In a surprising turn of events, Elon Musk now appears poised to become the sole owner of Twitter, after Twitter’s board of directors was set to vote over the weekend to accept his $44 billion takeover offer. .
Initially, it appeared that Twitter would rebuke Musk’s offer, even initiating a ‘poison pill’ mitigation process to prevent Musk from acquiring the company through a stock purchase. But Twitter’s board of directors reportedly ultimately felt they had no choice but to accept the billionaire’s offer, meaning that Elon himself will now be the one to set the rules and greenlight the way forward for the platform.
So what does that mean?
Well, no one knows for sure, probably not even Musk himself, who recently admitted that he’s still working on his plans.
But we do have some pretty clear pointers about Musk’s intentions, ranging from restoring “free speech” to fighting bots.
Here’s a look at Musk’s key areas of focus, based on his public statements so far, and how he might address each one.
Restoring freedom of expression
Free speech has become the main focus of the Musk-Twitter push, with the Tesla owner publicly denouncing Twitter’s past actions to silence certain users.
Since Twitter functions as the de facto public square, failing to adhere to the principles of free expression fundamentally undermines democracy.
What should be done? https://t.co/aPS9ycji37
— Elon Musk (@elonmusk) March 26, 2022
Musk also has criticized Twitter’s decision to veto former US President Donald Trumpwhile he has also had his own number of problems related to his comments and statements on Twitter.
Will Twitter take a different approach under Musk?
You have to suspect that it will, but how, exactly, that will look is anyone’s guess.
Musk’s main argument here is that by making Twitter privately owned, that will allow him to be more free in what he allows, since he won’t be beholden to shareholders or advertisers in this regard.
But ads, of course, are Twitter’s biggest moneymaker: Looking at Twitter’s Q4 2021 results, ad sales made up the vast majority of Twitter’s revenue.
On the other hand, under private ownership, Twitter will not be under the same revenue pressures, in terms of increasing revenue and improving performance in line with shareholder expectations. But Elon is still paying $44 billion for the company. I would assume that you would like to recoup at least part of that expense.
So what would be a profitable revenue target for the platform?
Looking at Twitter’s numbers, it’s still paying some hefty operating costs, with the company reporting an operating loss of $493 million for fiscal 2021.
That means that while Twitter generated $5.08 billion in revenue for the year, it actually paid $5.5 billion in costs.
Some of these expenses were one-offs (such as a ‘one-time net charge related to $766 million litigation’ due to a shareholder class action lawsuit), but breaking them down into individual items, some of Twitter’s key costs for 2021 were:
- Research and development: $1.2 billion
- Sales and marketing: $1.2 billion
- General and Administrative – $584 million
Factoring in cloud and other infrastructure costs, you’re looking at a baseline operating cost of at least $3b-$4b, so at a minimum Musk will need to generate at least that to avoid costing you money, and no ads. It will be a difficult question.
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 check mark, that will lessen the impact of bots (another of his key focus points) and force people to pay for Twitter Blue, at $3 per month, it could be the way he does it.
But would people really pay for Twitter? Does anyone really need the app enough to justify a $3 per month charge?
Right now, very few people are signing up for Twitter Blue, with the lure of some custom color options and ‘undo tweets’ not really moving the needle for regular users.
But if Musk cut everyone off unless they paid the fee, maybe that would get more people to actually pay, and if a lot of prominent users ended up paying, that would entice others to sign up, so you wouldn’t miss a thing.
Twitter currently has 217 million daily active users, which, if each paid $3 per month, would bring $7.8 billion in annual app revenue. Of course, not all of these users are going to pay, but I also suspect that Twitter is actually a very important tool for those who use it, even if its user count pales in comparison to Facebook or Instagram.
Let’s say only half of these people sign up; That’s still $3.4 billion in annual revenue, no ads, and with Musk also promising to cut costs, whether it’s getting rid of Twitter’s San Francisco headquarters or eliminating board member pay, there could be ways. to make this a working option.
But it would be a big risk. If Elon decided to block all non-paying users, that could also cause conversations to move to other free networks, potentially leaving Twitter with nothing and reducing its $44 billion investment to zero very quickly.
But I do think it could work, and if Musk can too add new features, as it saysTo make that $3 monthly investment even better, Twitter could very quickly become a hub for more engaged, active, and responsible conversations. And as I say, I suspect that a lot of people in the media, at least, would be willing to pay to participate in that group chat.
This is the kind of bet I think Musk will make, and while it could reduce Twitter’s presence in the social media sphere, by shrinking its user base, it could still ensure that it remains a relevant and valuable entity, and potentially profitable. for Musk in the long run.
And ultimately, that could also be Musk’s path to free speech. With every user registered and accountable, and only paying users allowed to enter the app, that puts more responsibility on each contributor, while trolls couldn’t easily create new accounts just to attack and harass others.
It would be free speech with responsibility, which may not be exactly what free speech advocates have been calling for. But it appears to be one of the only viable ways for Musk to achieve some of his key goals stated here.
Algorithm open source
Another element of Musk’s Twitter takeover push has been algorithmic transparency and giving users the opportunity to understand, and even control, how the system decides what’s most relevant to them.
According to Musk:
“Any changes to people’s tweets, whether or not they’re emphasized, that action needs to be made apparent, so that anyone can see that that action was taken, so that there’s no kind of behind-the-scenes manipulation, whether it’s algorithmic.” or manually. .”
Twitter is already exploring through its blue sky initiativeand the concept that regular users might have a better understanding of such systems makes sense, though the complexities may be lost on us non-coders and regular people (i.e. the vast majority of Twitter users) who we just want to see the latest tweets.
A key risk on this front is that by opening up its algorithmic parameters, Twitter would allow users to identify key aspects that they may or may not want to emphasize within their experience. Which makes sense, for example, to remove mentions of ‘The Kardashians’ from your feed, but what if you wanted to remove ‘liberal bias’ or other elements that might contribute to the echo chamber effect?
It could also lead to new qualifiers being integrated into algorithms that may not deliver pleasing or even legal results.
TikTok, for example, has faced criticism in the past for their efforts to suppress posts from users with ‘bad teeth’, ‘big bellies’, physical disabilities and more. The fact that this is even possible suggests that TikTok’s system can categorize content based on such parameters, and with those kinds of options in place, that could lead to some worrying use cases in the app.
It’s not an easy road, and Musk will have a lot of work to do on this front, but again, Twitter is already moving down this path, and Musk’s momentum will likely see the bluesky project develop much faster.
Musk is also interested in weeding out bots, for which, as noted above, a new checkmark system for all users could help in many ways.
If our Twitter bid is successful, we will either beat the spam bots or die trying.
— Elon Musk (@elonmusk) April 21, 2022
Twitter has been working to address its bot issues for years, though the feeling 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 really wants to address bots or whether it is more beneficial for the platform to continue to count them as ‘active users’. With market pressure on Twitter to increase usage numbers, perhaps turning a blind eye to some of these bot profiles will help shore up those numbers.
Going private removes that emphasis and Twitter could, at least theoretically, now crack down on bot accounts.
It looks like Musk will push for that, and it’s another area that Twitter has been developing, while a shift towards more accountability for all human users will, again, be beneficial here.
These are the three key pillars of Musk’s Twitter push, or at least the ones we know about so far, and it looks like these will be the focal points of his platform’s leadership when he takes over the app.
Which could be soon, and while the deal is still subject to various approvals and processes, it looks like we’ll find out very quickly what Musk’s plans are for the app.