Overpaying for Twitter in the midst of a tech stock downturn and secular decline in social media advertising may turn out to be the least of Elon Musk’s troubles.
Having completed his purchase of the company last week, the world’s richest man has just taken on not one but two seriously difficult problems. Failure to solve them would tarnish his enviable reputation as the rare all-purpose entrepreneur who has brought a golden touch to markets as different as electric cars and rocket ships. It would also undermine his pretensions to being able to fix difficult societal problems, at just the moment he seems bent on using his considerable wealth and personal influence to assume a more prominent role in public life.
As one veteran Silicon Valley financier warned when the billionaire first declared his desire to buy Twitter: this deal could turn out to be Musk’s Waterloo.
The first problem is to cement Twitter’s role as an open marketplace for ideas without at the same time turning it into what he calls a “hellscape”. In some ways, Musk himself may be the worst person to take on this job.
For a start, his own use of Twitter hardly makes him look like a suitable arbiter of online behaviour. He has often shown a tone-deafness in trolling his enemies and has used the service to take aim at people he disagrees with. He notoriously tweeted that he was close to a fictitious Tesla buyout, leading to a fine from the US Securities and Exchange Commission and the loss of his Tesla chairmanship.
Despite claiming to be a “free speech absolutist”, Musk has already conceded that some degree of content moderation is needed. But he hasn’t explained clearly why he thinks Twitter’s previous management failed at this job, or what standards he would apply in trying to do it better. After sacking much of the company’s top management, including the executive most directly responsible for tackling online harassment and misinformation, he seems doomed to repeat lessons Twitter has already spent many years learning.
Musk’s extensive business interests also complicate the picture. His companies are dependent on government decisions when it comes to things such as opening new car plants, securing raw materials and winning contracts for rocket launches. That could give foreign governments leverage if they want to influence how Twitter operates.
His second problem is Twitter’s failure to break out of a relatively narrow business niche. For the information junkies who spend large parts of their day on the service, it is an invaluable tool. But Musk has set his sights on reaching a far bigger audience, while also moving beyond advertising to make money from payments and commerce.
His supporters talk as though his record in other markets almost guarantees success. One co-investor in the Twitter buyout, speaking before the deal was completed, claimed to be unconcerned about the $44bn purchase price, which was agreed before the recent tech stock slump. With Musk in charge, this person said, the company might end up being worth $300bn. Yet it was not clear how this would be achieved.
Musk has suggested that one route to expansion could be to build bigger audiences around different specialist interests. That is something Twitter had already been working on, though it was lagging well behind the ambitious goals that had been set for audience growth. To make faster audience gains, he will need something more radical.
One option would be to turn Twitter into a platform, making it a central repository for tweets that others could tap into. This is an idea that harks back to Twitter’s earliest days, when the company briefly pursued a platform strategy. If other companies brought their own algorithms to bear on Twitter’s content, presenting it in different ways for their own audiences, it might expand the market more rapidly than Twitter could do alone.
A platform approach could also go some way to resolving Twitter’s moderation problem. Groups of users could take on the job of moderating discussions on topics they are interested in, as they already do on Reddit. Or other companies that build their own services on the Twitter platform could assume the responsibility, devising different levels of moderation to suit the particular audiences they are trying to attract.
Would Musk back an idea like this? For now, the only sure thing is that he is taking Twitter back to the drawing board. The reputation of the era’s most successful entrepreneur is riding on the outcome.
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