Elon Musk has turned Twitter’s business upside down. Here’s how he might fix it

New York
CNN business

Much of Twitter’s ad sales team has been fired or kicked out. Big companies, from General Mills to Macy’s, have suspended advertising on the platform, with others potentially following suit after new owner Elon Musk’s decision to reinstate the account of former President Donald Trump and other controversial figures. And any shallow scrolling of the platform will likely show you fewer ads from big brands.

That would all seem like awful news for a company that generates the lion’s share of its revenue from advertising. But Musk may not care.

The Tesla CEO has previously said he “hates advertising,” and as the owner of Twitter, has expressed a desire to make the company more dependent on subscription revenue than ad dollars. Twitter has always struggled to turn its massive influence in media, politics, and culture into a hugely successful advertising business. And without having to please advertisers, the billionaire would be freer to implement his vision of “free speech” for Twitter.

“I’ve always thought that moving to a subscription business would make sense for Twitter…it’s never been a big advertising platform,” said Larry Vincent, an associate professor of marketing at USC’s Marshall School of Business. Twitter’s advertising business has long lagged behind rivals like Facebook, in part because it didn’t offer the same level of user targeting.

Successfully overhauling Twitter into a thriving subscription business would reverse the trend of many other media properties that have struggled with the model. And Musk’s attempts out of the gate have faltered. An updated $8-per-month version of the Twitter Blue subscription service that allowed users to purchase a verification tick was discontinued after just two days when it was abused to impersonate prominent people (most notably Musk himself), companies and government agencies. Musk initially said he would relaunch the service on Nov. 29, but on Monday he suggested he could delay it further “until there is high confidence in the shutdown of the performance.”

Some industry observers have also wondered whether, given Twitter’s rather niche status as a relatively small platform used largely by members of the media, politicians and academics, such a subscription service could be widely adopted. Even if all of Twitter’s 217 million daily users reported signing up for Musk’s $8-a-month subscription at the end of 2021, annual revenue would still be less than a quarter the size of rival Meta.

However, some industry insiders have reason to think it can pull it off. “Twitter over the last month has been a lot more fun than Netflix and easily worth $8,” Roy Price, the founder of Amazon Studios, said in a tweet Saturday. Salesforce CEO Marc Benioff said in a tweet, “don’t underestimate” Musk. And Twitch co-founder Justin Kan tweeted that he thinks Twitter will “probably survive well (and potentially thrive!)” in part because, unlike some high-profile users who have announced their departures from the platform, most of regular users probably don’t no matter who is driving the platform and how.

Indeed, Musk’s move from advertising to a subscription model could work if Twitter can survive the preemptive decimation of all of its revenue, keep its systems up and running, avoid violating copyright infringement laws, and the hate speech, and also stay in good standing with Apple. and Google, which control the app stores that Twitter depends on.

The stakes of making that happen are significant for Musk. After borrowing billions of dollars to finance the Twitter takeover, Musk is racing the clock to turn what was already a struggling company into one that can generate enough cash flow to pay down its debt . He could also be risking his reputation as the “gifted and daring entrepreneur who made Tesla work against widespread misgivings and opposition,” said Robert Bruner, a professor of business administration at the University of Virginia’s Darden School of Business.

Whether he likes advertising or not, the business accounted for 90% of Twitter’s revenue before the Musk takeover, and replacing him won’t be an immediate change.

In the wake of the chaos on Twitter in recent weeks, there has been talk of brands leaving the platform out of concern that their ads could end up alongside objectionable content. But that may not be the only or even the main reason advertisers are gone, or why attracting new ones could be tricky. Advertisers are also likely nervous about Twitter’s stability, as users and former employees voice concerns that the mass exodus of staff could leave the platform vulnerable to glitches and outages.

Brands may also be angered that many of Twitter’s ad sales employees who handled their campaigns have been fired or kicked out, even after another round of layoffs and exits on Monday.

The big digital platforms “have experienced professionals out there who develop relationships with these advertisers,” Vincent said. “When you let go of veteran staff like Twitter and there’s no one there to answer those [brands]you essentially reduce the value of the ad platform.”

By bringing Trump and other controversial figures back to the platform, Twitter could better appeal to right-wing advertisers doing business on alternative platforms like Trump’s Truth Social. While there is a market for advertising “people who buy gold, people who buy survival kits and guns and weapons,” Twitter has long been known as a more politically neutral, if not a little leftist, platform and could have difficulty attracting such companies, said Michael Serazio, a communications professor at Boston College.

Musk will also have to contend with potential pressure from regulators, as well as app store operators Apple and Google, if he is to succeed in turning the Twitter business around. A group of US senators has already called on the Federal Trade Commission to investigate Musk’s Twitter for potential violations of the company’s 2011 consent decree. And Europe’s Digital Services Act could impose limits on how free Twitter of “freedom of speech” can be. by Musk.

In an op-ed published in The New York Times last week, former Twitter trust and security chief Yoel Roth, who left the company earlier this month, said the company’s inability to adhering to Google and Apple’s app store rules could be “catastrophic.” App stores have previously taken down social media apps for failing to protect their users from harmful content, and Roth hinted that Twitter had already started receiving calls from app store operators following the Musk acquisition. the head of the Apple app store, Phil Schiller, deleted his Twitter account.

More importantly, Twitter will need to keep users invested in the platform if Musk’s subscription strategy is going to work. And it’s not just existing users: Musk will also need to attract new people to the platform, which has long struggled to break out of its niche status and grow its user base, while making sure it’s filled with must-read content.

In the weeks since Musk took over Twitter, which was immediately followed by a surge in hateful content, there have been many gestures of agitation from users about switching to other platforms, and several high-profile accounts have announced their exits, including director Shonda Rimes. and model Gigi Hadid. But it’s unclear whether there’s been a large decline in the user base; instead, Musk said in tweets that usage of the platform is at an all-time high.

As long as Musk can keep Twitter running smoothly despite having fewer employees, many users will likely stick around, perhaps even more so after the comeback of controversial accounts that tend to make headlines with incendiary comments on the platform. Musk himself has pointed out that even as people worry about the demise of Twitter, they are worrying about the platform itself. And the billionaire proposed making it easier for creators to earn money on the platform, which could also drive usage.

However, there is no guarantee that continuing to capture the online world’s attention will result in subscription payments or other revenue growth.

“Even if both Musk and Trump are driven by the gravity of the attention economy, that doesn’t mean they will be able to cash in on it,” Serazio said. He said Musk likely made the decision to reinstate Trump’s account because he “would cause headlines, it would get attention,” adding that “attention won’t save Twitter … but I don’t know [Musk] it has no other strategy than the attention economy, even if it doesn’t know how to profit from it.


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