By Yoree Koh
Twitter Inc.'s shares plunged 12% on Monday as the odds of a
sale appeared to dim further, shifting attention back to the
social-media company's troublesome pursuit of a strategy to
jump-start user and revenue growth.
The San Francisco company planned to field offers from suitors
last week after Salesforce.com Inc., Walt Disney Co. and Alphabet
Inc.'s Google expressed interest or weighed bids, people familiar
with the matter have said.
But Salesforce is re-evaluating its interest in buying Twitter
after the software company's shares plummeted on news of the
potential offer, according to people familiar with the matter.
Salesforce could still be interested if the price for Twitter came
down, one of the people said.
Google isn't expected to make a bid, another person said last
week. Disney reportedly isn't likely to bid either.
The prospect that Twitter will need to go it alone is weighing
heavily on its stock, which had shot up about 33% through last
Wednesday following news in late September of possible talks.
Since Thursday, investors have sent the shares down about 31% to
$17.17, below where it was at the time of the original news
reports, and wiping about $5 billion from its market
capitalization.
With a market value now of about $12 billion, a buyer could
still step in, especially if Twitter's shares continue to
crater.
For now, Chief Executive Jack Dorsey would face added pressure
to show his new live-video strategy, various product changes and
advertising initiatives are leading to meaningful user and revenue
gains.
Mr. Dorsey sent a companywide memo last week, encouraging
employees that "we can do this!" and thanking them for their hard
work, according to a person familiar with the matter. "I know it
hasn't been easy," he wrote, without mentioning any acquisition
talks. "But we are seeing people want to use our service more every
single day." He said the company is "only limited by our sense of
urgency." Bloomberg News reported on the memo earlier Monday.
In his first 12 months since returning as CEO in July 2015,
Twitter added only 9 million monthly users to give it 313 million,
while Facebook Inc. added about 160 million monthly users in that
time frame. Twitter's quarterly revenue growth shrank to under 20%
from 61% in the quarter before Mr. Dorsey returned.
Mr. Dorsey's next test comes on Oct. 27 when the company reports
third-quarter earnings. A Twitter spokeswoman declined to
comment.
"It's hard not to look at this and view Twitter as being a
somewhat tainted asset that potentially strategic bidders don't
seem to be interested in," said RBC Capital analyst Mark
Mahaney.
Advertisers could become less inclined to seal long-term deals
and it could make it more challenging for Mr. Dorsey to hire talent
when the company could wind up on the chopping block, he said.
Mr. Mahaney downgraded Twitter's stock last month to $14 a share
after a survey of 1,100 advertising professionals by RBC revealed
that a higher percentage of respondents plan to reduce spending on
Twitter than those who plan to increase it.
For advertisers, a potential sale raised "mixed emotions"
because a marriage with tech giants such as Google or Facebook
could have helped advertisers reach a wider audience with the
benefit of Twitter's user data, said Bryan Wiener, executive
chairman at digital marketing agency 360i, whose clients include
Nestlé SA and Time Warner Inc.'s HBO.
Twitter is banking part of its future on live video, the
cornerstone of a broad push into video advertising. Twitter paid
$10 million in April for the rights to live-stream 10 Thursday
night National Football League games in a high-profile deal to lure
a more mainstream audience and command premium advertising
rates.
Twitter offered NFL sponsorship ad packages ranging from $1
million to $8 million for the season. With only a few streamed
games under its belt, it is too soon to deem the strategy a success
or failure.
Last Thursday, an average audience of 236,000 viewers a minute
watched the Arizona Cardinals beat the San Francisco 49ers during
Twitter's third NFL live-stream, according to the NFL. That was
down from the previous two games, and paled in comparison with the
average of 17.5 million people who watched the game on CBS or the
NFL Network.
If Twitter can't turn things around, it may follow a similar
path as Yahoo Inc., the internet portal that never regained its
footing after it was eclipsed by Google and Facebook in the
digital-ad business.
Twitter and Yahoo each command less than 2% of world-wide
digital-ad revenue, according to eMarketer.
Like Twitter, Yahoo has a strong presence in the digital lives
of hundreds of millions of people. But it failed to build a
sustainable moneymaking business as its various CEOs seesawed
between tech, commerce and media strategies.
Yahoo CEO Marissa Mayer's attempts to refresh the company around
video and search didn't generate meaningful revenue growth after
more than three years, compelling activist investor Starboard Value
LP to pressure the company into a sale.
Yahoo in July agreed to sell its core web business to Verizon
Communications Inc. for nearly $5 billion.
Josh Elman, a Twitter shareholder and partner at venture-capital
firm Greylock Partners, said all isn't lost yet. With the
exploration of a potential sale behind it, Twitter could refocus
and restart with the right people.
"I don't think anything dramatically has changed," said Mr.
Elman, who worked as a product manager at Twitter. "They just have
to really figure out if they can build a stronger network."
--Rachael King contributed to this article.
Write to Yoree Koh at yoree.koh@wsj.com
(END) Dow Jones Newswires
October 10, 2016 18:23 ET (22:23 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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