Elon Musk buys Twitter – So what now?

Social Media Today/Andrew Hutchinson Opinion Apr - 26 - 2022 , 17:16 9 minutes read

In a surprising turn of events, Elon Musk now looks set to become the sole proprietor of Twitter, after Twitter’s board met on the weekend to vote on accepting his $44b takeover offer.

Initially, it seemed that Twitter would rebuke Musk’s bid, even initiating a ‘poison pill’ mitigation process to stop Musk from acquiring the company through a share buy-up. But according to reports, Twitter’s board ultimately felt that they had little choice but to accept the billionaire’s offer – which means that Elon himself will now be the one setting the rules, and giving the green light on the way forward for the platform.

So what does that mean?

Well, no one knows for sure, likely not even Musk himself, who recently admitted that he’s still working through his plans.

But we do have some pretty clear indicators about Musk’s intentions, ranging from restoring ‘free speech’ to combating bots.

Here’s a look at Musk’s key areas of focus, based on his public statements thus far, and how he might go about tackling each.

Restoring Free Speech

Free speech has become the main focus of the Musk-Twitter push, with the Tesla owner publicly decrying Twitter’s past actions in silencing certain users.

Musk has also criticized Twitter’s decision to ban former US President Donald Trump, while he’s also had his own share of issues related to his tweeted remarks and statements.

Will Twitter take a different approach to such under Musk’s leadership?

You have to suspect it will - but how, exactly, that will look is anyone’s guess.

Musk’s main contention here is that by taking Twitter into private ownership, that will enable it to be more free in what it allows, as it won’t be beholden to shareholders or advertisers in this respect.

But ads, of course, are Twitter’s key money maker – in looking at Twitter’s Q4 21 results, ad sales made up the vast majority of Twitter’s revenue intake.

Then again, under private ownership, Twitter won’t be under the same revenue pressures, in terms of increasing revenue and improving performance in line with shareholder expectation. But Elon’s still paying $44 billion for the company. You would assume that he would like to recoup at least some of that expense.

So what would be a profitable revenue target for the platform?

Looking at Twitter’s numbers, it’s still paying some high operating costs, with the company reporting an operating loss of $493 million for FY 2021.

That means that, while Twitter brought in $5.08b in revenue for the year, it actually paid out $5.5b in costs.

Some of these expenses were once-offs (like a ‘one-time litigation-related net charge of $766 million’ due to a shareholder class action), but breaking them down into individual elements, some of Twitter’s key costs for 2021 were:

Research and Development - $1.2b
Sales and Marketing – $1.2b
General and Administrative - $584 million

Taking into account cloud and other infrastructure costs, you’re looking at a baseline operational cost of at least $3b-$4b, so at a bare minimum, Musk will need to generate at least that to avoid it costing him money, and without ads, that’ll be a tough ask.

So how will Musk do it?

I suspect this is the answer:

Musk’s view is that by authenticating real people, and giving them a checkmark, that will lessen the impact of bots (another of his key focus points), and forcing people to pay for Twitter Blue, at $3 per month, could be the way that he does it.

But would people actually pay for Twitter? Does anyone actually need the app that much that it would justify a $3 per month charge?

Right now, very few people are signing up for Twitter Blue, with the lure of a few custom color options and ‘undo tweets’ really not moving the needle for regular users.

Twitter’s been working to address its bot problems for years, though the view is that it could do more, with bot accounts seemingly easy to identify for most users.

The question in the past has been whether Twitter actually wants to tackle bots, or whether it’s more beneficial for the platform to continue counting them as ‘active users’. With market pressure on Twitter to boost usage numbers, maybe, by turning a blind eye to some of these bot profiles, that helps to prop up those figures.

Going private eliminates that emphasis, and Twitter could, at least theoretically, now take stronger action on bot accounts.

It seems like Musk will be pushing for that, and it’s another area that Twitter has been developing, while a shift to increased accountability for all human users will, again, be of benefit here.

These are the three key pillars of Musk’s Twitter push - or at least, the ones that we know of thus far, and it does seem like these will be the focal points of his platform leadership when he takes over at the helm of the app.

Which could be soon, and while the deal is still subject to various approvals and processes, it does seem that we’ll find out very quickly what Musk’s plans are for the app.

– Andrew Hutchinson @adhutchinson