Musk messed with Twitter’s business; see what can happen to the network

Much of Twitter’s ad sales team has been laid off or laid off. Big companies from General Mills to Macy’s have stopped advertising on the platform, more likely to follow suit after new owner Elon Musk’s decision to restore the account of former President Donald Trump and other controversial figures. And any shallow scrolling of the platform will likely show fewer ads for big brands.

All of this would seem like awful news for a company that generates most of its revenue from advertising. But Musk might not care. Tesla’s CEO has previously said that he “hates advertising” and, as the owner of Twitter, has expressed a desire to make the company more dependent on subscription revenue than advertising dollars.

Twitter has always struggled to turn its enormous influence in media, politics and culture into a wildly successful advertising business. And without having to please advertisers, the billionaire would be freer to implement his vision of “free speech” on Twitter.

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

Turning Twitter into a thriving subscription business would buck many other media outlets that have struggled with the model. And Musk’s early attempts failed.

An upgraded $8-a-month version of the Twitter Blue subscription service, which allowed users to buy a checkmark, had to be stopped after just two days when it was abused to impersonate important people (most notably Musk himself). ), companies and government agencies.

Musk initially said he would relaunch the service on November 29, but on Monday (21) he suggested he could delay it further “until there is great confidence to stop representation”.

Some industry observers also questioned whether, given Twitter’s 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 217 million daily Twitter users reported having subscribed to Musk’s $8-a-month subscription in late 2021, annual revenue would still be less than a quarter the size of rival Meta.

Still, some industry insiders have reason to think he can do it. “Over the last month, Twitter has been way more fun than Netflix and easily worth $8,” Roy Price, founder of Amazon Studios, said in a tweet on 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 departure from the platform, most regular users probably don’t care who is leading the platform and how.

Indeed, Musk’s shift from advertising to a subscription model might work if Twitter can survive with all its revenue decimated upfront, keep its systems running, avoid violating laws on copyright infringement and hate speech, and also remain in good standing with Apple and Google, which control the app stores that Twitter depends on.

The stakes for making it happen are significant for Musk. After borrowing billions of dollars to finance the Twitter acquisition, Musk is against the clock to turn what was already a struggling business into a company that can generate enough cash flow to pay off its debt.

He could also risk his reputation as “a talented and audacious entrepreneur who made Tesla work against widespread doubt and negativity,” said Robert Bruner, a professor of business administration at the University of Virginia’s Darden School of Business.

problems with ads

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

After the chaos on Twitter in recent weeks, there have been rumors of brands abandoning the platform out of fear that their ads could end up alongside objectionable content.

But that may not be the only or even the main reason why advertisers have turned away – or why attracting new ones can be tricky. Advertisers are also concerned about Twitter’s stability, as users and former employees raise concerns that the mass exodus of employees could leave the platform vulnerable to outages and outages.

Brands may also be angered that many of Twitter’s ad sales staff who managed their campaigns have been laid off or expelled, including following another round of layoffs and departures on Monday.

Large digital platforms “have experienced professionals who develop relationships with these advertisers,” Vincent said. “When you let go of a team as veteran as Twitter’s and there’s no one to answer those questions, [marcas]you basically reduce the value of the ad platform.”

By bringing Trump and other controversial figures back to the platform, Twitter could appeal more to right-wing advertisers who do business on alternative platforms like Trump’s Truth Social.

While there is a market for advertising to “people who buy gold, people who buy home survival kits, or guns,” Twitter has long been known as a politically neutral, if not somewhat leftist, platform, and it may struggle to appeal to these people. companies. , said Michael Serazio, professor of communication at Boston College.

Life beyond ads

Musk will also have to deal with potential pressure from regulators, as well as app store operators from Apple and Google, if he wants to succeed in transforming Twitter’s business.

A group of US senators have already asked the Federal Trade Commission to investigate Musk’s Twitter over possible violations of the company’s 2011 consent decree. And Europe’s Digital Services Act may impose limits on how free Musk’s “free speech” Twitter can be.

In an op-ed published in the New York Times last week, former Twitter head of trust and security Yoel Roth, who left the company earlier this month, said the company’s failure to adhere to the app store’s rules Google and Apple could be “catastrophic”.

”Stores had already removed social media apps for failing to protect their users from harmful content, and Roth suggested that Twitter had already started taking calls from app store operators following the Musk acquisition. Over the weekend, Apple’s app store boss Phil Schiller deleted his Twitter account.

Most importantly, Twitter will have to keep users invested in the platform if Musk’s subscription strategy works. 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, ensuring 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 plenty of hand-wavings from users about switching to other platforms, and several high-profile accounts have announced their departures, including director Shonda Rimes. and model Gigi Hadid. But it’s not clear if there’s been a big drop in the user base; instead, Musk tweeted that usage of the platform was on the rise.

As long as Musk manages to keep Twitter functioning properly despite having fewer employees, many users will likely stick around, perhaps even more so after the return of controversial accounts that tend to make the news with incendiary comments on the platform.

Musk himself pointed out that even if people are worried about the demise of Twitter, they are doing so on the platform itself. And the billionaire has proposed making it easier for creators to earn money on the platform, which could also boost usage.

Even so, there’s no guarantee that continuing to attract the attention of the online world will translate into subscription payments or other revenue growth.

“Even if Musk and Trump are driven by the gravity of the attention economy, that doesn’t mean they will be able to profit from it,” Serazio said. He said Musk likely made the decision to restore Trump’s account because “it would make headlines, it would get attention,” adding that “the attention won’t save Twitter. Any other strategy other than the attention economy, even if you don’t know how to profit from it.”