Can Google Make Any Money with Twitter?

Google may acquire Twitter, according to reports circulating online, but how would it benefit from such an acquisition?

On TechCrunch, Michael Arrington wrote that "two separate people close to the negotiations" had told him that Google was jockeying to acquire the microblogging site, which lets users post "tweets" of up to 140 characters.

Twitter previously declined a buyout by Facebook in 2008. No valuation has been publicly announced for a potential Google deal.

This would be Twitter co-founder Biz Stone’s second deal with Google; he was part of the team behind Blogger, which the search-engine giant bought in February 2003. 

According to analysts, Twitter offers potential real value to any company seeking to acquire it.

"Twitter's value is in its content, growing by 6 million tweets per day," Jeffrey Mann, an analyst at Gartner, said in an e-mail. "Twitter is attractive because it has built a service that attracts this much volume, creating a constantly growing, twitching, seething real-time source of comments, news and opinions.

"The culture and ambitions of Twitter and Google match," Mann added. "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."

Twitter has been taking steps to make its search feature more robust, starting with the March 6 transfer of its search bar from search.twitter.com onto its main site. A "Trends" menu, where users could see the most talked-about subjects among Twitter users, was integrated into the search function at the time.

At the time, the thinking was that such steps would allow Twitter to seize a larger share of online revenue dollars and thus offer more powerful competition to Google. However, if Google acquires the company, then Twitter’s newfound strengths only contribute to Google’s already substantial assets—and eliminate a potential source of future competition.

"I think Google is starting to see the beginning of a threat to its dominance of search coming from the microbloggers." John Byrne, an analyst at TBRI, said in an e-mail. "Twitter has its own search engine, which is great for getting up-to-the-minute tweets on any topic, and Google does not have a significant presence in microblogging as part of its search index. If people start using Twitter to search, that would come at the expense of Google."

When it comes to a potential Google-Twitter deal, Byrne said, “What I would expect is to see two affiliations: a deal in which Twitter’s search results are included in Google’s search results, and a deal in which Google starts posting search-based ads on Twitter’s search site.

"The first would allow Google to improve its search results significantly and expand Twitter’s reach significantly," he added. "Both affiliations would allow Twitter to see significant revenue-sharing deals with Google that would, for the first time, allow it to monetize the significant momentum it has achieved in microblogging."

Twitter had already been exploring alternate ways to aggressively monetize itself, starting with the March 23 launch of ExecTweets, a site sponsored by Microsoft that clustered the microblogging missives of some of the nation’s most prominent executives. In addition, it announced business- and enterprise-centric plans to launch paid commercial accounts sometime in 2009.  

Should a Twitter acquisition take place, any such revenue-generating features will likely contribute to Google’s bottom line, as well. 

A Google-Twitter acquisition would mark the second major IT deal in this period; IBM and Sun Microsystems are reportedly finishing negotiations for a mega-buyout, with IBM acquiring Sun for as much as $6.5 billion in cash. The deal would allow IBM to position itself as the 800-pound gorilla with regard to open-source Linux and Java software for Web application development, data storage, government systems and telecommunications.