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Musk’s Twitter Takeover

After finally buying Twitter, firing the CEO, dissolving the Board, plus naming himself sole director and “Chief Twit,” we look at what’s happening at Twitter and where it could be heading.

Twitter Takeover

Following many months of negotiations, Tesla founder, Space X boss and the world’s richest man Elon Musk finally bought Twitter in a $44bn (£38.3bn) deal. 

Why?

As with most significant moves that Musk makes, there are different opinions about his motives, many of them critical. As for Musk himself, he said, “The reason I acquired Twitter is because it is important for the future of civilisation to have a common digital town square”, which is similar to his reason given back in May when she described “free speech” as being “the bedrock of a functioning democracy” and said that “Twitter is the digital town square where matters vital to the future of humanity are debated.” 

Mr Musk, however, tempered any free speech purist views (which have worried many) with an assurance that “Twitter obviously cannot become a free-for-all hell-scape, where anything can be said with no consequences!”   

More critical voices have suggested that Musk bought Twitter to control what’s being said about himself, that it’s a kind of folly that he has no firm plan of what to do with it, and that he had to go through with the purchase in the end to avoid an extremely costly legal action. 

Recent Events

Although the Twitter purchase has been a long-running, on/off affair, now that the purchase/takeover has gone through, Musk has moved quickly in making some significant changes, including:  

– Dissolving Twitter’s Board of Directors and making himself the sole Director. As CEO anyway, he now has total control over Twitter. Musk also jokingly altered his profile, first to “Chief Twit” and now to “Twitter Complaint Hotline Operator”.  

– Many top Twitter executives have gone in the takeover, including CEO Parag Agrawal, COO Ned Segal, legal and policy head Vijaya Gadde, and general counsel Sean Edgett. 

– Musk announced plans to revise Twitter’s “Blue Tick” service, which could involve charging businesses $20 (£17) per month to be verified. The Blue Tick service gives subscribers access to various premium features, such as being able to undo a tweet. 

Musk brought Tesla engineers into Twitter’s office to scrutinise internal codes after the takeover. 

Concerns

Twitter has 230 million users (compared with more than 1 billion on TikTok) and has been shown to play an important part in America’s national politics, with some high-profile users able to create a serious impact with their Tweets (e.g., Donald Trump or Elon Musk himself) making it an enormously powerful social media channel with huge influence. This, along with the fact that the company is a large employer and has businesses as advertisers (its customers), has led to many concerns about Musk’s takeover and what could happen next. These include: 

– Musk’s well-publicised view that Twitter has done too much to control its platform and that there needs to be more free speech could make advertisers nervous. Twitter currently relies upon advertising for 90 per cent of its revenues. If more free speech means less restrictive moderation and potentially toxic content, advertisers may fear that their brands may be tarnished by association and stop ad spending with Twitter.  

– Questions about how responsible Musk himself is/will be going forward regarding the nature of his Tweets, judging by his past record. For example, Musk’s recent (withdrawn) Tweet about Paul Pelosi, which apparently gave credence to a conspiracy theory, and his famous 2018 tweet where he stated that he was considering taking Tesla Inc. Private. 

– Some brand managers have criticised Twitter as becoming a less engaging and interesting platform over the last year, where a high expectation customer-service perception can easily lead to complaints and trolling.  

– Even though Twitter has a daily user base of 230 million people, the company hasn’t generated significant profits in nearly nine years (as a public company), and share values have lagged behind those of rivals.  

– Ongoing, growing competition from other social media platforms (e.g., TikTok) and their visions for the future, e.g. Meta providing new potential advertising ideas for companies.  

– The unusual nature of the deal to buy Twitter, i.e., more cash than the typical buyout and more debt than Twitter may be able to cope with. This, combined with the underwhelming profits, plus the dangers of free speech and its deterrent effect on advertisers, could threaten the company’s ability to pay off the high debt and interest payments.  

– Apart from Musk’s latest plans to start charging £20 per month for Blue Tick, no other current meaningful source of revenue other than advertising, meaning that the company may have to continue with its current model for longer. No real revenue source changes coupled with nervous advertisers could create huge risks.  

– Concerns over potential job losses at Twitter. For example, there have been reports that Musk’s Twitter could lay off 25 per cent of the workforce in the first round of job cuts. 

– Concerns about the potential effects on national security in the US and possible Saudi influences. For example, U.S. Senator (Democrat) Chris Murphy has said he wants a U.S. national security review of a Saudi Arabian conglomerate’s stake in Twitter Inc. 

– Concerns that Donald Trump will be allowed back onto Twitter. For example, Musk tweeted that he would introduce a “council’ to decide whether Donald Trump would be allowed back, despite Trump being given a ‘permanent’ ban, and saying he didn’t plan to re-join Twitter anyway. 

– Fears for Tesla. For example, some people have expressed concern that Musk’s Twitter deal and the work needed to make changes and create more revenue could take his attention away from Tesla. Also, Musk selling Tesla shares and putting them up as collateral for personal loans to raise cash means that Tesla’s value may now be linked to Twitter. This could mean that any problems with Twitter, e.g., caused by the wrong kind of “free speech” or trouble paying back debt, could mean Musk drawing even more on Tesla stock, thereby creating more risk for Tesla.  

What Could Go Right?

Despite there being many concerns, a great deal of uncertainty, plus the significant risk to Musk, Tesla, and Twitter’s fortunes, some commentators have pointed to the necessity of keeping advertisers happy, which Musk will no doubt wish to do following the hype of the takeover. In addition to saving costs through executive and other staff layoffs and adding more revenue via Blue Tick subscriptions, other ways that Musk may add revenue and value going forward could include, for example: 

– Enhanced product features, open-source algorithms, spam-beating, and authentication changes building trust among advertisers (and attracting new ones) while creating new revenue opportunities. 

– Crypto advertisers, knowing about Musk’s liking for cryptocurrencies, buying more advertising with Twitter. 

– New types of experiential and immersive advertising which command higher rates from advertisers (again, remembering Musk’s dislike of traditional advertising).  

– New ways of monetising Tweets. For example, charging companies fees for embedding or quote-tweeting verified users. 

Like Weibo?

Some commentators have also suggested that Musk could tie many strands together to turn Twitter into something like China’s ‘Weibo app. Weibo is a kind of everything app / super app – an amalgamation of Twitter, WhatsApp, Amazon, and PayPal (PayPal was founded by Musk). Musk was reported to be considering an app like Weibo, which he called the ‘everything app’. Back in the summer, when talking to Twitter employees, Musk suggested that there was no equivalent to a super app like WeChat outside of Asia and has been reported to be considering creating a super app, perhaps from Twitter. 

What Does This Mean For Your Business?

Twitter has hundreds of millions of users, is highly influential socially and politically, and is a valuable channel to advertisers and businesses globally. This means that who is in charge of it plus its direction and fate, socially significant and with Musk’s controversial personal brand now linked with Twitter’s (not to mention Tesla’s fate also linked to the deal), there are obvious concerns going forward, particularly if too much of the wrong kind of ‘free speech is involved. That said, as the world’s richest man with some significant business successes on the cutting edge of future technologies (Tesla electric vehicles, Space X etc.), it could be argued that he has the skills and experience to improve Twitter. Musk has already suggested new revenue streams, e.g. Blue Tick, and could develop Twitter into a super app. However, it’s early days with Musk as supreme leader, and it remains to be seen how things move forward following what appears likely to be an imminent and significant round of job cuts. 

 

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