Apple,
which has stumbled in its efforts to get into social media, has talked with Twitter
in recent months about making a strategic investment in it, according to people
briefed on the matter.
While Apple has been hugely
successful in selling phones and tablets, it has little traction in social
networking, which has become a major engine of activity on the Web and on
mobile devices. Social media are increasingly influencing how people spend
their time and money — an important consideration for Apple, which also sells
applications, games, music and movies.
Apple has considered an investment
in the hundreds of millions of dollars, one that could value Twitter at more
than $10 billion, up from an $8.4 billion valuation last year, these people
said. They declined to be named because the discussions were private.
There is no guarantee that the two
companies, which are not in negotiations at the moment, will come to an
agreement. But the earlier talks are a sign that they may form a stronger
partnership amid intensifying competition from the likes of Google and Facebook.
Apple has not made many friends in
social media. Its relationship with Facebook, for example, has been strained
since a deal to build Facebook features into Ping, Apple’s music-centric social
network, fell apart. Facebook is also aligned with Microsoft, which owns a
small stake in it. And Google, an Apple rival in the phone market, has been
pushing its own social network, Google Plus.
“Apple doesn’t have to own a social
network,” Timothy D. Cook, Apple’s chief executive, said at a recent technology
conference. “But does Apple need to be social? Yes.”
Twitter and Apple have already been
working together. Recently, Apple has tightly sewn Twitter features into its
software for phones, tablets and computers, while, behind the scenes, Twitter
has put more resources into managing its relationship with Apple.
Though an investment in Twitter
would not be a big financial move for Apple by any stretch — it has $117
billion in liquid investments, and it quietly agreed to buy
a mobile security company for $356 million on Friday — it would be one of Mr.
Cook’s most important strategic decisions as chief executive.
And it would be
an uncommon arrangement for Apple, which tends to buy small start-ups that are
then absorbed into the company.
But such a deal would give Apple
more access to Twitter’s deep understanding of the social Web, and pave the way
for closer Twitter integration into Apple’s products.
Twitter has grown quickly, amassing
more than 140 million monthly active users who generate a vast stream of short
messages about their lives, the news and everything else.
An Apple investment
would give it the glow of a close relationship with a technology icon, and
would instantly bolster its valuation, which, like that of other start-ups, has
languished in the wake of Facebook’s lackluster market debut. In fact, word of
the talks comes at a time when some are asking whether expectations for the
potential of social media companies have gotten out of hand, and shares of
Facebook, Zynga and other companies have wilted.
But Twitter does not need Apple’s
cash. Earlier this year, Dick Costolo, Twitter’s chief executive, said the
company had “truckloads of money in the bank.”
The truckloads, according to people
familiar with the matter, add up to more than $600 million in cash on hand.
This comes from the $1 billion in financing it has raised over the years and,
more recently, from a healthy flow of advertising revenue.
Regardless, Twitter is widely
expected to pursue a public offering within the next couple of years, whether
or not it agrees to deals with investors like Apple.
Apple and Twitter are logical
partners in some ways. Unlike Facebook or Google, Twitter has no plans to
compete with Apple in the phone business or elsewhere. And as Apple has found,
social is just not in its DNA.
“Those guys are a great partner,”
Mr. Costolo said of Apple in a recent interview. “We think of them as a company
that our company looks up to.” Mr. Costolo would not discuss any potential
investments or anything else related to the company’s relationship with Apple.
Spokesmen for both Apple and Twitter
said on Friday that their companies did not comment on rumors.
If an investment were to happen,
Twitter’s chief financial officer, Ali Rowghani, would be instrumental in
cementing the deal. Mr. Rowghani joined Twitter in early 2010 after nine years
at Pixar Animation Studios, where he worked directly with Steven P. Jobs,
Apple’s co-founder.
Facebook, the world’s largest social
network, is said to be working on developing its own phone or core software for
phones. Similarly, Google acquired Motorola Mobility last year and is now in
the business of building phones.
The jumbled landscape reflects the
rising significance of mobile, as more consumers neglect their desktops in
favor of computing that fits in their pockets. Eager to win on such a critical
battleground, technology giants are rushing to control both hardware and
software on mobile devices.
The turf wars have fortified
alliances and pushed companies to choose sides. Apple’s dealings with Twitter,
for instance, began after its relationship with Facebook soured. In 2010, the
company was eager to integrate its Ping service with Facebook, but discussions
broke down. Mr. Jobs, the Apple chief executive who died last year, told the
technology news site AllThingsD that Facebook had demanded “onerous terms that
we could not agree to.”
Apple, which had spent months
preparing to hook Facebook into iOS, its mobile operating system, swiftly
reworked it for Twitter.
One former Twitter employee, who described Twitter as
the “lucky mistress” in this chain of events, said the partnership was
essentially “handed to Twitter on a silver platter.” Ping, in the end, never
caught on with users.
For Twitter, the union has proved
fruitful. The mobile integration, introduced in late 2011, made it easy for iPhone
and iPad
users to sling photos, maps and other media directly to Twitter. So far they
have generated some 10 billion tweets. And, in recent months, Apple has also
incorporated Twitter features into its operating system for computers as well
as its advertising service.
The relationship with Apple is so
prized at Twitter that the company assigned a vice president, Kevin Thau, to
work with Apple full time, according to an Apple employee who asked not to be
named.
Apple’s relationship with Facebook
has started to thaw. Last month, the company said it would add Facebook
features to the next version of its mobile operating system. Still, the two
companies are wary of each other. Facebook, which recently began its own “App
Center” and is intent on bulking up its mobile revenue, is likely to continue
to bump up against Apple.
Analysts are concerned that Apple
may fall behind in mobile software because of increasing competition and a lack
of social features. And as Apple has shown, software and content can make or
break hardware sales.“Content was a key pillar in the
success of the iPhone,” said Al Hilwa, an analyst at IDC. He noted that
consumer loyalty to the iTunes library, which many used to store their music
collections, helped lift early sales of the phone. “Down the road, social
engagement may dictate how consumers spend,” Mr. Hilwa said.
Courtesy: NYTimes.com
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