Will Apple Buy Twitter?
Apple surprised the tech world by announcing an update to their still-new Mac operating system, Lion. Mountain Lion, as it’s being called, will feature deep Twitter integration into all corners of the operating system. Whether it’s a photo, link, or app, you’ll be able to share it on Twitter within 2 clicks.
Apple clearly believes sharing is an essential component of modern day computing, and they’re using Twitter to tap into that ecosystem. Facebook would be a less appealing choice because, well, Facebook’s trying to put Apple out of business.
Twitter has become a supplier to Apple, and Apple is making them a lot more powerful. Tim Cook rose to prominence in Apple through adroit supply chain management — not exactly sexy stuff, but it’s extremely important. One of his tricks has been to never let a single supplier get too much power. When suppliers become powerful, they can extract value from you.
So what is Apple to do?
- Switch networks when Twitter becomes too powerful. This is not a viable plan as long as Twitter has no real competition, or its competition comes from Apple’s biggest enemies.
- Build a new network. This is an incredibly hard thing to do, as Google is seeing with Google+ and Apple saw with Ping.
- Strategically invest in Twitter. Apple strategically locks out suppliers for hardware components. Can they apply this to Twitter? Maybe they fund Twitter’s first server farm and, in exchange, prohibit them from integrating with other companies for 5 years?
- But them. The risk is that Twitter is only as valuable as its users, and Apple doesn’t like users that aren’t locked in to their platforms. However, by owning the company, Apple could extract additional value and build them into an even larger presence.
I think Option 3 is most likely: Apple will figure out how to extract value from Twitter while allowing them to continue innovating under their own steam. Reasons:
- Maintain Twitter’s talent: the people who are building Twitter love Twitter. They don’t want to work for Apple. They’re hungry and they’re making it happen. The worst thing Apple could do would be to satiate that hunger. After all, Apple needs a successful social partner who’s not Facebook or Google.
- Enable Twitter’s growth: this works in tandem with the point above. If Apple enables Twitter’s team to rapidly innovate and scale, both companies win.
- Twitter is the people’s megaphone, used for everything from political uprisings to news breaks to sandwich reports. The appearance of integrity might be lost if it’s folded into the largest company on earth.
- Buying is forever. 5 years ago, Twitter basically didn’t exist. In 5 years, who knows what will be used. Careful contracts can lock Twitter’s value in to Apple for the foreseeable future without having to buy the proverbial cow.
- Apple is careful with their money, and Twitter is a horrible business. It’s a great service, but a horrible business. Their users have no switching costs, new entrants constantly spring out of nowhere, they’re relying on a revenue stream that is extremely difficult to make consistent (advertising), top talent is always being poached, and they’re in fierce competition with existing services. Yuck. Better to drink the milk than own the smelly cow.
What do you think?