There is no sign that Elon Musk has approached the purchase of Twitter in any coherent fashion. He spent six months trying his hardest to get out of the deal, and only gave in and bought the site after discussions of the purchase were publicly revealed in discovery.
I don’t believe that Musk must surely have a nine-dimensional chess plan to make Twitter work according to all the conflicting desires he’s already posted for the site. I think it’s more likely Musk never had a plan, and he’s now floundering from crisis to crisis, all of his own making.
He has absolutely no idea how to fix this. There probably isn’t a way.
Balancing the books
I don’t believe there’s vistas of unexploited value in Twitter just waiting to be unlocked by Musk.
Twitter just doesn’t make as much money as it needs to. From the New York Times: [NYT]
Last year, Twitter’s interest expense was about $50 million. With the new debt taken on in the deal, that will now balloon to about $1 billion a year. Yet the company’s operations last year generated about $630 million in cash flow to meet its financial obligations.
Twitter’s 2021 advertising revenue was $4.5 billion. Compare Google’s $209 billion in ad revenue. [Barron’s]
Can Twitter squeeze more money from advertisers? Not by going the way Musk wants to.
Big-brand advertisers are centrists, and so are their target markets. They want a mass audience of reasonably normal people who are comfortable being there. Neither the advertisers nor their desired audience want weird, disturbing or horrible content.
Musk, however, wants a “free speech” site.
The term “free speech” should mean so much more than “gibbering racists and bigots.” Unfortunately, this is 2022, and there’s one very loud group of swivel-eyed loons using these words to mean their assumed right to scream spittle into your face.
Others have written how there just isn’t the market for the sort of right-wing “free speech” site that Musk and his advisors Peter Thiel and David O. Sacks want. This sort of site has been tried, over and over — Parler, Gettr, Truth Social. These sites only ever attract a small core of fringe nutcases, who drive away any non-nutcases. Even Gab eventually had to put in content moderation. [The Verge]
Major brands are already jumping ship from Twitter as fast as possible. Musk tried to reassure the brands that “free speech” wouldn’t mean odious nutters, and they don’t believe him. Some brands are departing loudly, and others are just quietly fading into the bushes. Sarah Personette, Twitter’s chief commercial officer, resigned on Tuesday. She was the main liaison to the big brands. Musk will need a replacement who can reassure the brands. [Twitter; FT, paywalled]
Musk, Thiel and Sacks are telling their paying customers — the advertisers — that they’re wrong. That’s not going to work. They’re pushing a piece of string.
Twitter can’t work as a money-making business the way Thiel and Sacks have talked Musk into trying to run it. If Thiel wants this, he’ll need to fund it himself, substantially, as an influence loss-leader.
Doing less with less
Musk’s great idea to save money at Twitter is to get as many staff to leave as possible, and fire a lot of the rest. Venture capitalist Jason Calacanis, who is now helping Musk at Twitter, suggested various forms of constructive dismissal that should go down really badly with labour boards in California and New York — let alone outside the US — and are now on the public record. [TechCrunch; redacted discovery, PDF]
Firing everyone might work if all your employees are completely interchangeable, and it doesn’t really matter who is in a particular job. It’s a less great idea if you have particular people who remember how a large, complicated and legacy-filled proprietary system works, and who didn’t jump ship any time in the previous six months.
Employees were shaky about Twitter between April and October, but at least the management were relatively normal. Since Musk arrived, his new team isn’t telling workers anything. They’ve had to scour tweets and rumour message boards to find out what the heck is going on. Key employees are jumping or being pushed. [Washington Post]
Management by tweet is how you get a site that just breaks one day, and nobody who remains knows how to fix.
I don’t think Musk wants Twitter to disappear. I do think he’s going to get that unless someone can slap some sense into him.
Death spiral financing
Musk has overleveraged Tesla’s already-inflated stock price to buy Twitter, and even that didn’t give him enough money.
If Tesla stock goes down, Musk is in a lot of trouble — he set himself up in what’s effectively death spiral financing, where you need to throw in more stock to compensate for the stock dropping in price, which then causes the stock to drop in price.
