Is Microsoft Buying Twitter?

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Comments made by Microsoft (Nasdaq: MSFT  ) CEO Steve Ballmer yesterday have the blogosphere riled up with Twitter buyout speculation.

Ballmer was asked about the potential of a Twitter acquisition during the Search Marketing Expo West conference.

He began with the politically correct response. He alluded to its search partnership with Twitter, even if the same can be said on behalf of other Twitter search partners Google (Nasdaq: GOOG  ) and Yahoo! (Nasdaq: YHOO  ) .

Then he let out this meaty morsel.

"Whether we need to own the company or not I think is far less clear," Ballmer said.

In other words, he's certainly leaving the door open for it to happen -- once things clear up.

Ballmer also emphasized that Twitter and Facebook want to be independent companies. I don't know about you, but I'm guessing that you can't tell that someone wants to be a swinging single until you hit on them first. Does Ballmer assume that Twitter isn't for sale because his company has inquired about swallowing it whole?

Buying Twitter now probably makes a lot more sense than buying it later, after it figures out how to monetize its traffic. Microsoft will certainly have to pay up the longer it waits if Twitter's popularity continues ascending.

Sure, it may pay to wait. Internet users are fickle, and social media sites come and go. United Online's (Nasdaq: UNTD  ) and News Corp.'s (NYSE: NWS  ) MySpace could have been what Facebook is today, but blew it along the way. As relevant as Twitter feels today, there's always the threat of a better mousetrap springing elsewhere.

The last thing that Microsoft needs is to overpay for a Web 2.0 phenom that's peaking. However, that may also be what kept Yahoo! from raising the ante when it seemingly could have acquired Facebook a few years ago. Life would have been materially different for Yahoo! if it had the sticky traffic magnet known as Facebook in its back pocket. Maybe it would have been Microsoft outsourcing its search through Yahoo! and not the other way around.

I don't think Twitter will ever be as valuable as Microsoft, but it's a property that Microsoft, Google, and Yahoo! -- and even AOL (NYSE: AOL  ) and IAC (Nasdaq: IACI  ) -- would love to own.

If it can happen, Ballmer, make it happen before everyone else hears the dinner bell.

Should Microsoft buy Twitter? Share your thoughts in the comments box below.

Microsoft is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers recommendation. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletter services, free for 30 days.

Longtime Fool contributor Rick Munarriz remembers when Web 2.0 was an afterthought. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.

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  • Report this Comment On March 04, 2010, at 4:53 AM, alimaamoser wrote:

    I don't understand why some companies feel the need to buy out other companies. For example, lately we've been hearing about certain companies like Facebook, Microsoft, etc. wanting to buy out Twitter. Might be old news, I haven't really been keeping up. Anyway, why do these companies have to buy out Twitter? Why can't they just create a similar service of their own? Would that be copyright infringement? Do they want to buy out the company so they can get more money from the bought out company's users? Please help explain.

  • Report this Comment On March 04, 2010, at 2:11 PM, dargus wrote:

    I don't understand why anyone wants to buy Twitter. Can someone explain HOW to monetize it? If ads come along with tweets, I'd expect usage to drop. If you ask people to pay to tweet, usage drops. I know Twitter is a social phenomenon right now, but am I the only person who finds it monstrously stupid? I can think of some good uses, getting out small bits of information about events, but there are a million other ways to do that which appear less childish. It seems to fit the Microsoft profile to me. When they wanted to buy Yahoo! outright, the only reason I could see was user traffic, but buying a company doesn't mean the users will stick around.

    Disclosure, I've never used Twitter, and I think I'm turning into a bitter old man since I just hit 30.

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