Microsoft Must Buy Twitter
Microsoft (MSFT) is about to finally consummate a search deal with Yahoo — and that's great. But if Redmond really wants to carve into's Google search business over the next 10 years, it needs to offer whatever it takes — $800 million? $1 billion? more? — to buy Twitter right now.
Context & Ripple Effects
This column is the latest move in a two-year argument about whether Microsoft can buy its way into the consumer web. The arc so far: talks over a minority stake in Facebook in 2007, then the Microsoft-plus-Yahoo discussion over email strategic assets in early 2008, and an Ars Technica opinion last summer insisting Redmond must move fast on its online business.
Silicon Alley Insider now adds a sequencing claim: close the rumored Yahoo search partnership first, then spend up to $1 billion on Twitter as the weapon against Google. The timing is pointed — the same day, Microsoft confirms thousands more layoffs in phase two of its 2009 cuts even as it ships the Windows 7 Release Candidate, so any nine-figure Twitter check would sit beside visible cost discipline elsewhere in the company.
First-order effects
- A purchase at the suggested $800 million–$1 billion range hands Twitter's founders and investors an exit at a valuation far above anything its revenue could justify, while taking the fastest-growing real-time data stream off the market before Google can lock it up.
Second-order effects
- Google and Yahoo are forced to respond — bidding for Twitter themselves or paying for access to its firehose, because whoever lacks the conversational stream looks stale next to an index that includes it.
- The rumored Microsoft-Yahoo search deal changes shape: adding Twitter's data gives the combined challenger a freshness angle against Google rather than just a bigger query share.
Third-order effects
- If the pattern holds from Facebook stake talks through Yahoo assets to Twitter, minority stakes and partnerships prove insufficient and Microsoft keeps paying outright premiums for user-generated data sources — resetting valuations across the whole category of hot social startups.
- Search competition structurally shifts from index size toward ownership of live, conversational content, making platforms that hold exclusive user-generated streams permanent acquisition targets for the large search players.
The trend: Large web companies are shifting from building search technology to buying exclusive access to real-time, user-generated data streams as the new competitive moat.