Typical of conventional market trends, any industry survives courtesy of the consolidation curve. After an era of numerous small businesses, growing enterprises buy out competing small players. Further, larger businesses extend their market reach to new areas by buying out specialist startups who offer services in the area of interest. Eventually, the market is marked by fewer and fewer businesses, as small rivals are consolidated across the business landscape to join the dominant brand names. The Information Age is now dominated by such behemoths as Google, Microsoft, Facebook, and to an extent Apple. As would be expected, these giant brands are largely growing by buying out small players serving unique facets of the technology industry.
LinkedIn Pioneered a Trend Likely to Become the Norm
The process of consolidation, and one Twitter is likely to follow soon, changed the fate of LinkedIn in 2016. The fiscal muscle and market dominance of Microsoft helped buyout LinkedIn for US$ 26.2 billion. Soon after, Yahoo ended its pioneering years as an independent business as Verizon came banging on the door with US$ 4.8 billion. What LinkedIn did was set the trend for a takeover of social media platforms by the tech giants. Nonetheless, the process of consolidation had started years earlier. It is only now however, that social media seems to be a patient in the tech industry.
Google has been perhaps the most active tech company that is perfecting the art of domination though strategic consolidation frenzy. From the purchase or NEST worth US$ 3.2 billion, to the buyout of YouTube for a price of US$ 1.65 billion, and buying out Israeli's mapping app, Waze for US$ 1.15 billion, to DoubleClick's takeover for US$ 3.1 billion, Google has been on the overdrive for the last decade. Under Google's consolidation are numerous small players that include Dodgeball's social networking forum (US$ 625 million), Apigee (US$ 625 million), Applied Semantics (US$ 102 million), Android (US$ 50 million), dMarc Broadcasting (US$ 625 million), FeedBurner (US$ 100 million), AdMob (US$ 750 million), Adscape (US$ 23 million) and tens of other small companies. All these small companies were tapping from an internet market that appealed to a tech giant that was once only a search engine platform.
Twitter and Potential Fate
It is evident that Twitter is soon to follow the trend of consolidation exemplified by LinkedIn. Twitter closed 2016 with over 17% drop in share price, at US$ 23 per share. January started with rumors that Twitter had received bids from Google and Salesforce.com by the beginning of 2017. Most market experts predicted that Twitter will be purchased by either Google or Microsoft, with the balancing scale slanting towards Google.
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The rumors triggered market valuation of Twitter as a business venture. The social media platform is characterized by the middle and upper class following, and more so in developed economies. Businesses are often inclined to choose Twitter for social media interaction because of additional security for their data, than is otherwise possible with the mass following common with Facebook.
There has however been a progressive trend of Twitter uptake in developing economies among the working class populations. This attractive trait however, does not belittle the fact that within the US alone, Twitter only holds 5% of a market share, against the domination of Facebook at 42.2%, and YouTube at 23.4% in 2017. Further, the company has registered worsening reduction of share value, with reduced profitability over the last 3 years.
Market Dynamics for Google and Microsoft in the Race for Twitter
Google
In view of the foregoing appraisal, and given that most experts predict a likely buyout of Twitter by Google, it is important to consider why Google's bid is likely to win, or otherwise. In the last 3 years, Google has been on the overdrive of purchasing online advertising and social media companies, including YouTube, Admob, and Doubleclick. Adding Twitter on its shopping bag would therefore not be out of character. More so, even with the foregoing purchases, Google has failed miserably to compete with Facebook for the social media market.
Twitter would therefore be an additional competitive strategy for Google, against the domination of Facebook, for its main income line of online advertising. Given that Twitter's IPO price was US$ 26 per share, which has already reduced US$ 23 currently, the buyout would most probably be at about US$ 19 billion against last years Google's net profit of US$ 78 billion. Twitter only represents 4% of Google's net value. Most likely however, Google will not purchase Twitter because the company represents a market segregation that is confined, while Google's market is globally inclusive. Further, Google is already two thirds near Facebook in the share of social media market, and they would not have purchased the smaller companies is they were interested in Twitter. Instead, Google purchased YouTube in 2016.
Microsoft
If Google is out, the Microsoft would mostly be interested in Twitter. Microsoft ranks high as technology giant but one without mass access to the online consumer space promised by Twitter. Its search engine, Bing, has always been in a desperate race with Google, and Twitter may over the critical step towards that. However, Microsoft is not likely to win a purchase bid for Twitter.
It is only a few months after Microsoft expended US$ 26 billion to purchase LinkedIn. LinkedIn is a pioneer in the social media space, and one with the most successful business-focused brand above even that of Facebook. The business social networking promised by LinkedIn are incomparable to Twitter, and Microsoft is not likely to spend another US$ 19 billion before successfully taking over and optimizing the potential of LinkedIn.
The Case for Salesforce.com
Following from the foregoing market dynamics that will likely place Google and Microsoft out of the race for Twitter, it is understandable why Salesforce.com is likely to be successful in the takeover. Later into 2016, Saleforce.com has officially announced its withdrawal from the bids on Twitter, but recent reports project a likely reversal of that withdrawal. Primarily, Salesforce.com main line of business is as online business software, where Customer Relationship Management (CRM) software predominate its sales volume. Saleforce.com offers the leading CRM solution in the market today. Social media has not recorded any business-focused software infusion, and Twitter holds allegiance in a market segment that is most interested in business productivity (working class).
The only limitation would be that, at a price of US$ 19 billion, purchasing Twitter would represent almost 40% of Salesforce.com market value currently. The question however, is whether purchasing Twitter is likely to be a profitable step. The answer is an astounding yes, and one punctuated with an attractive business opportunity. Even more important, not only has CRM become a critical requirement when building profitability and competitiveness in online business, but also a likely reduction of its cost. The social media outlet like Twitter may give Salesforce.com a chance to advertise to common users how little it may cost to build a CRM software and still build on competitiveness and profitability of their businesses. By so doing, Salesforce.com may grow its core business with new market access, to add onto the profit-tapping potential of Twitter.
In conclusion, therefore, when compared to other tech giants likely to bid for Twitter, most notably Google and Microsoft, Salesforce.com is still likely to win the race. While the former two would only be interested with Twitter as replacement or improvement of previous attempts to the social media market, Salesforce.com is the only competitive venture that has not previously ventured into the social media footprint. Google's superior financial muscle already led towards YouTube last year, and Microsoft's entry into social media already preferred LinkedIn. As such, if Microsoft gained its rise from personal computing software and is now consolidating the consumer market niche of social media, Salesforce.com may be as successful at a US$ 19 billion price, to elevate CRM software into the next phase of global dominance. Indeed, Twitter has built loyalty among high and middle class professionals who are the main market categories of CRM. The reduced cost, increased necessity, and the competitive/profitable genius of CRM is ready for a successful dive into the social media market.