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Why Facebook Should Buy Twitter

Stocks in this article: TWTR FB YHOO

NEW YORK (TheStreet) -- On Tuesday, TheStreet contributor Richard Saintvilus published an article that nicely sums up some of Twitter's (TWTR) woes:

No one is debating Twitter's popularity. But beyond sending out a tweet, no one has been able to explain the point of doing so. Or for that matter, what happens on the other end ...
Until management figures out ways to turn this utility into a necessity, Twitter will continue to struggle.

The Saint emphasized that management needs to "turn this utility into a necessity" to make it a safe long-term investment. That's an excellent way to put it. As Marissa Mayer is attempting to do with Yahoo! (YHOO) by raising the profile of video and concert streaming, monetization opportunities will come naturally if you're able to differentiate yourself from the pack with a compelling slate of cross-platform, cross-medium information and entertainment consumption options.

TheStreet's Chris Ciaccia pointed out Tuesday that, at these levels Twitter stock might be a better buy than Facebook, particularly for a short-term trade. I won't disagree, but I stand by what I've been saying for over a year -- Facebook Should Buy Twitter. I'm not sure if Facebook's actively thinking about the idea, but the folks with major interests in TWTR ought to be. They should be begging for Facebook to do the same thing it did with Instagram and WhatsApp -- make the purchase and run the platform independently. However, in Twitter's case, it makes all the sense in the world for sales teams to sell them as a package just like programmers do with their suites of cable channels.

At Twitter, they're developing advertising products at way-too-quick a clip for an audience that, in large swaths, is disengaged and shows no signs of engaging. You can blame this on the pressure of being a public company, but that doesn't change the fact that it's not going to work. And herein lies a problem with many of today's technology companies ...

Somebody created something and had no idea what it would turn into. It turned into something cool and now nobody has any idea what to do with it other than follow the Facebook (FB) model. That makes no sense because, relative to Twitter, Facebook has a highly-engaged population visiting its site daily. Often multiple times a day.

Facebook, for all it did wrong, did not put the advertising cart before the user engagement horse. Facebook developed a sticky user base that understands exactly the why and how of the platform before it really went to town exploiting them for ad revenue. That's a bit like what I think Mayer's doing at Yahoo! and the opposite of what Dick Costolo -- 2014's most in over his head CEO -- is doing at Twitter.

There would no regulatory hangups for Facebook buying Twitter. Do you really think the government could block Facebook/Twitter when it hasn't taken a hard-line approach toward the mega deal between Comcast (CMCSA) and Time Warner Cable (TWC)? And it would be easy to bury Twitter's shortcomings and sell it as part of a dynamic Facebook-centric advertising package.

This strategy would not only save and maximize Twitter's potential, it would take Internet-based and mobile advertising to the next, more mature level. At that point, social media would become an even bigger and more competent rival to broadcast/cable television.

--Written by Rocco Pendola in Santa Monica, Calif.

>>Read More:

Facebook on China Road

Why Twitter Has More Upside Than Facebook

Apple's Next Major Acquisition After Beats

Rocco Pendola is a full-time columnist for TheStreet. He lives in Santa Monica. Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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