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

Congratulations, Elon Musk?

Eleven days ago, you told the world that you wanted to buy Twitter for $ 43 billion, which … created skepticism. Now it looks like you’re going to make it. * $ 44 billion, it seems.

What now? More specifically, how do you use Twitter, which is a non-profit business that is not very good at making a profit?

The richest man in the world says he buys Twitter because he cares about freedom of expression, not money. For now, let’s get the word out. ** But even in that case, Musk will want Twitter, you know, to make money.

And more than that, Twitter will want it to be worth as much as it has paid for itself, which is 38 percent more than it thought it was worth on the day it announced its intention to buy Wall Street. And he and the people who are helping to finance the deal would think that he would like to be even more valuable.

So how do they do that?

In short, the biggest problem with Twitter as a business — which it has always struggled with — is that it’s a free business that doesn’t have enough users to make it attractive to advertisers.

As I wrote 11 days ago, when Elon Twitter seemed inevitable, at all:

Twitter has the same business model as Google and Facebook, which is free and supported by advertisers. But it has a much smaller reach than these companies, so advertisers won’t give it as much support.

That’s why Google made $ 257 billion last year, and Facebook $ 117 billion – and Twitter $ 5 billion. And 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 say out loud, even though he allegedly made a gesture about it when he was courting investors last week.

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

Cut costs. The standard book of mergers and acquisitions always states that the company you buy would work better with fewer people. Here is Marc Andreessen’s investor and Twitter power user / troll:

Supposedly, Musk already has plans to lay off some Twitter employees, and perhaps he anticipates that other employees will leave gradually because he is alone. And I would assume that he intends to reduce his content moderation group because he says he wants less content moderation. On the other hand, although Twitter’s staff grew by 36 percent last year, it still has only 7,500 employees, just 10 percent of Facebook’s total. And these employees generate revenue: about a million dollars a year per employee, according to CSIMarket. Elon Musk’s Tesla, by the way, generates about $ 760,000 per employee.

Bring more tweets. This is tough. Twitter’s audience growth hasn’t completely equaled – it’s really risen in recent years – but Twitter has been trying for years to get more people to sign up, without showing anything little. (That’s one of the reasons the company stopped providing monthly user numbers in 2019.) The bottom line is, from all the Twitter people I’ve ever talked to: everyone knows what Twitter is and wants to use it. , do. Would you make the product more appealing to more people? I guess? But no one knows how. (And don’t worry, if Elon makes them more attractive, there’s a horde of conservative / free-thinking users who will return to Twitter.

Sell ​​more / more expensive ads. Hard too. A line that most Twitter fans agree on is: “Look at the impact of this platform! After all, we’re working on it! So advertisers should shout at us to reach out to influential people.” go to a lot of people, and while advertisers have a new interest in spending money on “influential” social networks that can promote their stuff to followers, these agents aren’t on Twitter; they’re on YouTube, Instagram, and TikTok.

Sell ​​access to Twitter. This is well-known, and syncs with the “look at how it affects Twitter” argument: Twitter is apparently very important to Elon Musk. Wouldn’t he pay for using it? And the answer is: Yes. But what about everyone else? “I think there’s a movement left,” a former Twitter director told me today. “One way to tweet to pay”. You don’t charge anyone for reading Twitter, just for Twitter. Maybe it’s the only price, maybe it goes up by the reach.

Twitter is an idea that has been flirting since the beginning, but it doesn’t really do that, beyond its “promoted tweet” ads. And if you want to give it a go, you might want to stop paying for tweets and get people out of tweets. On the other hand, you can imagine scenarios where people with a lot of money tweet a lot of silly things because. And where the lesser ones don’t tweet so much, or at all. That’s not fun, or it’s useless.

Sell ​​something else? Like Twitter, says tech commentator Ben Thompson, who says Twitter should focus on running Twitter — a service that displays your tweets in real time around the world — and then allow anyone who wants to start a business around it. , however they would like. Think of Twitter as a white-label Twitter that sells to people who want to do their Twitter: maybe you want to run a Twitter service that only caters to long-haired Persian cats and their owners, and wants to unite your friends. dedicated to ivermectin fans: you buy data from Twitter and present it the way you want. Ads? Pay to read? Whatever you decide: Twitter sells you gas.

But again, Musk really needs … something. Even though Twitter is actually buying on behalf of humanity, it has bought a business. And just running Twitter as a nonprofit is not an option for the good he describes. His Twitter deal is partially funded by bank debt, as they will eventually want to get their money back; part of the debt is also linked to its Tesla shares, and Tesla’s stock is variable and highly valued. If it failed (see: Netflix), Musk’s finances would be pretty slow, fast.

There’s also a chance that Musk won’t touch Twitter so much: he’ll push back on moderation, re-launch people like Donald Trump (no thanks, says Trump), and decide that maybe it’s a lot more fun. be a Twitter user – for free! – Than the owner of Twitter. And then look for someone to get rid of. That can be a lot harder than buying Twitter.

* A standard warning about not formally closing a deal, along with a standard warning from Elon Musk … indicates that it is irregular.

** Taking Elon Musk’s word can be an expensive and dangerous proposition, but you’re reading some words on the internet for free, so we’re probably fine here.

Do you have any better idea what Musk should do with Twitter? Let me know (Twitter It works, and this email also includes: [email protected]).

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