benefit from Google’s monetization practices, with a vast trove of search and user data, backed by its high-end monetising practices (ad-tech).

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