Twitter denies Google buyout rumours

Twitter Inc. co-founder Biz Stone today denied widespread rumors that its acquisition by Google Inc. is imminent.

The rumors erupted late Thursday when tech blog site TechCrunch, citing two anonymous sources, reported that the companies were engaged in “late stage negotiations.” TechCrunch later tempered that report, saying that a third source characterized the discussions as “early stage” and possibly revolving around a search engine collaboration.

Earlier today, The Wall Street Journal‘s All Things Digital tech blog, also quoting anonymous sources, said no acquisition discussions were on the table, but rather talks about collaboration on real-time search and better crawling of Twitter’s content.

While Google declined to comment on the rumor, Twitter co-founder Biz Stone posted a note on the company’s official blog saying the company’s plans are to remain independent. “It should come as no surprise that Twitter engages in discussions with other companies regularly and on a variety of subjects,” he wrote. “Our goal is to build a profitable, independent company and we’re just getting started.”

Stone also encouraged people to apply for jobs at the company, an interesting document to peruse for clues to Twitter’s product plans and business and technology strategies.

Stone had appeared on Stephen Colbert’s Colbert Nation television show on Thursday, and restated Twitter’s intention to remain independent. “We’re recognizing a difference right now between profit and value. Right now, we’re building value,” Stone told Colbert.

That means extending Twitter globally, tapping not only into Web-based users but also into mobile phone networks, as well as adding features and refining the service, Stone said. “When we get to a certain point where we feel we’ve gotten there, we’ll begin experimenting with a revenue model. This isn’t unlike the way Google approached their revenue model.”

The revenue-model testing and experimentation will begin this year, but Twitter will take its time getting it right, Stone added.

While the acquisition rumors were apparently off base, it wouldn’t be surprising to see the companies strike up a formal collaboration or partnership, analysts said. Twitter, a microblogging service used by millions of people to post brief text messages, has emerged as the custodian of a valuable online index of real-time facts, comments, musings and announcements, information that is clearly valuable for Google’s search engine index.

Google routinely collaborates with major Web sites to determine the best way to crawl and index their content for its search engine, so sitting down with Twitter for that purpose would be consistent with its modus operandi.

“Twitter is clearly hot. The phenomenon of real-time search and the ability to capture this stream of ‘tweet’ discussions is an important development in social media and search because people are trying to mine data for information that might otherwise be sought in a search engine,” said Greg Sterling, an analyst at Sterling Market Intelligence. “This whole phenomenon Twitter represents is here to stay and needs to be addressed by search engines.”

However, it’s less clear why Google would want to spend major acquisition money on Twitter at this time, he added. “Twitter exemplifies the category of real-time search, but it’s not a Google killer,” Sterling said. In addition, Google, like most companies, is in cost-cutting mode and Twitter, while wildly popular, hasn’t figured out a way to generate much revenue yet.

“There’s a very interesting parallel between Twitter and YouTube. When Google bought YouTube, they did it because it was extremely popular, got tons of traffic and represented this new trend of video hosting and sharing. [But] Google still hasn’t found a way to effectively monetize YouTube in a big way,” said Allen Weiner, an analyst at Gartner Inc. “Does Google really want to spend another huge amount of money on another extremely popular service that hasn’t figured out a way to make money? I don’t see it happening.”

IDC analyst Karsten Weide said Google would gain “tremendous stickiness and traffic” from Twitter. “Microblogging is becoming an accepted new channel of online communications in addition to e-mail and instant messaging, and it is here to stay.” While the technology will never generate significant revenue, he said, it would, like Web-based e-mail systems, “be a loss leader that one cross-finances in order to have the indirect benefits.”

He also noted that Google could acquire Twitter to keep it out of the hands of competitors like Yahoo Inc. and Microsoft Corp. “I think an acquisition would make sense, and if they can get it for less than $1 billion, the better it is,” Weide said.

Others believe Twitter should actively entertain the option of getting acquired by Google and strike while the iron is hot.

Gartner analyst Jeff Mann added that while “other tie-ins short of an acquisition could make sense … now is the time for Twitter to sell. It is at the top of its hype range now. Monetizing on its own would be a long, hard slog.”

Sterling suggested that Twitter could turn into the next evolution of question-and-answer search engines, especially for users tapping into it from mobile devices. “It becomes a word-of-mouth network that is kind of instantaneous,” he said. Such a use of the technology would complement Twitter’s already successful use as a marketing vehicle, he added.

Sterling theorized that Twitter officials may be hesitant to be acquired by Google because of past experience. He noted that several Twitter staffers, including Stone and co-founder Evan Williams, already went through the experience of working for Google, after the search firm acquired Pyra Labs and its Blogger blog publishing service in 2003. “Blogger was ahead of the curve when Google bought it and then it became the AOL of blogging platforms: an early leader that then lost ground,” Sterling said.

If Google bought Twitter, the Twitter service would see some immediate improvements, Sterling said. However, he added, “You might see Twitter maintain its current leader status for a while, but maybe not see it evolve as dynamically as it would under the stewardship of its founders,” Sterling said.

It can’t be encouraging that Google decided to stop actively developing Jaiku, a Twitter competitor Google acquired in 2007. Instead, Google has decided to port Jaiku to Google App Engine, and later to release the Jaiku engine as an open-source project under the Apache license.

The Jaiku service is maintained by volunteer Google engineers. Google also recently put mobile social-networking service Dodgeball out to pasture.

Other signs that would point against a Twitter acquisition are recent comments made by Google CEO Eric Schmidt, who called Twitter “a poor man’s e-mail” and wondered whether it will remain a stand-alone service or become an e-mail feature. Schmidt has also said recently that he doesn’t foresee Google making major acquisitions in the immediate future.

Sterling did suggest that Stone’s comments that the company wants to remain independent could rile its investors, who have poured $55 million into the company. “Investors may agitate for an acquisition because the idea of an IPO is unlikely if not impossible,” Sterling said.

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Jim Love, Chief Content Officer, IT World Canada

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