October 3, 2022
Chicago 12, Melborne City, USA
Tech

 Twitter is a lousy business. What’s Elon Musk’s plan?

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Congratulations, Elon Musk?

Eleven days ago, you told the world that you wanted to buy Twitter for $ 43 billion, which created some … skepticism. Now it looks like you’re really going to do it. * For $ 44 billion, it turns out.

What now? More specifically: Now, how do you run Twitter, a for-profit business that isn’t very good at making a profit?

The richest man in the world says he buys Twitter because he cares about freedom of speech, not money. For now, let’s get him to his word. ** But even then, Mask will want Twitter, you know, to make money.

And more than that, he wants Twitter to be worth at least as much as he paid for it – 38 percent more than Wall Street thought the day he announced his plans to buy it. And he, and those who are helping him finance this deal, will probably prefer it to be even more valuable.

So how are they going to do it?

To recap: Twitter’s biggest problem as a business – which it has always struggled with – is a free, ad-supported business that does not have enough users to attract advertisers.

As I wrote 11 days ago, when ElonTwitter didn’t seem inevitable, at all:

Twitter has the same business model – free and supported by advertisers – like Google and Facebook. But it has more, much less reach than these companies, so advertisers are not going to support it as much.

That’s why Google brought in 25 257 billion last year, and Facebook brought in 7 117 billion – and Twitter made 5 billion. That’s why Google is worth $ 1.7 trillion, Facebook $ 583 billion, and Twitter $ 36 billion.

So. What can Elon do to make Twitter more valuable? He did not speak out, although he did make some gestures when talking to investors last week.

But Twitter is Twitter, so people have suggestions. Let’s take a quick survey:

Cut costs. The standard consolidation and acquisition playbook always includes this: it will work better if fewer people run the company you bought. Here is investor and Twitter power user / troll Mark Andresen:

Presumably, Musk already has plans to lay off some of Twitter’s employees – and he’s probably hoping that other employees will just leave Huff because he owns it. And I guess he’s planning to shrink his content moderation team, since he says he wants less content moderation. On the other hand: Twitter’s workforce grew 36 percent last year, but it still has 7,500 employees – 10 percent of Facebook’s total. And those employees generate revenue – about $ 1 million per employee per year, according to CSImarket. Elon Musk’s Tesla, however, earns about 60 760,000 per employee.

Bring more Twitter. This is one of the hardest. Twitter’s audience growth hasn’t completely flattened out – it’s actually been ticked up in recent years – but Twitter has spent years trying to get more people to sign up, with little to show for it. (One of the reasons the company stopped reporting its monthly user numbers in 2019.) Conclusion, I’ve talked to almost every Twitter person: Everyone knows what Twitter is, and those who want to use it, will. Can you make the product more attractive to more people? I guess? But no one knows how. (And don’t argue that there is a bunch of conservative / free-thinking users who will return to Twitter if Elon invites more: If there were, Donald Trump’s truth would be a social boom, not a ghost town.)

Selling more / more expensive ads. Also a tough one. One line that most Twitter fans agree on is, “Look at how influential this platform is! After all, we’re doing it! So advertisers should demand that we reach out to influential people.” But advertisers aren’t buying it: they like to go where they can reach a lot of people at once, and when advertisers are interested in spending money on “influencers” on social media who can spread the word to their followers, those influencers don’t hang out on Twitter. – They are on YouTube, Instagram and TikTok

Sell ​​access to Twitter. It’s a popular one, and it syncs with the “see how effective Twitter is” argument: Twitter is seemingly very important to Elon Musk. Won’t he pay to use it? And there’s the answer: yes. But what about the rest? “I think there’s one step left,” a former Twitter executive reminded me today. “Some forms of tweet-tweet.” You don’t charge anyone to read Twitter – just to create Twitter. Maybe it’s a single price, maybe it increases based on reach.

It’s an idea that Twitter has been flirting with from the beginning – but isn’t actually doing it outside of its “promoted tweets” ad. And if you want to put a positive spin on it, you have to remember that pay-to-tweet should prevent most people from tweeting dumb things. On the other hand, you can imagine a situation where people who have a lot of money tweet a lot of dumb things, because. And where there are fewer, they don’t tweet more – or at all. Any fun, or a lot of use for someone.

Selling something else? Like, Twitter, technology commentator Ben Thompson, who argues that Twitter should focus solely on running Twitter – a service that displays your tweets around the world in real time – and then licensing it to anyone who wants to build a business around it. Can , But they want. Think of it as a white-label Twitter that sells to people who want to create their own Twitter: You might want to run a Twitter service that focuses only on long haired Persian cats and their owners and your friend wants to run an ivermectin fan. Dedicated to: You buy data from Twitter and present it as you like. Advertising? Can i read Whatever you decide: Twitter is selling you gas.

But again, the musk really needs … something. Even if he’s really buying Twitter on behalf of humanity, he’s bought a business. And simply running Twitter as a nonprofit is not a better option than what he has described. His Twitter deal is partly financed by a loan from a bank, which will eventually demand their money back; Some debt is tied to its Tesla stock, and Tesla stock is both volatile and extremely, extremely valuable. If it crashes (see: Netflix), Mask’s financial situation will get worse, faster.

There’s also the possibility that Musk doesn’t really touch Twitter so much: he’ll come back from restraint, allow Donald Trump’s likes to be revived (no thanks, Trump says), and maybe decide it’s a lot more fun. Become a Twitter user – FREE! – More than a Twitter owner. And then look for someone to snatch it from his hands. This can be much harder than buying Twitter.

* Standard Warning that the deal has not been formally closed, with a Standard Elon Musk warning that he is… uncertain.

** Taking Elon Musk to his word can be a costly and risky proposition, but you’re reading some free words on the internet, so we’re probably right here.

Got a better idea of ​​what Mask should do with Twitter? Let me know (Twitter Works, and this email does: kafkaonmedia@recode.net)



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