Elon Musk has turned the business of Twitter upside down. Here’s how he could fix it

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New York
CNN Business

Much of Twitter’s ad sales team has been fired or expelled. Major companies from General Mills to Macy’s have suspended advertising on the platform, and others have potentially followed suit after new owner Elon Musk’s decision to restore former President Donald Trump’s account and… other controversial personalities. And any cursory scrolling through the platform will likely show you fewer big brand ads.

All of this would seem like horrible news for a company that generates the lion’s share of its revenue from advertising. But Musk may not care.

The Tesla CEO has previously said he “hates advertising” and, as the owner of Twitter, has said he wants to make the company more dependent on subscription revenue than advertising dollars. Twitter has always struggled to turn its outsized influence in media, politics, and culture into a highly successful advertising business. And without needing to please advertisers, the billionaire would be freer to implement his vision of “free speech” for Twitter.

“I always thought a move to a subscription business would make sense for Twitter…it’s never been a great advertising platform,” said Larry Vincent, associate professor of marketing at the Marshall School of USC Business. Twitter’s ad business has long been smaller than rivals like Facebook, in part because it didn’t offer the same level of user targeting.

Successfully revamping Twitter into a thriving subscription business would be like turning the tide on many other media properties that have struggled with the model. And Musk’s attempts from the start failed. An updated $8-a-month version of the Twitter Blue subscription service that allowed users to purchase a verification tick had to be discontinued after just two days when it was used to impersonate prominent figures ( including Musk himself), corporations and government agencies. . Musk initially said he would relaunch the service on Nov. 29, but suggested on Monday he could delay it further “until there is a high level of confidence in stopping the spoofing.” .

Some industry observers have also questioned whether, given Twitter’s somewhat niche status as a relatively small platform used largely by members of the media, politicians and academics, such a service would subscription could be widely adopted. Even if Twitter’s 217 million daily users said they signed up to 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 believe he can pull it off. “Twitter over the past month has been far more entertaining than Netflix and easily worth $8,” Amazon Studios founder Roy Price said in a tweet on Saturday. Salesforce CEO Marc Benioff said in a tweet, “don’t underestimate” Musk. And Twitch co-founder Justin Kan tweeted that he thinks Twitter “could survive (and potentially thrive!) very well,” in part because, unlike some high-profile users who announced their departure from platform, most regular users probably don’t. it doesn’t matter who runs the platform and how.

Indeed, Musk’s shift from advertising to a subscription model could work if Twitter can survive with all of its revenue decimated beforehand, keep its systems operational, avoid violating copyright infringement laws. and hate speech, and also staying in good standing with Apple. and Google, which control the app stores that Twitter depends on.

The stakes in getting there are high for Musk. After borrowing billions of dollars to fund the takeover of Twitter, Musk is against time to turn what was already a struggling business into one that can generate enough cash to pay off its debt. He may also risk his reputation as the “gifted and daring entrepreneur who made Tesla work against widespread doubt and denial,” said Robert Bruner, professor of business administration at the University of Virginia’s Darden School of Business. .

Whether he likes advertising or not, the company accounted for 90% of Twitter’s revenue before Musk’s takeover and his replacement won’t be an immediate change.

In the wake of the chaos on Twitter in recent weeks, there have been reports of brands leaving the platform over fears their ads could end up alongside objectionable content. But that may not be the only or even the main reason advertisers have moved away – or why attracting new ones could be tricky. Advertisers are also likely nervous about Twitter’s stability, as users and former employees fear the mass exodus of staff will leave the platform vulnerable to glitches and outages.

Brands may also be angry that many of Twitter’s ad sales employees who ran their campaigns were fired or expelled, including after another round of layoffs and departures on Monday.

The big digital platforms “have experienced professionals who develop relationships with these advertisers,” Vincent said. “When you let go of a staff as experienced as Twitter’s and there’s no one to answer those [brands]you essentially reduce the value of the advertising platform. »

By bringing Trump and other controversial figures back to the platform, Twitter could have greater appeal for right-wing advertisers doing business on alternative platforms like Trump’s Truth Social. Although there is a market for advertising to “people who buy gold, people who buy survival kits, guns and weapons”, Twitter has long been known as a platform. more politically neutral, even somewhat left-wing form, and may struggle to attract such businesses. , said Michael Serazio, professor of communication at Boston College.

Musk will also face potential pressure from regulators, as well as app store operators from Apple and Google, if he is to succeed in turning Twitter’s business around. A group of US senators has already asked the Federal Trade Commission to investigate Musk’s Twitter account for potential violations of the company’s 2011 consent decree. And the EU Digital Services Act could impose limits on Musk’s freedom of expression on Twitter.

In an op-ed in The New York Times last week, former Twitter trust and safety chief Yoel Roth, who left the company earlier this month, said the company’s failure to comply business of Google and Apple’s App Store rules could be ‘catastrophic’. .” App stores have previously taken down social media apps for failing to protect their users from harmful content, and Roth suggested that Twitter had already started receiving calls from app store operators after the takeover. Musk. Over the weekend, Apple’s App Store manager Phil Schiller deleted his twitter account.

More importantly, Twitter will need to keep users invested in the platform if Musk’s subscription strategy works. And it’s not just existing users – Musk will also have to attract new people to the platform, which has long struggled to break out of its niche status and grow its user base, ensuring it is filled with must-see content.

In the weeks following Musk’s takeover of Twitter – which was immediately followed by an increase in hateful content – ​​users beckoned heavily to switch to other platforms, with several high-profile accounts announcing their departure, including director Shonda Rimes. and model Gigi Hadid. But it’s not clear that there’s been a large drop in the user base; instead, Musk claimed in tweets that usage of the platform was at an all-time high.

As long as Musk can keep Twitter running smoothly despite the reduced number of employees, many users are likely to stick around, perhaps even more after the return of controversial accounts that tend to make news with inflammatory comments on the platform. -form. Musk himself pointed out that while people are worried about Twitter’s demise, they are on the platform itself. And the billionaire has offered to make it easier for creators to earn money on the platform, which could also boost usage.

Even still, there’s no guarantee that continuing to capture the attention of the online world will translate into subscription payments or other revenue growth.

“Even though Musk and Trump are both driven by the gravity of the attention economy, that doesn’t mean they’ll be able to take advantage of it,” Serazio said. He said Musk probably made the decision to restore Trump’s account because “it was going to make headlines, it was going to get attention,” adding that “attention won’t save Twitter…but I don’t know that”. [Musk] has another strategy than the attention economy, even if he does not know how to take advantage of it.

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