That Whole Twitter Thing: Further Thoughts
Now that we’re several days into the Elon Musk era of Twitter, some additional musings on how we got here and where we’re going. In no particular order:
1. Elon Musk did this to himself. There’s an old quip about how to make a small fortune in publishing: Start with a large fortune. Well, certainly Musk has a large fortune — the largest in the world, if we’re talking valuation rather than actual liquidity — and he’s about to make it smaller, because Twitter is worth nowhere near the $44 billion or so that he paid for it. Certainly Musk realized that almost immediately, which is why he tried to back out of the deal as soon as he made it.
The (former) board and shareholders realized it, too, which is why they absolutely, positively would not let him back out. From their point of view, Musk was their patsy, their stooge, their pigeon in a confidence game that let them cash out while Musk was left holding the bag. Twitter hardly ever made money as it was; now with the debt Musk has to service on an annual basis, it’ll probably be underwater for a long, long time.
But, look, no one made Musk do this. No one made him decide to become Twitter’s largest stockholder, no one made him make a ridiculous offer for the service, no one made him make that offer at what was basically a locked-in high price with little to no way of backing out gracefully if the financials did not add up. Musk, high on his own presumed genius and fashy-flirting worldview (and possibly also just high, period), was playing to his right-wing cheering squad of simpering fanboys when he decided to buy the place, and didn’t think through the consequences. So now he’s got himself a social media service and no clue what to do with it. Which is actually a thing we should underscore:
2. Elon Musk has no idea what he’s doing with Twitter. Both Musk’s frothy bootlickers and ardent haters think the dude has some sort of master plan for the service and that he’s bought the place to turn it into a fascist-friendly sinkhole that he can push democracy into (this being a bug or feature, depending on one’s own tendencies). And maybe, left to his own rich-white-dude-libertarian tendencies, he would have done. But the thing is, there’s no money in social media that way. Elon Musk may be an authoritarian-frotteuring bore, but the majority of the heavy users of Twitter (i.e., the ones generating content) are vaguely-to-solidly lefty, and the companies who advertise on the service don’t want to have their ads served next to an orgy of bigoted utterances by shitty people. Musk’s deal for the service has left him with something like a billion dollars in debt to service on an annual basis. He’s not going to do that with an exodus of high-profile users and no ads.
And this is before the various governments all over the world weigh in on what’s acceptable content on social media platforms. The EU has already made it clear to Musk they will take a dim view of him turning the service into a Nazi clubhouse, US politicians are looking to revisit Section 230 of the Communications Decency Act (which largely immunizes platforms from the legal repercussions of the speech of their users), and other countries will have their own bones to pick on this score. Thanks to Musk owning other companies that are vulnerable to government pressure and punishment (Tesla, SpaceX and Starlink among them), anything he does with Twitter that displeases governments can also have an effect on his other businesses.
Remember what I said earlier about Musk being left holding the bag? This is the bag! He’s got to find a way to make incredibly disparate constituencies — users, advertisers, governments — happy, and still make enough annually to service his debt. Doing all this was hard enough for the previous Twitter regime, and they didn’t have either the amount of debt servicing Musk has, or the additional business vulnerabilities he does.
How will Musk do this all? He doesn’t know! Neither does anyone else! But of course it’s no one else’s problem, now; he’s the sole director of the place. At the moment, he’s trying to suggest that raising the price of the Twitter Blue subscription scheme and tying verification to that is going to do something useful for him, which it probably won’t, since tying verification to payment is not a great idea, and Twitter Blue is — and I can say this as a subscriber — a benefit for a niche audience at best. He’s also going to lay off staff, which will save some money but is likely to make the service worse. Which brings us to the next point:
3. No matter what Musk does, he’ll probably make the service worse in the short run. Minimizing moderation on the site, allowing creeps and trolls more latitude, will make the service worse. Fiddling with how verification works and opening it up without an actual plan other than to have it as a bonus for subscribing to Twitter Blue, will make the service worse. Cutting staff hastily on sketchy criteria, will make the service worse. And making the service worse is bad for Musk, because everyone is watching him, and these first few days and weeks are very likely to seal the service’s overall fate.
Celebrities and other heavy users are already leaving or making plans to leave or curtail their use of the service. Advertisers can go elsewhere. What and who is left will not necessarily be inclined to participate in a subscription scheme. The snowball of collapse is likely to start rolling downhill, picking up momentum as it goes, hurtling toward the cliff.
Mind you, it doesn’t have to go this way — Musk could just say, hey, in the short term, I’m going to keep things as they are while I and my crew figure this thing out. But he won’t, because that’s not who he is. He’s the sort of guy who decides to buy a social media service in a fit of pique, and then panic when he realize he’s overpaid and is now in charge of a money pit. So he’s going to do things, and just doing things quickly isn’t going to be great. Beyond this:
4. Musk picked a really bad time to jump into social media. Aside from Twitter’s already-existing money and user woes — it is the smallest of the major social media outlets, by a considerable margin — all the social media giants seem to be doing a faceplant these days. Meta/Facebook has seen its value slashed by hundreds of billions of dollars as Zuckerberg frantically tries to make VR happen; the formerly trillion-dollar company was famously recently valuated less than Home Depot. TikTok really does seem to be Chinese government spyware, and an FCC commissioner thinks it should be banned. More widely, Google is thinking about layoffs, and even Amazon’s valuation dropped below a trillion for the first time in a couple of years. Just about the only major social media that doesn’t seem to be about to implode is LinkedIn, i.e., PleaseHireMeIJustGotLaidOffFromTwitter.com.
The best time for Musk to have bought Twitter was never, but last Friday was definitely not the second-best time. The whole concept of what social media is seems to be undergoing scrutiny, and not just on an existential basis. It would not entirely surprise me to see the social media giants of today sold at fire sale prices tomorrow. It’s happened before! Which, hey, dovetails right into this:
5. I don’t expect Musk to keep Twitter for long. Or at the very least I don’t expect him to have it be his focus for very long. Right now Musk is in the “oh, shit, how do I make money from this” phase of things, and once he figures out he can’t (or alternately, realizes what he’s doing will just make things worse), I think his attention will drift to the other companies of his that actually do make money and will need his attention. At which point he’ll either foist the service off to someone at a substantially reduced price (Google could take it on and happily mine it for all the ad data it’s worth), or hire a caretaker CEO, whose job is to keep the bleeding to a minimum as the service deflates like a sad balloon, and then go back to his previous role on Twitter, which is stoned billionaire iconoclast occasionally posting an outrageous opinion for lulz.
Which is to say: Musk is gonna lose money on this! Like, a lot! But it’s his money to lose, and also, he has the money to lose. If the other parts of his empire do well (and they might!), he might not even miss that money as his overall net worth continues to expand.
Of course, I could be wrong about all of this. It’s possible that Musk will unlock heretofore-unrealized value from the service, shepherd it to wild profitability, and make all the services’ constituencies happy. In which case: Swell. I’ve liked Twitter, a lot, and would be happy for it to survive and thrive. Prove me wrong, Elon Musk! I will be happy to be wrong!
I don’t suspect I will be wrong, however. Musk overpaid, there’s not that much value to unlock, and he’s gonna take a bath on this purchase before he gives up the ghost and cuts his losses. Musk will survive his Twitter foolishness. We’ll see if Twitter survives it as well.