Musk’s highly leveraged deal also leaves Twitter without sufficient profit to even service the debt Musk ran up to buy it.
This leaves Musk in a position where he might have to ask his co-owners for more money — at which point they will expect much more influence.
Yes, but what about crypto?
Crypto remains heavily dependent on Twitter.
The Binance crypto exchange put $500 million toward the purchase of Twitter — a bit over a 1% share. Note that this cost them $500 million in actual money, not cryptos.
It’s not clear what direct effect Binance expects this to give them on what happens on Twitter, but I think it’s safe to say they expect the effect to be greater than zero. Perhaps Changpeng Zhao hopes being in with Twitter can be leveraged into wider influence. He’s already suggested being on the Twitter board, if there ever is one. [Benzinga]
Crypto Twitter is really pretty free for speech. There isn’t much limit on talking about or pumping your cryptos.
The crypto scammers are a plague. Musk already finds crypto spammers personally annoying; it’s possible he could have a word with someone from the relevant department who he hasn’t fired yet.
Twitter founder Jack Dorsey already tried to put crypto-based tipping into the Twitter Tip Jar feature, at least on iOS. I’ve never even heard of anyone using the Tip Jar — but Twitter is big, perhaps it works somewhere.
There was some idiot hopium-addled mumbling that Musk might run Twitter from a DAO. Twitter is never going to be governed meaningfully by a DAO. Musk is the proprietor, leading Twitter to a glorious new future. He’s taking advice from his venture capital buddies, but he is absolutely not letting anyone other than himself have the final say.
If Musk is talking up cryptocurrency, then you should keep in mind that Musk says a lot of things.
Liberty for me and my money
The people Musk went into the Twitter deal with very much like one thing about cryptocurrency: the promise of a private currency for rich guys to swing their cash around as they please, without such dire threats to human liberty as taxes, capital controls or regulatory oversight. Musk, Thiel and Dorsey (who is also advising Musk) are very into this promise of cryptocurrency.
I wrote about this in Foreign Policy when Facebook’s Libra was launched in June 2019, and again in Libra Shrugged chapter 5. I should really have broken it out as its own chapter — I’ve come to think that a private currency for rich guys to use out of sight of governments was always the real point of Libra. Or what sold it to the Facebook board, anyway. (Thiel was on the Facebook board at the time.)
I don’t believe cryptocurrency can deliver on this promise of the sort of private money that rich guys want. When Facebook tried with Libra, it was rejected instantly by every regulator in the world. The regulators are still writing new rules to stop any such thing happening again.
As well as regulators not allowing it, crypto is just technically bad at being money. Bitcoin failed hard at being a currency for payments. Even the dark net drug market users hated bitcoin, they just weren’t able to use dollars.
That a cryptocurrency-based private money for rich guys can’t possibly work will never stop them from trying, of course. Perhaps they can alienate Twitter’s remaining non-crypto users.
What about the users?
Twitter is shedding users fast. For what it’s worth, I’ve lost about 200 Twitter followers out of 25,000 in just the past few days. This could be my bad tweets finally doing their work — but a lot of other semi-popular Twitter users are reporting sudden declines as well. I think active users are already leaving Twitter.
Personally, I plan to keep riding Twitter all the way into the ground. I’m pretty certain it will auger in hard.
Yahoo! bought blogging site Tumblr for $1.1 billion in 2013. Yahoo!’s buyer Verizon eventually sold Tumblr to WordPress.com in 2019 for $3 million. The only question for Twitter is how long this takes.
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I don’t know if it’s ironic or not, but I have always blocked any account that lands a promoted tweet on my feed. This is, I hasten to add, not unique to Twitter: I routinely boycott any company that manages to weasel an advertisement into any media I am consuming. I was mildly conflicted when I blocked my own employer. I genuinely believe that social media will never be genuinely good until we have a paid ad-free version that allows, you know, actual social interaction, free of bloodsuckers.
I do wonder if there’s a parallel here with the media, where extremists offer their content for nothing, while reality-based publications tend to be behind paywalls. Imagine if you could pay $20 per month but any link to a normally paywalled site (FT, NYT, WaPo etc) was free. I would pay that $20 like a shot.
