Twitter and the Buyer and Seller Network
Although Twitter was at its prime in 2012 with over 100 million users posting 340 million tweets a day, Twitter is currently a struggling company. It has had three consecutive quarters of zero user growth and in February, its market value dropped to less than $10 billion, an all-time low for the company. On Thursday, Twitter’s shares decreased by 20% to a value of $19.87. Consequently, there have been multiple rumors of buyouts and on Wednesday, Reuter reported that the company wanted to wrap up sales negotiation by Oct 27th. However, with its decreasing market value, Apple, Disney, and Google’s parent company, Alphabet, have no interest in acquiring the company. This leaves Salesforce as the sole potential bidder. As stated by James Cakmak, an analyst with Monness, Crespi, Hardt & Co., Salesforce is not a good fit for Twitter because although it will be able to “attract bigger budgets from businesses and better utilize data to enhance customer relationship management tool”, it will not be able to improve the consumer aspect of the product. Thus, it is speculated that Twitter plans to remain independent and work on improving its user engagement until it gets the valuation it desires from potential buyers.
This a reflection of the Buyer and Seller Network because in 2012, Twitter was a very popular social network, so it had a high value and many potential buyers. Therefore, there was a constricted set between Twitter, the seller, and the companies that wanted to acquire Twitter, the potential buyers. However, as number of active users decreased, Twitter’s value dropped, so the number of potential buyers decreased. This is similar to what we learned in the homework: As you increase the price of the item, less people are willing to pay the higher price and as result, this leads to a perfect matching. However, now as Twitter’s value drops, less companies are willing to spend money on a lower value product, leading to a perfect matching between Salesforce and Twitter.
Twitter’s dilemma also relates to powers in networks. In 2012, as a popular social media, Twitter had many potential buyers. It had introduced the concept of followers and hashtag, so it a had unique niche in the social media market. You couldn’t find a product like Twitter anywhere else with its unique features, huge user base, and heavy user engagement, so its potential buyers, the companies who wanted to acquire Twitter, were weaker because they had no other outside options. Twitter was very powerful in comparison because it had many outside options. As a result, Twitter could charge a high price for acquisition. However, as its user engagement decreased, its value decreased. Further, Snapchat and Facebook’s Instagram rose in popularity. In turn, because Twitter’s potential buyers have more outside options such as Snapchat and Instagram for possible acquisition, Twitter’s power decreased, so it is unable to negotiate a higher price deal. This forces it to remain independent until it is able to improve the value of its product and thus, increase the power of its company in order to obtain a desirable acquisition price.
https://www.cnet.com/news/twitter-sale-october-salesforce-disney-google-apple-chris-sacca/