Elon Musk has upended Twitter’s business. Here’s how he could fix it

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CNN Business

Much of Twitter’s advertising sales team has been laid off or fired. Major companies from General Mills to Macy’s have stopped advertising on the platform, potentially following new owner Elon Musk’s decision to revoke the accounts of former President Donald Trump and other controversial figures. And any cursory scrolling of the platform will likely show you less big brand ads.

All of this would seem like terrible news for a business that generates a large portion of its revenue from advertising. But Musk probably doesn’t care.

Tesla’s CEO has previously said he “hates advertising” and, as the owner of Twitter, has claimed the company’s desire to rely more on partnership revenue than advertising dollars. Twitter has always tried to turn its vast influence in media, politics and culture into a very successful advertising business. And without needing to please advertisers, the billionaire will be free to implement his “free speech” vision for Twitter.

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

Rethinking Twitter’s success as a participatory business will buck the trend of many other media properties that have struggled with the model. And Musk’s efforts to get out the door failed. An updated, $8-a-month version of Twitter’s Blue subscription service, which allows users to buy an authentication checkmark, has been discontinued just two days after celebrities (notably Musk himself), businesses, and government agencies Abused for imitation. . Musk initially said he would restart the service on November 29, but suggested on Monday that he might delay it further “until there is a high degree of confidence in stopping the impersonation.”

Some industry observers have also questioned whether, given Twitter’s somewhat unique status as a relatively small platform widely used by members of the media, politicians, and academics, such a subscription service would gain widespread acceptance. can be Even if all of Twitter’s reported 217 million daily users signed up for Musk’s $8-a-month subscription by the end of 2021, annual revenue would still be less than a quarter of rival Meta’s size.

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Still, some industry insiders have reason to think he can pull it off. “Twitter has been more entertaining than Netflix in the past month and is easily worth $8,” Roy Price, founder of Amazon Studios, said in a tweet on Saturday. “Don’t underestimate Musk,” Salesforce CEO Marc Benioff said in a tweet. And Twitch co-founder Justin Kahn tweeted that he thinks Twitter will “probably survive (and possibly thrive!)” in part because, unlike some high-profile users who have announced their departure from the platform Done, most regular users likely don’t care who leads the platform and how.

In fact, Musk’s shift away from advertising and toward a subscription model could work if Twitter survives having to cut all of its revenue beforehand, run its own systems, crack down on copyright infringement and hate speech. Avoid breaking the law, and stay in good standing with Apple. And Google, which controls the app store that belongs to Twitter.

It’s worth the effort to pull it off. After borrowing billions of dollars to finance his takeover of Twitter, Musk is racing against the clock to turn what was already struggling into a company that can generate enough cash flow to repay the debt. He may also risk his reputation as “a brilliant and courageous entrepreneur who built Tesla against widespread skepticism and criticism,” said Robert Breuner, a professor of business administration at the University of Virginia’s Darden School of Business.

Whether he likes ads or not, the business generated 90% of Twitter’s revenue before Musk bought it, and replacing it won’t be an immediate change.

In the wake of the turmoil on Twitter in recent weeks, there has been talk of brands leaving the platform out of concern that their ads could be exposed to objectionable content. But that may not be the only, or even the primary, reason why advertisers have fallen away — or why it’s been difficult to attract new ones. Advertisers are also concerned about Twitter’s stability, as users and former employees raise concerns that mass exodus of employees could damage the platform with disruptions and outages.

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Brands may also be upset that several employees of Twitter’s ad sales team who managed their campaigns have been laid off or fired, including another round of layoffs and walkouts since Monday.

The big digital platforms “have experienced professionals out there building relationships with these advertisers,” Vincent said. “When you let go of an employee who was as experienced as Twitter and there’s no one to answer to. [brands]you basically devalue the ad platform.

By bringing Trump and other controversial figures back to the platform, Twitter may have more appeal to right-wing advertisers who trade on alternative platforms like Trump’s True Social. While there is a market where “people buy gold, people buy survival kits, guns and weapons,” Twitter has long been known as a very politically neutral, if Not something left, the platform and may struggle to attract such companies. , said Michael Serrazio, professor of communications at Boston College.

Musk must also contend with potential pressure from regulators, as well as App Store operators at Apple and Google, if he wants to succeed in turning Twitter’s business around. A group of US senators has already asked the Federal Trade Commission to investigate Musk’s Twitter for possible violations of the 2011 consent decree. And Europe’s digital services law 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, Yoel Roth, Twitter’s former director of trust and safety, who left the company earlier this month, said Google and Apple’s rules for buying into the App Store A company’s failure to participate could be “catastrophic.” “App stores have already removed social media apps that failed to protect their users from harmful content, and Roth suggested that Twitter had already started receiving calls from App Store operators after Musk’s takeover. Finally, Phil Schiller, head of Apple’s App Store, He deleted his Twitter account.

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More importantly, Twitter must get users invested in the platform if Musk’s engagement strategy is to work. And it’s not just existing users — Musk will need to attract new people to the platform, which has long struggled to break out of its niche and grow its user base, by ensuring It is full of reading content.

In the weeks since Musk took control of Twitter — which was immediately followed by a surge in hateful content — there has been a lot of hand-wringing about users moving to other platforms, and many high-profile accounts have had their announced departures, including director Shonda Rhimes and model Gigi Hadid. But it’s not clear that there is a massive decline in the user base; Instead, Musk claimed in tweets that the platform’s usage is at an all-time high.

As long as Musk can keep Twitter functioning despite having fewer employees, many users will likely stick around, perhaps even after the return of controversial accounts that make news on the platform with outrageous comments. Musk himself has indicated that even as people fear the death of Twitter, they are doing so on the platform itself. And the billionaire has offered to make it easier for creators to make money on the platform, which could also drive usage.

Even now, there is no guarantee that continuing to capture the attention of the online world will translate into growth in subscription payments or other revenue.

“Even as Musk and Trump are both driven by the gravity of the care economy, that doesn’t mean they’re going to be able to cash in on it,” Serrazio said. He said Musk likely decided to restore Trump’s account because “it’s going to cause headlines, it’s going to cause attention,” adding that “attention won’t save Twitter…but I don’t know if [Musk] There is no strategy other than the care economy, even if he doesn’t know how to use it.


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