The $20-per-month-for-any-paywalled-article-anywhere is a great idea. But it would flounder on the Netflix problem: studios bet that they could make more money by pulling their content from the central service and starting their own.
> Imagine if you could pay $20 per month but any link to a normally paywalled site (FT, NYT, WaPo etc) was free. I would pay that $20 like a shot.
Apple News+ is basically this service. I don’t now how successful it is or whether it also prevents ads.
That is a really good idea
If it also removed whiny anti-adblock stuff, I’d pay 20$ a WEEK for that.
“Firing everyone might work if all your employees are completely interchangeable, and it doesn’t really matter who is in a particular job. It’s a less great idea if you have particular people who remember how a large, complicated and legacy-filled proprietary system works, and who didn’t jump ship any time in the previous six months.”
And in a technical organization you have the issue that the best employees can easily find work at other organizations – even in a down market. The best employees have the incentive to be headhunted away to other companies leaving behind the folks who don’t have other opportunities available. Especially if you’re going out of your way to create a hostile work environment to get people to quit – the people who are going to quit first are the ones who have the easiest time finding opportunities elsewhere. The folks who have been fending off headhunters for years and are going to land on their feet. The last to leave are going to be the ones with the least to offer another potential employer.
I’ve seen this happen in other companies. It never works out well for the company that does it. Generally they end up stuck with the technical staff who can’t find other opportunities because at least they have knowledge of the system and you can’t let all of the system knowledge walk out the door and still have a system.
I have been the junior sysadmin with six months’ total sysadmin experience who survived when the three people in the org chart above me all got laid off and I inherited their jobs. Because all sysadmins are interchangeable, right? I stayed on long enough to make it a full year and then ran away to London. I heard a few months later that the unit was shutting down, but they’d laid off so many people they’d literally lost track of where the server room was in the building. I could have told them, but I would have been charging appropriately for the consultation.
This is a timely post- news this morning (Friday 4 November) is of “total chaos” at Twitter as employees are locked out of their accounts and await emails about their fate
Apparently the on-call engineer lost access while on call. Goodness me.
The sign of a well-run and functional organization is when you fire the person who is on call before their on call shift even finishes! It’s disruptive or something!
I see that a class action lawsuit has already been filed since this short term notice for mass layoffs violates certain state and federal laws. You have to give people more than 5 minutes notice. You’d think Musk would know this since Tesla is currently being sued for a similar mass layoff where they didn’t give enough notice that violated federal law.
Talk about going all in on the “Move fast and break things” philosophy…
Reading Musk’s comments after buying Twitter, I keep picturing Principal Skinner from the Simpsons:
“Am I out of touch? No, it is my userbase that is wrong”
Quite apart from Musk’s obvious deficiencies, I think he bought at exactly the wrong time and that the golden age of Twitter was fading anyway. The social media giants are starting to look like evolutionary dead-ends, their quest for engagement worked well for a while but the environment is changing. Twitters global townhall design is unappealing to younger users.
I tried to put down my thoughts in a post but the gist of it is in this comment.
https://sheep.horse/2022/11/social_media_is_not_dying%2C_yet.html
As one of your lost 200 followers im now rediscovering the art of actually reading an entire article before commenting.
I’ve literally joined Twitter a year before its Founder, Edgelord Musk.
But then one man sacrificed his empire to remind us all that being terminally online is an addiction, leading to terrible decision making.
I think I’ve found out what Binance are hoping for. A transcript surfaced of what Musk said at his first all-hands company meeting (https://www.theverge.com/2022/11/10/23452196/elon-musk-twitter-employee-meeting-q-and-a), which included this:
“I think there’s this transformative opportunity in payments. And payments really are just the exchange of information. From an information standpoint, not a huge difference between, say, just sending a direct message and sending a payment. They are basically the same thing. In principle, you can use a direct messaging stack for payments. And so that’s definitely a direction we’re going to go in, enabling people on Twitter to be able to send money anywhere in the world instantly and in real time. We just want to make it as useful as possible.”
Binance would presumably love to run Twitter Pay. They’d mess it up, of course.