So after week two of the Elon Musk Twitter drama, we’re left in a state of limbo, as we await the ultimate approvals for the deal, which is able to ultimately make Musk the top honcho at a personal Twitter, which can or could not run advertisements anymore, could or could not permit all kinds of racist, homophobic and abusive speech, and should or could not be capable of, in the future, really generate profits, regardless of these adjustments.
And we’ve got little to go on proper now as to the way it will impression the corporate, and the platform as we all know it. What we do know is that Twitter workers are increasingly nervous about their jobs, and the enterprise that they might find yourself working for underneath Musk, whereas we’ve additionally had some slight hints as to how Musk plans to alter the app.
To be clear, Twitter shouldn’t be a charity, and after spending $44 billion on the app, Elon Musk shall be on the lookout for methods to maximise Twitter’s income consumption, and recoup no less than a few of that price. In a latest interview, Musk stated that doesn’t care about the economics of the deal in any respect, and that his driving mission is to run “a public platform that’s maximally trusted and broadly inclusive”.
However with enormous debt, and accumulating curiosity, Musk has to generate profits too, and the bull case for the acquisition is that Musk, being the visionary that he’s, sees one thing that others don’t, and may clear a pathway to optimum success for the platform – despite the fact that most market analysts see no viable pathway to turning any significant profit from the app.
So how will Musk do it?
Listed below are the areas that Musk is reportedly taking a look at proper now – and to be clear, Musk has give you these proposals with out inner data of the corporate and its present make up.
- Rising subscriptions – Musk is reportedly seeking to build Twitter Blue into a registration layer, of types, with customers paying a month-to-month payment to get a verification tick that confirms that they’re an precise, actual individual. That might higher allow Twitter to deal with bots (as it will make operating bot farms price prohibitive), whereas it will additionally guarantee a stage of transparency within the app, since you would know, based mostly on these new types of authentication tags, that you simply’re interacting with an actual individual, who’s registered their contact and fee particulars within the app. The economics could possibly be troublesome – if Musk have been to cost $1 monthly for this, that may usher in $229m monthly/$2.7b every year, if the current number of active users stick round, and aren’t all bots. You’d must assume that fairly a couple of gained’t find yourself paying, which brings this down so much, and would cut back Twitter’s income consumption considerably, if this have been the one manner Twitter may generate profits in future. For reference, Twitter made $5.08b in revenue in 2021.
- Taking Twitter personal – In fact, a few of that income stress is lessened if Twitter goes personal, as it will not be beholden to shareholders who count on to see income rise by an outlined, acceptable quantity. Musk’s view is that Twitter must go personal to make sure that it could possibly make choices free from the stress of outdoor forces, enabling it to really grow to be a platform of free speech. The issue with that, in fact, is that advertisers shall be much less snug putting advertisements alongside probably offensive content material – however that then leads into the following stage of Musk’s grand Twitter plan.
- No extra advertisements – This could clearly be the most important impression from a social media advertising and marketing perspective – Musk has stated that Twitter ought to no longer run ads at all to stay actually impartial. That then additionally signifies that Twitter would wish to depend on alternate sources of earnings, and with advertisements making up 98% of the corporate’s income, that’s an enormous gap to fill. A part of Musk’s considering right here may additionally be that Twitter can minimize prices by additionally eradicating the entire workers that work on its advert parts, which might be a significant price saving – besides, if Musk desires to get shut to creating Twitter worthwhile, when factoring in its working bills versus earnings, it’ll be an enormous shortfall to make up. It’s troublesome to see how this is able to be potential, however possibly, Musk is aware of one thing that we don’t.
- Charging for tweet embeds – This looks as if a bit extra of a stretch, however Musk has additionally reportedly floated the thought of charging websites for embeds of tweets from verified users, with the cash probably going again to the customers themselves. That may align with Musk’s push to get more high profile users tweeting more often – possibly, if they will make a couple of bucks from tweeting, that might act as a motivator to get them sharing extra within the app, which may spark extra engagement with their followers, and generate extra in-app exercise general. In fact, the counter is that individuals may simply screenshot tweets as an alternative, although there are methods that Musk may make tweets copyright protected, which might be even simpler if he have been to take this subsequent step.
- Make Twitter ‘Pay to play’ for customers – It is a extra radical transfer – and to be clear, Musk himself has not proposed this concept, as such, simply but. However aligning with the idea of charging customers for a verified person tick (totally different to the present blue tick for top profile customers), Musk may look to make all customers pay, or they merely wouldn’t be capable of use the app. Your first intuition to that is that nobody can pay, proper? Folks can simply use Fb or Instagram or Snapchat as an alternative – so why would anybody pay to easily go browsing and skim tweets? I assumed that too, however upon additional reflection, I do suppose that Twitter is a essential platform for a lot of journalists, political and different media varieties that use tweets to remain up with the newest information. That’s why Twitter is so influential, regardless of having solely a tenth of the active users that Facebook does – whereas its viewers could also be smaller, the those that do use Twitter are usually among the many most energetic of their respective industries, and following the newest tweets allows them to guide tendencies, re-distribute the newest information to their audiences off-platform, stay in-the-know, and many others. As such, I think that a lot of them would pay, and if Musk have been to lock tweets down, that may imply that they’re not publicly accessible, making it a lot simpler to implement fees for tweet embeds, in addition to another re-use of on-platform content material.
- Value-cutting – The opposite key space that Musk is exploring is cost-cutting, which once more aligns with the above factors, in that Twitter may minimize prices considerably if it not ran advertisements. Twitter spent $1.7b last year on gross sales and advertising and marketing and basic admin prices, whereas it additionally spent a further $1.2b on analysis and improvement, and $2b on infrastructure. With out advertisements, these prices may come down so much, and if Musk can scale back these outgoings in an enormous manner, he may, theoretically, make sufficient cash from his subscription proposals to generate constructive money circulation for the app over time, whereas additionally enabling it to stay impartial, and subsequently higher in a position to run with a ‘free speech’ strategy.
Once more, Musk has made these pitches in meetings to secure funding for his Twitter bid, and with out inner perception into how the corporate is presently run, and what’s actually potential inside the present construction, or inside any future re-shaping of the enterprise.
But it surely does look like that is the place Musk is prone to make his large adjustments, particularly provided that Twitter doesn’t have a number of different paths to take, based mostly on historic efficiency.
However there could also be further alternatives that we’re not seeing, and the overall view is that Twitter has underperformed over time, with even present CEO Parag Agrawal noting in an all-hands meeting this week that:
“I may have completed issues otherwise. I take into consideration this so much. I really feel accountable for my actions I’ve taken during the last decade. I’ve solely been on this job for 4 months, however I’ve been on the firm for a decade. And sure, we may have completed higher. Ought to have completed higher.”
Perhaps, now could be the time that Twitter could make these large adjustments, with extra freedom as an impartial firm – and once more, many have pointed to Musk’s genius in different fields, so possibly he does certainly see one thing that others don’t right here.
What we all know for certain is that this would be the most public demonstration of that genius that Musk has ever had, and if he actually is the visionary that many imagine, he’ll undoubtedly have an opportunity to show it.