CRM Salesforce Inc

Software maker considers a takeover of social media firm as growth efforts sputter

By Dana Mattioli and Yoree Koh 

Twitter Inc. may be contemplating a future in the hands of an acquirer after a yearslong effort to sharpen its focus and ignite user growth has fallen short.

Salesforce.com Inc. is considering a takeover of the social media company, according to people familiar with the matter. The exploration is in early stages, one of the people said, and might not lead to a deal.

Shares of Twitter rose 21% to $22.62 on Friday after CNBC reported talks of a possible sale. Before Friday, the stock had fallen 30% over the past year and its market value was about $13 billion. Its all-time high of $40.7 billion came in December 2013.

Salesforce Chief Executive Marc Benioff has been a voracious acquirer, and the company has indicated an interest in challenging its business-software competitors by devouring startups in such areas as e-commerce and artificial intelligence.

The sales talks shift the conversation around Twitter from constant business turmoil to the strategic and financial value it could bring to any number of Silicon Valley giants.

Twitter is approaching the three-year anniversary of its flashy IPO, when its stock shot up 73% as investors crowned the company a social media star rivaling Alphabet Inc.'s Google and Facebook Inc. for advertising dollars. Twitter had become a household name, building a powerful communication tool that gives voice to ordinary citizens and celebrities alike.

Since that debut, a series of management upheavals, product delays and muddled business strategies have complicated Twitter's effort to capture the world's mobile users and wring revenue out of them.

Last year, Twitter brought back Jack Dorsey as its chief executive after some investors lost confidence in former CEO Dick Costolo's ability to spark growth in the business. Mr. Dorsey's return was hailed by some employees and investors who believed Twitter needed its founding architect to right the company.

But even the self-assured Mr. Dorsey, who splits his time as CEO of payments company Square Inc., has in recent months grown increasingly stressed about the difficulty of fixing Twitter amid a march of negative press reports, according to people close to him.

Mr. Dorsey has sought to reinvigorate Twitter's ad business around video and revive user growth by making the short-messaging service he invented easier to use and by getting rid of rules that some find confusing.

Those efforts haven't translated into meaningful user or revenue growth. Twitter's second-quarter revenue rose 20% to $602 million, its smallest gain and eighth-straight period of declining growth. Total monthly users grew just 1% to 313 million.

Meanwhile, other social and messaging apps such as Facebook, Instagram and Snapchat Inc. have gained favor with advertisers and wooed smartphone users at a faster clip. Twitter's share of global digital-ad spending stands at just 1.2%, according to eMarketer.

Twitter's struggles, alongside a deal-friendly climate in Silicon Valley, have raised questions around the firm's future as an independent public company.

Twitter's audience is still sizable for most companies interested in expanding their social media offerings, especially as people spend more of their time on smartphones.

Public figures, from Kim Kardashian to Pope Francis, have ardent followings in the millions and outsize cultural influence on Twitter, as seen during the presidential election season each time Donald Trump sends a tweet.

Twitter also has a small but promising data-licensing business that lets companies mine the billions of tweets flowing through the service each day for information. That group's revenue totaled $67 million in the second quarter, up 35% from a year ago.

Many big brands like Anheuser-Busch InBev NV ADR and Ford Motor Co. are still eager to advertise on Twitter, especially now that the company is creating ways for people to watch live events free. Last week, Twitter introduced its first live stream of a National Football League game, and on Monday it plans to broadcast Bloomberg TV's feed of the presidential debate. Executives hope the push into live-streaming will attract the more premium ad dollars that come with video ads.

"I think [a Twitter acquisition] would be a way for a media or technology company to have immediate access to a sizable platform," said Nomura analyst Anthony diClemente. "That's a big means of distribution of media and social content and in some ways the strategic value of Twitter is in the eyes of the beholder."

Twitter would in some ways be an odd fit for Salesforce, which is focused on providing software services to businesses.

Mr. Benioff has signaled more big deals are coming and expressed his frustration after losing out to Microsoft Corp. in the acquisition of LinkedIn Corp. On Friday, Salesforce shares fell 5.6% to $70.39.

Like LinkedIn, Twitter could bring Salesforce reams of data to create recommendations and insights for its corporate customers. Salesforce already has a partnership with Twitter to feed social media data into Salesforce's analytics systems to give its customers insights on things like how their customers are talking about their products and brands.

That alliance, started in 2012, provides Salesforce access to the full fire hose of public tweets on Twitter, giving Salesforce insight into the value of that information for its products.

--Rachael King contributed to this article.

Write to Dana Mattioli at dana.mattioli@wsj.com and Yoree Koh at yoree.koh@wsj.com

(END) Dow Jones Newswires

September 24, 2016 02:48 ET (06:48 GMT)

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