William A. Foster, IV
Enemy of my enemy is my friend. – Proverb
Yahoo recently filed a lawsuit against Facebook to the dismay of pretty much everyone in the tech industry. It reeked of a desperate attempt by Yahoo to take attention off the reality that they have yet to figure out how to remain a relevant company since Google came on the search scene, why it can not seem to figure out its own management issue, and is in the midst of major shareholder revolt. Again.
Then, there is the loveable new but not so new kid on the block Twitter who launched in 2006 and caught fire with well over 100 million users that pump out over 340 million tweets a day. The company produced $140 million in revenue and had a valuation of approximately $8.4 billion toward the end of 2011. However, even with such a strong valuation the business model at Twitter still leaves much to be desired from an investor’s standpoint to believe the company could grow sizable revenues over time. The company has had its own share of musical chairs in management primarily because of its inability to figure out its business model but there is no denying its management has been with the platform and its growth. While things seem settled with co-founder Jack Dorsey taking the helm (again) there is still an air of uncertainty if this company can produce sizable revenue growth expected out of a young company based simply off its ad revenue. I believed then and I believe now that the boat Twitter truly missed was charging its business and non-profit organization users for accounts.
All that leads up to why these two companies need each other. Yahoo is completely absent as it were in the social media space and could use a more visionary management team which I believe Twitter has. Twitter on the other hand needs a stable source of revenue and a way to monetize users toward products it can actually sale with growth. Something Yahoo has with the likes of Yahoo Travel and other products. Offering specials to its users that could easily spread like wildfire given Twitter’s application of the ‘Retweet’ which is a unique feature that neither Facebook or Google has found a way to mimic. This would allow the new company to have a diverse mix of ad and product revenue. Both companies weaknesses would be offset with the others strengths which is exactly what a merger is suppose to create. The company indeed would put Facebook & Google on notice. Finally, the tables would be turned and the move could potentially spark off a much needed consolidation arms race of the tech social media space. Pinterest anyone?
Disclaimer: There is no ownership of any of the companies mentioned in this article by myself, my business, or my family as of this article’s publishing.
Mr. Foster is the Interim Executive Director of HBCU Endowment Foundation, sits on the board of directors at the Center for HBCU Media Advocacy, & President of AK, Inc. A former banker & financial analyst who earned his bachelor’s degree in Economics & Finance from Virginia State University as well his master’s degree in Community Development & Urban Planning from Prairie View A&M University. Publishing research on the agriculture economics of food waste as well as writing articles for other African American media outlets.