Musk's Turn
As Twitter changes hands, uncertainty about its future reigns
And it’s done. By all accounts, who could have predicted this bizarre and rapid turn of events? In a matter of weeks Elon Musk was able to launch a full bid to buy-out Twitter, finance it and take it private. Here’s what I tweeted once the word got out yesterday:
I think this sums it up. Twitter always struggled to become a real business and that was reflected in the stock price over the years (see chart above) during which it was public. It was hard to develop a real model that would deliver customer satisfaction, financial results and scale. But the value was and is immense which is why jumped in and out of the stock over the years, realizing it was not so much a long term growth story but something that would always be of value, depending on the moment. Disappointing results and a downturn in sentiment would always be reversed by Twitter. It was a struggle, but somehow worth it.
It was actually in 2009 that during the protests in Iran following the contested presidential election (remember reform minded candidate Mousavi?) that Twitter emerged as a force that could not only report on, but actually influence world events. That was always an exceptional piece of value and this survives all the hysteria and outrage that has followed ever since. Thirteen years on we move from event to event and Twitter moves from tweak to tweak while anger and commotion over the platform rages. It does not diminish the value, it just keeps reiterating the question: what is this business really about and what should we do with it next?
Much of the discussion now focuses on ‘content moderation’ vs. ‘free speech’, something that Musk himself has been playing up quite a bit. He will struggle with this as there is no easy fix as any platform will require some rules of engagement and reasonable behaviour of its members. It may also need user authentication to weed out the worst if not all the anonymous users. One way out of this is to ‘federate’ Twitter and let sub-communities of Twitter write their own user standards. This points us directly to overhauling how Twitter actually works. There are many ways to accomplish this one of which is making the algorithms open source such that we can actually see why some tweets get promoted and others don’t. This may also shed light on why many people (even I thought that for a while but figured out it wasn’t the case) are ‘shadow banned’: they can tweet themselves silly but no one will see it. At the same time there are other much desired items on the menu such as banning the just mentioned anonymous user as well as the ‘edit your tweet’ request which is probably one of the easier things to fix. It’s a lot. In fact, taken altogether it is a major overhaul.
All these product innovations then must go hand-in-hand with developing a better business model. The ad-driven revenue streams that support Twitter today are exactly the thing that drives how tweets are promoted. If we open that up, we open up the way ads work. Is the subscription model showing enough traction? It does not seem that way so premium users are probably not going to carry the cost so the rest of the world can tweet for free? Deep changes pose serious business risks and despite his assurances that he is not in it for the money, Musk will need to service the debt incurred to acquire Twitter. He may also decide to spin it out again on a public market in a different form, but that again would require to have a tested and performing business model ready. No one will buy a still broken toy.
There are other, more external factors, that will also weigh on Musk. His other venture, the one making electric cars, is heavily dependent on the China market for both the production of batteries and selling the actual vehicles to a wealthy and growing market. Even though it has banned Twitter, China is actively influencing worldwide opinion ever more aggressively. It now all of a sudden has the ability to put some direct pressure on the generally China-unfriendly Twitter crowd by leveraging the Tesla relationship, something that was not the case prior to this deal. The Trump saga will raise its head too, although that would be more of a phenomenal distraction rather than a real threat to the business.
So I have no solution and no one really has, lots of ideas though. This is no easy task and Musk has taken on a beast that may gyrate in many different directions. As I said, let’s continue to enjoy the journey. It’s a pity we cannot trade the stock anymore, Elon has them now.
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