Twitter (TWTR) - Get Twitter, Inc. Report investors are seeing a nice boost in share price today on rumors of a sale. Of the two companies looking to buy the troubled social media platform, Alphabet's (GOOGL) - Get Alphabet Inc. Class A ReportGoogle and Salesforce (CRM) - Get salesforce.com, inc. Report , Alphabet appears to be the one most likely to be able leverage Twitter's data and user base to drive revenue.
Twitter is a great platform for a large number of people for an equally large number of reasons, it's just not very valuable to advertisers, otherwise known as Twitter's main source of revenue. The dynamic of Twitter is quick info, and while its usefulness and impact has been incalculable, its user growth has remained stagnant, as has its ROI for both advertisers and investors.
So what could be driving the interest? While I do think Twitter will continue to have difficulty becoming a viable advertising platform itself, the value of its users could prove to be a door opener for Google. What Google failed to do with its social network Google+ it could begin to do with Twitter.
Google is one of the richest corporations in the world, and how it has amassed that fortune is primarily by selling ads that are related to people's search queries. This is an extremely effective way to reach customers, because when you know exactly what somebody is searching for, you can deliver ads directly related to those queries. For some circumstances, it really is the only way to go.
But in other circumstances there is a different way to target customers and that's using ads based on demographics, in Google's case that's called display ads. With demographics essentially you can reach users who you know have an interest in what you have to offer. When it comes to this type of advertising, Facebook (FB) - Get Meta Platforms Inc. Class A Reportis king. Facebook knows your age, sex, behaviors, what you like, it knows what you like to talk about and even what you've said. On top of all that, Facebook buys information about its users from third parties to know even more about them.
Facebook uses all that information to match its users to the appropriate ads. Marketers supply Facebook with the info to match up to. And yes, it has been very profitable. In my own marketing agency, Facebook has begun to eat up a percentage of ad budgets typically slated for Google.
If Google is still looking for ways to compete with Facebook on display ads, while creating a more effective environment where marketers can choose specific user traits, then buying Twitter could be a real way forward for them.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.