So far Elon Musk’s acquisition of Twitter looks like a pretty standard private equity takeover – load the business with debt and sack most of the staff.
But Twitter is not a department store or widget manufacturer. As Musk says, it is the digital town square, a tool used by hundreds of millions of people around the world to inform each other, shout at each other and tear each other down.
It’s a place where the world’s earnest and elite mingle with anonymous clowns and bullies. Twitter is a river of 500 million messages per day that you dip a cup into as it flows past, and spit, weep or vomit into yourself, as you feel the urge.
It’s also not a very good business. In the latest quarter, revenue was $US1.17 billion, costs $US1.52 billion, loss $US343.7 million.
And Elon Musk paid way too much. When he first offered to pay $US54.20 a share in April, or $US44 billion in total, Twitter was trading at under $US40.
Since then, shares in Facebook’s owner, Meta, have halved and all technology and social media stocks have been smashed in another brutal tech bust. Twitter shares would have fallen a lot too, so if he’d waited Musk could probably have picked it up for half what he’s now paying.
But is it a trophy purchase, where the returns don’t matter, or an investment, where they do?
Well, he showed up at Twitter headquarters last week making a dad joke – carrying a sink, saying, and tweeting, “let that sink in” – and since then there has been a small flurry of tweets, like “the bird is now freed”, and “to be super clear, we have not yet made any changes to Twitter’s content moderation policies”, as well as replying personally to some customer complaints.
Tweet from @elonmusk
He’s a big user of Twitter, has 111,279,343 followers and now calls himself “chief twit”, so it’s definitely trophy-ish.
But he also has a business plan, or at least said he had one. It involves turning Twitter into a super-app, like China’s WeChat, which started out as a messaging service and now does everything, from banking, travel and ordering food deliveries and taxis to online shopping.
That’s a perfectly sound idea: WeChat earned more than three times Twitter’s $US5 billion revenue last year, some from advertising but mainly from clipping the ticket on transactions.
Whether WeChat makes a profit is unclear, but its parent, Tencent, certainly does – $US2.8 billion in the latest quarter, which was down 55 per cent against the same quarter last year because of the zero COVID lockdowns in China.
And no one has managed to create a WeChat-style super-app outside China, where shopping is on Amazon, ride hailing and food deliveries are on Uber, pizzas on Domino’s app, video conferencing on Zoom, banking on each bank’s app, pictures are sent on Instagram and Facebook, videos posted on YouTube.
Persuading enough of Twitter’s 400 million users to switch all that to Twitter will be easier said than done.
For a start, are there really 400 million human beings using it? When he was trying to get out of the takeover in August, Musk’s lawyers claimed that at least 10 per cent of the accounts are fake, operated by “bots”. Twitter successfully refuted that, which is why Musk has had to now complete the takeover.
Another problem is that 10 per cent of the users do 92 per cent of tweets; the other 90 per cent are idly lurking or have moved on after creating an account and don’t bother with it at all.
Anyway, everyone is quite happy with the way things work now, ordering a ride on Uber, dinner on Uber Eats or Deliveroo, doing banking with the bank, booking travel on Webjet and checking out Facebook, Instagram and Twitter to see what everyone else is up to.
But perhaps the biggest problem for Musk is that a lot of the Twitter accounts are anonymous, which is both a strength and a weakness.
Facebook makes more money because its users are identified and the advertising can be targeted – down to a single individual if necessary.
And anonymity allows people to say some pretty terrible things on Twitter that they would never say to someone they were standing in front of. Twitter is both gloriously riotous, and a snake pit.
A year ago, Twitter put up a blog defending its policy of anonymity, saying: “Put simply, trust is based on what you do, not who you are. And anonymity provides space for more people to express themselves freely and safely, in ways that actually engender that sort of trust-building connection.”
But you can’t order dinner or book a flight if you’re anonymous, so Musk’s business plan must involve forcing its users to be identified. Without anonymity, Twitter will be a smaller, and probably less interesting, platform, which means this is a significant business risk for its new owner.
And then there’s the matter of how many Twitter users will resent it being owned by a capitalist, and flee.
Over the weekend, ABC broadcaster and News Corp columnist Phillip Adams, plaintively tweeted: “Sad day. The twitterverse bows down to the Great Twit Ego Musk. To tweet or not to tweet? That is the question”, and then later: “All together now. Let’s block Musk.”
In general, Twitter is not a place for right-wingers, although that may change: Elon Musk seems prepared to let Donald Trump back in.
But as Trump showed when he was booted off it, Twitter is neither an essential service nor a monopoly – he just went and started up his own version of it.
If we don’t like what Elon Musk does with Twitter, we can read a book, or whatever else we used to do BT (before Twitter).
Alan Kohler writes twice a week for The New Daily. He is also founding editor of Eureka Report and finance presenter on ABC news
