Elon Musk has paid $54.20 or $44 billion to buy Twitter, a platform with somewhere around 217 million active users which makes Twitter about 10% the size of Facebook. Last year Twitter lost $493 million on revenue of $5.57 billion and again, in contrast to Facebook (now Meta) that had a profit last year of $39 billion on revenue of $118 billion.
Musk has said he is not interested if Twitter makes money which is a good thing since Twitter has not turned a profit for eight of the last ten years. Of the 217 million active users on Twitter, 88 million already follow Musk’s Twitter feed which sort of suggests that Musk just paid $44 billion to capture just over half of the users that don’t already follow him.
Since Twitter went public in 2013, it has remained somewhat of an under-performer both in terms of its revenue generation and user growth and has made headlines as often for its dysfunctional board and missteps with corporate governance as it has for highlighting its very purpose for being. In the past ten years Twitter has become the platform that “needs saving” and more than one multi-billion-dollar company has come knocking at the door with a plan to buy the social media company. Disney kicked the tires but walked away at the thought of how owning a platform of disinformation could tarnish the Disney brand’s squeaky-clean reputation. Salesforce came close to buying Twitter before a shareholder revolt derailed the deal. Activist investor Elliot Management took a stake in Twitter, not as an attempt to own the company outright but as a way of driving change and to influence shareholder value. Elliot successfully had founder Jack Dorsey step down as CEO in 2021.
Everyone wants to own Twitter not because it is a well-oiled machine but for what it potentially could be. And now Musk is the guy with the keys to the castle.
Betting against Musk is a fool’s game. He has become the richest man in the world by revolutionizing the auto industry with Tesla, by creating a space fleet with SpaceX and by digging tunnels with the Boring Company that may one day be the answer to mass transportation. But why on earth would Musk want the headache of owning Twitter?
In Musk’s own words, “free speech is the bedrock of a functioning democracy and Twitter is the digital town square where matters vital to the future of humanity are debated.” That sounds absolutely terrific, until it isn’t. Like all social media platforms, what’s defined as free speech can fall off a cliff rather quickly when it comes to government propaganda, disinformation, conspiracy theories, pornography, counterfeiting, ethnic violence, gender bias and a million other grey areas that have become a huge headache for anyone in the “free speech” business. Free speech means different things to different people and living up to the proclamation “I believe in giving people a voice” that Meta’s Mark Zuckerberg said in 2019 may be easier said than done. Give the world a platform and quickly learn human behaviour can be ugly and sinister and someone needs to make the judgement call of defining what’s right and what’s wrong. That guy is now Elon Musk.
So how does Musk open the gates to twitter being the champion of free speech while also ensuring that there is no Russian interference in the next U.S election? How does he keep fake Gucci bags from popping up in every feed that ever watched “The House of Gucci”? What about the next pandemic? The list is long and it sounds like a nightmare. An easy fix could be creating a subscription and member base which could be ideal so long as Russia, China, Iran, Saudia Arabia, North Korea and Myanmar are excluded from the member base. But that screws up free speech being the bedrock. Good grief what a mess!
Musk now has five companies that he runs when you include the start-up on implanting computer chips in to human brains. Jack Dorsey who used to run Twitter as well as Square (now Block) was regularly criticized for spreading himself too thin being the head of two companies and Musk has five!
Musk may take a hand’s off approach in the same way Jeff Bezos stayed arm’s length when the Amazon founder purchased the Washington Post, but I doubt it, since Musk has been critical of the Twitter management team so he’s not going to take a business-as-usual stride with his latest acquisition.
Musk is larger than life and the easiest conclusion is that if anyone can fix the internet it’s probably him. Then again, just because you have had a history of success (PayPal, Tesla, SpaceX and so on) that doesn’t mean that winning streak goes on forever. Is it hubris? Is it ego? Or is it brilliance? Only time will tell.
Musk will take Twitter private, tweak the board, change the bots, adjust the revenue model while then returning the company to public markets at say, $80 a share. He will recoup his capital while adding another $30 billion to his wealth. Like they say, it takes money to make money and Musk is pretty good at that. Don’t bet against him even on the crazy bets like this one.