February 3, 2023

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

6 min read

New York
CNN Business

Most of Twitter has been the ad sales team. kicked out or pushed out. There are big companies from General Mills to Macy’s. Blocked advertising On the platform, with more Possibly the following suit After new owner Elon Musk decided to restore the accounts of former President Donald Trump and other controversial figures. And any cursory scrolling of the platform will likely show you fewer big brand ads.

All of this sounds like terrible news for a business that generates the bulk of its revenue from advertising. But Musk may not care.

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

“I’ve always thought it would make sense for Twitter to move 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 competitors like Facebook, in part because it hasn’t offered the same level of user targeting.

Successfully turning Twitter into a thriving subscription business will buck the trend of many other media properties struggling with the model. And out of the gate Musk’s efforts failed. An updated, $8-per-month version of Twitter’s Blue subscription service that allowed users to purchase verification checkmarks was halted after just two days after it was launched by prominent people (notably Musk himself), businesses and government agencies. misused to impersonate. . Musk initially said he would resume service on November 29, but Proposed on Monday He may delay it further “until there is greater confidence in preventing impersonation.”

Some industry watchers have also questioned whether, given Twitter’s somewhat niche status as a relatively small platform, such a subscription service used by media, politicians and academics would be a viable option. can 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.

Still, some industry insiders have reason to think he can pull it off. “Twitter has been more entertaining than Netflix over the past month and is easily worth $8,” Amazon Studios founder Roy Price 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 believes Twitter “has the potential to survive (and possibly thrive!)” because, unlike some high-profile users who have defected from the platform. announced, most regular users likely don’t care who is leading the platform and how.

In fact, Musk’s shift away from advertising and toward a subscription model might work if Twitter can survive off its entire revenue stream, keep its system running, and copyright infringement. And avoids violating hate speech laws, and is in good standing with Apple. and Google, which controls the app stores that Twitter relies on.

are too important for Musk to remove. After borrowing billions of dollars to finance the Twitter takeover, Musk is poised to turn an already struggling business into a company that can generate enough cash flow to pay off its debt. Robert Brunner, a professor of business administration at the University of Virginia’s Darden School of Business, said he could also risk his reputation as a “brilliant and courageous entrepreneur who built Tesla against widespread skepticism.” Worked.”

Whether he likes ads or not, the business made up 90% of Twitter’s revenue before Musk took over, and changing that won’t be immediate.

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 with questionable content. But that may not be the only or primary reason advertisers leave — or why it may be difficult to attract new ones. Advertisers are also potentially moving on Twitter’s stability, as users and former employees express concerns that a mass exodus of staff could leave the platform vulnerable to glitches and outages.

Brands may also be upset that many of Twitter’s ad sales employees who managed their campaigns have been fired or pushed out, including after another round of layoffs and exits on Monday.

The big digital platforms have “experienced professionals who build relationships with these advertisers,” Vincent said. “When you let go of a staff that was as experienced as Twitter and there’s no one there to answer to them. [brands]you essentially devalue the ad platform.”

By bringing Trump and other controversial figures back to the platform, Twitter could become more appealing to right-leaning advertisers who do business on alternative platforms like Trump’s Truth Social. While there is a market for advertising “people buying gold, people buying survival kits, guns and weapons,” Twitter has long been known as more politically neutral, if any. Limit is not a left-leaning platform and may struggle to attract such companies. , said Michael Serrazio, professor of communication 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 Twitter around. A group of US senators has already called on the Federal Trade Commission to investigate Musk’s Twitter for possible violations of the company’s 2011 consent decree. And Europe’s Digital Services Act could put 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 head of trust and safety, who left the company earlier this month, said Google and Apple’s failure to follow App Store rules A failure by the company “could be catastrophic.” App stores have already removed social media apps for failing to protect their users from harmful content, and Roth suggested that Twitter had already done so following Musk’s takeover. Started receiving calls from app store operators. Over the weekend, Phil Schiller, head of Apple’s App Store, Deleted your Twitter account..

Most importantly, if Musk’s subscription strategy is going to work, Twitter will have to keep users invested in the platform. 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 and expand its user base. By making sure it is filled with must-read material.

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

As long as Musk can keep Twitter functioning properly despite having fewer employees, many users will likely stick around, perhaps even after the return of more controversial accounts that made news on the platform with inflammatory comments. make Musk himself has pointed out that even if people are worried about Twitter’s demise, they’re doing so on the platform itself. And the billionaire has proposed making it easier for creators to make money on the platform, which could also increase usage.

Still, there’s no guarantee that continuing to gain the attention of the online world will translate into increased subscription payments or other revenue.

“Even when both Musk and Trump are driven by the gravity of the attention economy, that doesn’t mean they’ll be able to cash in on it,” Serrazio said. He said Musk likely decided to restore Trump’s account because “it was going to get headlines, it was going to get attention,” adding that “attention won’t save Twitter … but I don’t know that [Musk] He has a strategy other than the economy of attention, even if he doesn’t know how to exploit it.”

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