Why the Facebook-Twitter merger didn't happen

All Things Digital has the skinny on yet another eyebrow-raising tech merger that has failed to come to pass. Rumours that Twitter and Facebook would do a deal have been around for a while, but Kara Swisher has the details.

The big reason why it fell apart? Money, of course:

So why did the deal break down?

Well, as is usually the case, over price–was $500 million worth of Facebook stock actually worth $500 million?–and the typical concerns about integration and costs.

But, more important, it seems, was a feeling among Twitter investors and execs that the start-up should still take a shot at building its revenues–there are none right now–as well as it had done at building its growth.

And the fact that Facebook doesn't have any revenues of its own, means it would be tough for it to take Twitter's model of text message updates:

Lack of revenues was an issue for Facebook, said sources, especially related to fees Twitter pays for delivery of its messages to cell phones.

While the issue has been manageable in the U.S., Twitter cut off its SMS support in some international markets this summer because of too-high costs.

But, if Twitter was offered to Facebook’s 120 million users, Facebook execs estimated that it might have to deal with huge SMS fees–up to $75 million annually.

These problems will not go away until either Twitter or Facebook works out how to turn their impressive growth in terms of users into hard cash. So until that changes, don't expect a merger to happen. But that won't stop more rumours of a deal in the future.

Comments

[Stop Smoking]

Great take on the story! Still don't get though why these guys haven't figured out how to create revenue streams. Shouldn't be that difficult for them, one thinks...

[aljuk]

I did use twitter for a while to update my facebook status, but it was more of a hindrance in the end, and I now use them separately. I don't see the point of these kinds of mergers, I think these services work better individually and, given facebook's poor support for data privacy, they're the last company I'd trust with my information in any merged scenario...