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A Twitter logo is pictured. The company’s shares fell after Recode reported that Google wasn’t planning a bid.

© Dado Ruvic / Reuters/REUTERS

At least Twitter Inc. still has Donald Trump.

Shares of the 10-year-old social media company – which the polarizing U.S. Republican presidential nominee praised Sunday as "a very effective form of communication" – have dropped 28 per cent since last Wednesday after reports that a slew of potential buyers, including Google parent Alphabet, Apple and Walt Disney, weren't likely to bid. Salesforce, another suitor, is reported to be rethinking after its investors reacted negatively to news of its interest. Twitter stock rebounded slightly on Tuesday, but is down about 65 per cent since April, 2015.

Why would one of the world's most widely-used online properties be such a turnoff to buyers? Let's try to answer it in a series of tweet-sized headings.

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Twitter's user base has stopped growing

Twitter had 313 million monthly active users worldwide at last count, up just nine million in the past 12 months. (Facebook gained 160 million in the same period). In the U.S., Twitter has stalled at about 65 million to 66 million users in the past six quarters. Twitter is still a go-to platform for politicians, celebrities, companies and media to offer updates to the world in 140 characters – but other social media platforms are bigger, growing at a faster pace and more valued by investors.

Revenue has stalled … as has advertiser interest

Twitter's revenue growth rate has been decelerating. Second-quarter revenue was $602-million (U.S.), below estimates.

Advertising revenue (which accounts for almost 90 per cent of the total) per monthly average user grew 15 per cent year over year, less than half of Facebook's 38-per-cent growth rate. Twitter derives less than half the amount of revenue/user as Facebook.

RBC Capital Markets analyst Mark Mahaney surveyed more than 1,100 advertisers recently and found many are cool to spending on Twitter – more said they planned to lower ad spending on the platform rather than increase it. There was roughly an equal split between those who thought their return on investment had improved by advertising on Twitter, and those felt the opposite. Meanwhile, 30 per cent are allocating no budget to Twitter.

"The real issue is there are two very large platforms on the Net already to reach a lot of people and target them – Facebook and Google," Mr. Mahaney said. "Those are must-buys for Internet advertisers." Twitter "has never proven it's a must-buy."

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Meanwhile, Twitter has access to lots of data, but selling that data accounts for just 11 per cent of revenue.

In an era where Big Data is supposed to have value, many wonder how much more Twitter can capture.

#Toobigtobuy and #tooexpensive

With a market capitalization of about $12-billion, the list of potential buyers for Twitter is short to begin with. Several analysts say the stock is already overpriced and not an obvious fit or a must-buy – or a must-block-my-rivals-from-buying – for the world's tech giants. Some large companie, such as Oracle, SAP or Salesforce, could be interested in its data, but owning Twitter could bring execution challenges as it would move them into a new business. Many buyers would see their financials and stock market value eroded by paying such a high price, SunTrust Robinson Humphrey analyst Robert Peck said in a recent note.

Twitter still has startup problems – but it isn't one any more

Twitter's chronic management challenges have continued. Original CEO Jack Dorsey has been back for a year, but he's also running payments company Square Inc. The management ranks have been in flux. Mr. Dorsey's turnaround efforts have not yielded meaningful results. The company's costs are high and it continues to lose money. It has never quite articulated a strategy or had much success defining what it was. "Twitter is like the miracle startup," said Joshua Gans, professor of strategy management with University of Toronto's Rotman School of Management. "Any startup run without a strategy the way Twitter has been run should have failed ages ago."

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When Twitter finds its raison d'être, buyers will have a raison d'acheter

Last week, Mr. Dorsey sent a memo to staff, obtained by Bloomberg, enunciating the vision that Twitter "is what everyone is talking about [literally!] … We're the people's news network." People chose Twitter because it was the fastest to get and share news, he said. "Now let's strive to be first." To that end, Twitter has signed some deals, including a partnership with the National Football League to live broadcast games over Twitter.

Sounds great. Also, it sounds like Twitter remains a work in progress. It has so many things to fix, so many things to get right. No wonder potential bidders would take a pass. Why take on the burden of doing those things? Best to leave Twitter to the job of finding its wings.

The author owns shares of Facebook.

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