IBM or Twitter Who Needed the Deal More

IBM or Twitter: Who Needed the Deal More?

5 minute read
Dom Nicastro avatar

IBM posted disappointing quarterly revenues last month. Twitter hasn't found a way to make good money.

They needed a boost, and they hope it's each other.

But who needed who more?

"That’s arguable. Both need to can some lightning," said Tony Baer, principal analyst at Ovum Research.

"For Twitter it's the need for another path to market where they don’t have to compete with the Facebook colossus head-on. For IBM, this is entirely consistent with directions such as Watson where it is striving to establish cognitive computing as the new de facto enterprise solutions building block."

Twitter the Winner?

So maybe they just needed each other so badly, there wasn't a clear winner in the benefits department. Or maybe there was. 

Raul Castanon-Martinez, senior analyst for enterprise mobility infrastructure and services with 451 Research, called this a win-win for each organization. But Twitter's the big winner, he said, adding: "Twitter needed this more because even though user data is a valuable asset, other companies are stepping up and this asset can depreciate quickly."

Asked who benefits more, Seth Ulinski, senior analyst in ad tech for Technology Business Research, answered CMSWire with another question: "Why IBM and not Accenture?

"While significant for both companies," Ulinski added, "this is a bit of a red herring." 

Shortly after IBM announced its Twitter partnership, it made more business waves with another partnership, this time overseas. It joined forces with Chinese Internet Services Provider Tencent Holdings, which even we said has the potential to dwarf the Twitter deal. After all, Tencent's a top-five world Internet company.

"Longterm Tencent would appear to carry more weight than Twitter," Ulinski said, "as Tencent’s business expands beyond social, while also legitimizing IBM as a player in China’s IT services market."

But Baer calls the comparison between Tencent and Twitter a "loaded one."

"Of course Tencent, as gateway to Chinese Internet users, will generate higher revenue numbers," Baer said. "Twitter is more about strategic positioning, especially with Watson Analytics and any applications that are developed out of it. Yes, API level integration is a commodity, and Twitter -- through its acquired Gnip operation -- already makes that available to commercial providers."

Big Data Gains

If the Tencent partnership beats Twitter in terms of revenue, there are still gains to be had, Castanon-Martinez said. Because Twitter owns important data, IBM can leverage it with its big data machine. He noted:

Learning Opportunities

User data is becoming increasingly relevant for mobile advertising, mobile user engagement, customer relationship management, digital marketing, and many other applications where IBM is a major player. Twitter has struggled since the beginning to figure out a monetization strategy. They are starting to see positive, though not spectacular, results with mobile advertising. Transforming their vast amount of data into information enterprises can use is another way they can monetize their data."

IBM also gets a more native integration to Twitter feeds for products such as Watson Analytics, Baer added.

Products Forthcoming?

So how will the partnership play out in terms of product offerings, which Baer calls the "brass ring" of the deal? Baer said:

IBM and twitter have so far committed to developing a joint application around customer experience, which is obvious low hanging fruit. IBM will obviously develop the application, but the value Twitter added is a faster IBM to deliver to market Twitter-enhanced products for real-time applications that would require rivals to mount additional efforts. It also provides brand awareness that IBM enterprise software offerings in a software market segment that Ovum terms 'Fast Data' gain an explicit endorsement and halo effect from joint association with Twitter."

Twitter, meanwhile, is getting an enhanced profile that includes enterprise solutions -- something Baer said will help it distinguish itself from other social media networks.

"However," Baer said, "enterprise solutions will deliver just a fraction of the multiples that consumer-focused mass media advertising will bring in. But the impact on Twitter for adding an identified enterprise channel will be accretive to its core business."

What's Next?

Technology Business Research's take is the IBM-Twitter deal will be a harbinger of more enterprise systems integrating with social platforms and similar “systems of engagement,” Ulinski said.

"While other vendors have accessed and integrated the Twitter API in order to capture sentiment data for analysis," he added, "the partnership is both atechnical and business relationship that should create unique value."

Baer does not see the deal as unique. Twitter’s Gnip acquisition made the business of licensing APIs to the full Twitter stream a reality.

"And enterprise software offerings, like Oracle CRM, already ingest social media feeds," he added. "What is new is the degree to which IBM and Twitter jointly develop new software products based off this.

IBM-Twitter "sets the stage for similar deals," Castanon-Martinez said, adding: 

This initiatives usually begin with other type of applications such as government surveillance and intelligence operations, before spilling over to the enterprise. There are other similar initiatives already out there, the best examples are Recorded Future and Google Trends. What makes the Twitter-IBM partnership different is that it brings Twitter data directly into IBM’s analytics platform, the main advantage is that this data will be imported with a treasure of information in the form of metadata." 

Title image by Tecnomovida Caracas / (Flickr) via a Creative Commons license.