You’ve heard of Elon Musk. You might have strong feelings, or none at all, but you’ve heard of him.
Earth’s most wealthy, and divisive billionaire has of course recently become the owner and self proclaimed ‘Chief Twit’ of Twitter, declaring his new $44B regime underway by carrying a sink into Twitter’s San Francisco headquarters (“Let that sink in”).
Ambitious projects are of course no new thing for Tesla’s Chief Engineer, PayPal’s founding member, SpaceX’s CEO, and a host of other billion dollar companies.
However, social media is an area which has no clear laws or textbook, where secretive algorithms dictate the way we operate, and advertisements make up the business end.
Growing Usage & Advertising
As you’d expect, social media use is growing, with users spending well over an hour per day on average using these services.
The old guard of Facebook and Instagram make up the majority of this, but with innovative newer platforms such as TikTok and Snapchat engaging a rapidly growing younger user demographic, this could change very quickly.
With Meta Platforms Inc., formerly known as Facebook, moving their focus into developing the Metaverse, a large opening will be potentially coming into view for the next generation of Social Networks, with users looking for engaging and relevant content, as well as keeping up with their own inner circles.
Plenty of time spent online is this typical browsing and socialising, but plenty of users are taking advantage of their large audiences, and mastery of algorithm driven sales to make some serious money.
YouTube by far makes up the lion share of income for content creators, with monetisation for videos reaching certain viewer figures.
Users on other platforms tend to generate income from brand partnerships, digital products and affiliate referrals.
The companies themselves are all about the advertising though, with high value driven from the data collected on users’ search history, visited pages and frequent clicks.
Meta Platforms has been enormous revenue from such advertising over the last decade, until Apple introduced it’s app data tracking block, which allowed users to opt out of such tracking, spooking potential advertisers, and impacting revenues.
Let’s get back on track. How does Twitter fit in here?
I don’t know about you, but I’ve been on Twitter for a long time, and I still don’t feel like it particularly knows me. I have a profile photo, a username, and now and again flick through the feed, but nowhere is the site itself gathering any idea of what I’m interested in, or might want to purchase.
Currently Twitter makes its money in a couple of ways, advertising and data licencing. As we can see though, this is comparatively pitiful when we look at the revenues of Google, Meta Platforms, and even Microsoft’s search engine Bing.
For the platform to become a sustainable success, clearly the monetisation element per user needs to become more effective. With more income, the quality of the user experience will hopefully improve, and further opportunities will be identified.
New Look Twitter
That’s where Elon comes in. He’s suggested already that the advertising needs to be far more relevant to the user, suggesting some level of enhancing tracking, albeit potentially opt in.
“Super relevant ads are content” he suggests, making it clear that companies and users would benefit from furthering the reach of advertisers on the platform. He suggests an $8 per month verification system, which will ensure the users on the platform are actually using it, and advertisers are getting validation that their money is being used on real people.
He has also floated the idea of resurrecting old favourite Vine, in a seemingly direct challenge to TikTok.
Obviously, all of these innovations potentially go against the grain of the current text driven, live update style, as well as the anonymity which Twitter currently provides, but to truly monetise a platform, more than basic text is realistically needed.
He has spoken extensively about Twitter becoming a town square, or bastion of free speech, raising extensive fears of extremist views returning to the platform, and a lack of content moderation putting inappropriate content into wider public view.
This is an issue which has plagued social media for years now. Whether the platform is responsible for the content which sits within it, or if the users themselves should ultimately self govern. Verification would resolve this to some degree, but some level of a tiering system may be required, ensuring whistleblowers, and more anonymous users can maintain their usage without fear.
Wannabe WeChat?
Elon has clearly taken some ideas from popular Chinese social media platform WeChat, part of the Weibo network. Think of it as a ‘super app’, encompassing everything you need from video chatting, games, photo sharing, ride sharing, food delivery, banking, and shopping, among others.
He has long touted the development of a product called ‘X’, which he hopes will be everything a user needs, of which Twitter may only form a small part.
Of course there might be some resistance to developing such an all encompassing platform outside of China due to competition laws, but with a clearly effective and engaging business model as a template, moving Twitter in that direction may be a good place to start.
Is it Worth it?
At $44B, I think we can all agree that Elon has vastly overpaid in this deal.
He clearly and publicly attempted to back out, before accepting that he’d committed to the transaction, probably paying over double the true value of the company. Twitter is by all accounts dealing with some issues, with an extensive bot problem, low engagement rate, and is clearly bloated with personnel, with “10 managers for every 1 coder”.
However, being the world’s richest man, I can’t imagine this is a huge deal. He is a very active user of the service, and the time taken to develop a new product would largely be time he could be using in one of his extensive other commitments.
The challenges needed to overhaul the organisation are well within his remit also. Tesla has been run since the early days as a lean and vertically integrated company; with any waste or inefficiencies ironed out ruthlessly. Where automation or innovation can drive the product forward, changes will be made.
Monetisation improvements should also be within reach, with his background in PayPal, and alignment with blockchain technology. By integrating payments within the platform; the user experience and potential revenue streams open up extensively,
The real question for me remains whether he will make it better. By all means a large, streamlined and well developed interface will make the platform easier to use, but if the content is wild, if users boycott it, or if it becomes a poisoned chalice, then no amount of money or good intentions can save it.
I’ve been an investor in Tesla for long enough to know that you should never bet against Elon Musk, but that there are always some bumps and surprises along the way.
I suspect in 5 years we’ll look back and be amazed how basic Twitter looked in 2022, but may also remember fondly how we used to be able to switch off.
If Twitter, or X as it may be by then, is as addicting as TikTok, as lucrative as Google, and as all encompassing as WeChat, we might not spend much of our time anywhere else.