Does the “Muskification” of Twitter indicate a back in peak or a faster end?
Musk walked into Twitter’s headquarters holding a sink, a scene that could go down in the history books of the tech giant’s development. After half a year, the tug-of-war between Musk and Twitter is finally over. On November 27th, Twitter completed the merger with X Holdings II, a company controlled by Musk, and on 28th, Twitter was delisted from the New York Stock Exchange. Since then, Musk has officially become the new head of Twitter.
The day he walked into the headquarters, Musk also played a pun. In the video of his entry and host into Twitter, the text “Let that sink in” can be understood as thinking about this matter in addition to the literal meaning. Combined with the context, it can be interpreted as multiple meanings.
The world’s richest man worth $189 billion has many titles, not only the CEO of Twitter, but also the CEO of Tesla and Space X. From electric vehicles, commercial aerospace to brain-computer interfaces, and tunnel digging, Elon Musk’s business landscape has further extended to the field of social media.
It has been more than a month since the change of ownership, during which Twitter has been caught up in huge changes and unknowns, including massive layoffs, a number of advertisers stopping their ads and so on. It can be seen that Musk, as a major player in the technology field, is intent on creating a super app, and that Musk’s overhaul will be drastic at both the technology and its application levels.
It should be noted, however, that Twitter’s current business situation is rather bleak. In the second quarter of this year, the company reported revenue of $1.177 billion, down 1% year-on-year, and a net loss of $270 million, compared with a profit of $65.65 million in the same period last year. Musk said in his first address to employees that the company is at risk of bankruptcy if it doesn’t start generating more cash.
So will the frail “little blue bird” be able to set sail again under Musk’s management? Or will the curtain be drawn more quickly in the makeover? We are all waiting for the answer.
New officials take office: a powerful medicine to reduce costs and increase efficiency
A new broom sweeps clean. Musk immediately prescribed a powerful medicine to reduce costs and increase efficiency after taking over Twitter. Step one: conduct major layoffs. Even with the wave of layoffs in Silicon Valley first, the scale of Twitter’s layoffs is particularly unprecedented. As of now, Musk has not announced the exact number of layoffs. Twitter’s permanent workforce is likely to have been cut by about half, according to multiple sources, from about 7,500 employees at the end of last year.
On November 4, Yoel Roth, former head of Trust and Safety at Twitter, said on social media that the layoffs of the previous day affected about 15% of the employees in the Trust and Safety department, while the company has cut about 50%. Not to mention the situation of contract workers. On November 13, Twitter company sources indicate that Twitter fired about 4,400 of about 5,500 contract workers yesterday. According to this calculation, the layoff ratio of contract workers reached 80%. He also mentioned that the layoffs were not notified.
For the remaining employees, the future seems to be tough. According to reports, Musk mentioned in an email sent to employees that to build a breakthrough Twitter 2.0 and to succeed in the increasingly fierce competition, we will need a very hard core. This will mean long hours of intense work, with only excellent performance to be considered a passing grade.
It’s worth noting that Musk’s layoffs came swiftly, and so did his hiring. On November 27, Musk showed several slides on Twitter, and the words “We are recruiting” were particularly eye-catching. Perhaps in addition to streamlining the staff, Musk also intends to change troops.
Step two: make the best use of value-added services. After taking over, Musk quickly launched an updated version of Twitter blue, a paid subscription service, with the price rising from $4.99/month to $7.99/month, and paid subscription users will have a blue V certification. In the beginning, Twitter’s Blue V certification was mainly used to verify official accounts, mainly including government officials, sports stars, entertainers, journalists, brand parties, etc. In June last year, the company first launched the subscription service Twitter Blue in Australia and Canada, where paid subscribers would have premium features such as time-limited retraction of tweets for $3.49 Canadian dollars or $4.49 Australian dollars per month.
In Musk’s plan, maximizing the benefits of subscription services is an important step in optimizing the company’s revenue structure. He has said that by 2028, Twitter advertising revenue will reach $12 billion, and subscription revenue will be close to $10 billion, and other revenue will come from businesses such as data licensing. However, judging from the latest data, this goal is very far away. In the first half of this year, Twitter’s total revenue was $2.378 billion, of which advertising revenue was $2.183 billion, accounting for 92%, and subscription and other revenues were only $195 million.
Reliance on advertising revenue is commonplace for social media. Taking Meta as an example, in the first three quarters of this year, advertising revenue reached $82.4 billion, accounting for 97.6% of the company’s total revenue of $84.4 billion. However, at a time when Twitter is still unable to get rid of advertising revenue, advertisers are rapidly withdrawing. In recent weeks, 50 of Twitter’s top 100 advertisers have announced or suspected to stop advertising on Twitter, among which companies such as Chevrolet, Ford, and Kyndryl have been confirmed to have suspended their advertising business.
The main reason for leaving is surely the uncertainty of Twitter’s follow-up development. Dozens of civic groups have signed an open letter to Twitter advertisers, including Amazon, Coca-Cola and Procter & Gamble, urging them to stop all advertising if the new owner breaks community rules. Because they worry that under Musk’s management, Twitter’s community protection measures and content moderation system will be undermined.
Long-term vision: proposed to build a universal app with Twitter
In serving public conversations, Twitter has contributed an irreplaceable social function. However, in terms of business conditions, this little blue bird has already shown signs of fatigue.
In terms of revenue, compared with the data for 2021, Meta’s total revenue is $117.929 billion, with a net profit of $39.37 billion, while Twitter’s annual revenue is only $5.08 billion, with a net loss of $220 million. Today, Musk is confronted with huge operating pressure, missteps in subscription services, and a collective exodus of advertisers. In the long run, however, Musk’s ambition is to build Twitter 2.0. According to the information released by himself, the upgraded version of Twitter will have the following features: video, encrypted private messages, long-form tweets, the restart of blue V certification and payment, etc.
This ties in closely with Musk’s Vision X. In October of this year, Musk posted on Twitter that the purchase of Twitter was an accelerator for the creation of the universal application X. Based on Musk’s many statements, his ideal X may be a super app with multiple functions such as speech, discussion, payment, and taxi. It is worth mentioning that Musk praised WeChat before, “If you are in China, you can basically do anything with WeChat. It is a bit like Twitter plus PayPal with other functions.” And this X is similar to WeChat. If Musk can use Twitter to realize his dream of X, then this $ 44 billion acquisition may be very worthwhile.
Under the stewardship of a world-class figure with a huge fan base and attention, can Twitter really return to the top or evolve into a more comprehensive X vision? At present, investors, users, advertisers, and ordinary viewers are all waiting to see how the “Muskification” of Twitter will continue.