Why Apple won’t invest in Twitter: It doesn’t have to

Apple reportedly considered making a significant investment in social media giant Twitter more than a year ago, but backed away, probably because it ultimately realized it didn’t need to make such an investment to get its way.

Details of last year’s negotiations over such an investment, a deal that would have valued in the “hundreds of millions of dollars,” were reported last night by the New York Times, and confirmed by the Wall Street Journal.

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The NYT story makes it seem that a major Apple-Twitter equity alliance is potentially still in the offering. However, it concedes four paragraphs into the story that the “two companies are not in negotiations at the moment,” and the WSJ story is more definitive about the lack of momentum in the talks, saying that they happened more than a year ago.

While there may have been good reasons for Apple to have considered such an investment at the time, Apple’s corporate history of sticking to its knitting, and the fact that such an equity investment wouldn’t have necessarily guaranteed it any special access to Twitter’s deep understanding of the social web, make such an equity investment unlikely, in my opinion at least.

Here’s why. Apple’s interest in such an investment in Twitter would have been strategic. At the time of the said negotiations last year, Apple was wringing its hands about how to build traction in social networking, a major force behind online engagement, especially among mobile phone users. Apple’s sales of mobile phones had made it the most valuable company on the planet, but didn’t have a “play” in social — and social was where the future is.

And here, timing is important. Early last year, Apple’s biggest competitor on the mobile phone side, Google, launched its social network Google Plus, and incentivized its entire workforce to make it the company’s most important project. That happened, just as Apple hit a low with Facebook. Apple had worked hard with Facebook to integrate its iTunes social network Ping into Facebook, but Facebook had pulled Apple’s access to its APIs. Apple and Facebook butted heads big time in other areas.

In short, Apple’s negotiations on the Twitter investment last year came at the height of frustration for the company — perhaps even panic. And this is just conjecture on my part, but if you’re in an all-out wrestling match with Facebook over a partnership, wouldn’t you strike up a few conversations with Facebook’s leading alternative in the social space, Twitter? Wouldn’t you look for the best way possible to get close to Twitter, if not just to have a great back-up plan? Well, since Twitter was, and still is private, and was still working on ways to monetize, an investment would have been one way to get very close to Twitter, and ensure cooperation. But it wouldn’t have necessarily ensured access to any secret Twitter knowledge of the social space, as the NYT story claims it would have. (Even if Apple had negotiated a seat at Twitter’s board of directors, it’s hard to believe Twitter would agree to furnish Apple with any special secret sauce).

And of course, since early last year, things have calmed down markedly. While Apple may not have gotten its way with Facebook, it worked out a deal that was good enough. It began working with Facebook closely to integrate Facebook deeply into Apple’s latest operating system, iOS 6. That work, which probably got negotiated late last year, clearly took the edge off of Apple’s tense Facebook relationship.

To say the least. When the iOS 6 integration was announced last month, the companies had virtual grins on their face over their new relationship. Hell, Facebook’s integration extended across Apple’s entire offering, to iTunes and the App Store. In iOS 6, the App Store will feature Facebook “like” buttons, and users will be able to see which applications their friends like. Apple is also opening up the API and giving third-party developers access to a user’s Facebook log-in credentials so they can add more instantaneous connections to the social network inside their apps. As we reported at the time, gone apparently were the roadblocks that kept the pair from working together on previous versions of Apple’s operating system. The iOS 6 integration will be released to consumers this fall.

So what happened? With the demise of Ping, it appears Apple gave up on its thinking that it needed to own the social network layer — at least for now.

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And while Apple stopped butting heads with Facebook, the company also worked closely with Twitter last year — moving quickly to integrate Twitter into its new Mountain Lion operating system (announced in February), after integrating Twitter into its iOS 5 mobile operating system in October last year. So by early this year, Apple had concluded a strategy to integrate social — through alliances with both Facebook and Twitter — at the core of its operating system. The stress of the Facebook threat, and the need to scramble for an extremely tight relationship with Twitter, had fallen away.

And with Apple’s history of extreme focus, and Twitter’s progress over the past year at monetizing its network, any investment by Apple in the future Twitter simply begins to look unlikely.

Forbes sums it up nicely:

Apple is a company famous for sticking to its knitting — which as Tim Cook reminds us at every opportunity — is making the “very best products in the world” and selling millions of them at profit margins that are the envy of the rest of the industry. Everything else it does — from iTunes to the Genius Bar — it does in support of those hardware sales.

“Does Apple need to be social? Yes.” Cook asked himself rhetorically at a tech conference this spring. “Apple doesn’t have to own a social network.”

For his part, Twitter CEO Dick Costello told the L.A. Times earlier this month that his company was in no hurry go public or find a buyer.

Twitter has, he said, “a truckload of money in the bank.”

Photo credits: Mara earthlight/Flickr and Apple

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