LDN - Business

Analysis-For Twitter boss Elon Musk, now comes the hard part

[October 29, 2022] By Sheila Dang

(Reuters) - Overspending on Twitter Inc for $44 billion was the easy part.

Now, Tesla Inc Chief Executive Elon Musk must prove why he believes that Twitter is worth 10 times that amount and turn around a social media platform that he has spent months ridiculing.

Earlier this month, the outspoken billionaire said: "Myself and the other investors are obviously overpaying for Twitter right now. The long term potential for Twitter in my view is an order of magnitude greater than its current value."

Musk has provided few concrete details about his plans, and what he has shared appears far-fetched or contradictory.

Here is what lies ahead for Musk, the self-proclaimed "Chief Twit", according to current and former Twitter employees, analysts and investors who considered funding the deal.

OBEYING THE LAWS

Musk has promised to preserve free speech of all kinds, but has also struck a more conciliatory tone with global leaders who aim to rein in Big Tech, worrying activists and former leaders of Twitter.

Just three hours after Musk declared victory by tweeting "The bird is freed," European Commissioner Thierry Breton shot back: "In Europe, the bird flies by our rules."

He reshared a video from May, in which he said in a Twitter video that he agreed with the European Union's new digital media regulation, which will force Big Tech to do more to tackle illegal content or risk fines of up to 6% of global revenue, in one of the world's most severe approaches to regulating content online.

In India, regulators also reminded Musk on Friday on the rule of law. "Our rules and laws for intermediaries remain the same regardless of who owns the platforms," said Rajeev Chandrasekhar, India’s minister of state for electronics and information technology.

For years, Twitter has waged a "sophisticated battle" with the government to protect free speech online, and this battle would be at risk with Musk in charge, said Jason Goldman, a former Twitter board member.

Tesla's expanding business in China, where it generated $14 billion last year, could also put Twitter at risk, Goldman said.

"The idea that he’s going to be the one liaising with the Chinese government and potentially turning over information on users, that’s very scary," he said.

Twitter is staffed with experts who review data requests from governments, but Musk has shown his contempt of these experts, he added.

"Whether or not (former U.S. President Donald) Trump is going to come back on, I think that's a parlor game," Goldman said. "But what's actually going to happen is a dissident's IP address will be dropped on the floor."

CUTTING CONTENT MODERATION

Current and former employees who spoke with Reuters said Musk's plans to lower the guard rails that are common across all social media platforms would lead to a deluge of hateful, harmful and potentially illegal content on Twitter. Already, it has struggled with identifying and removing child porn.

Members of Twitter's trust and safety team, which includes content moderators, are expected to be among Musk's deepest job cuts, employees fear.

"Imagine a world where all those people are gone," one employee said. "It's going to be a hellscape."

[to top of second column]

Elon Musk, founder, CEO and lead designer at SpaceX and co-founder of Tesla, speaks at the SpaceX Hyperloop Pod Competition II in Hawthorne, California, U.S., August 27, 2017. REUTERS/Mike Blake/File Photo

PREVENT ADVERTISERS FROM FLEEING

In 2019, Musk tweeted "I hate advertising."

On the eve of the deal's expected closing, he appealed directly to advertisers in an open-letter tweet: "Twitter obviously cannot become a free-for-all hellscape, where anything can be said with no consequences!... Twitter aspires to be the most respected advertising platform in the world that strengthens your brand and grows your enterprise."

Advertisers are not buying it.

They point to Musk's plan to reinstate Trump's account as a major impediment to spending money on Twitter. Twitter permanently suspended Trump for risk of further incitement of violence after the Jan. 6, 2021, attack on the U.S. Capitol.

Welcoming back Trump could alienate moderate and liberal-leaning users, and as a result push away major household brands who aim to market products and appeal to people across the political spectrum, said Mark DiMassimo, founder of ad agency DiMassimo Goldstein.

At a presentation for advertisers in May, some ad agencies and brands were already skeptical and concerned for Twitter's future.

Until Musk finds new sources of revenue, he can't afford to trigger a backlash from a group that contributes 90% of Twitter’s revenue.

X SUPER APP

Musk's biggest bet borrows from China's greatest hits of the 2010s. "Buying Twitter is an accelerant to creating X, the everything app," Musk tweeted earlier this month.

The idea of an everything app, also referred to as a super app, originated in Asia with companies like WeChat, which lets users not only send messages but also make payments, shop online or hail a taxi. The all-in-one service appealed to users who had fewer choices in a region where Google, Facebook and others were blocked.

Musk has told investors he plans to build one that will sell premium subscriptions to reduce reliance on ads, allow content creators to make money and enable payments, according to a source briefed on the matter.

There are no super-apps in the United States because the barrier is high and there are app choices aplenty, said Scott Galloway, co-host of tech podcast Pivot and a professor of marketing at New York University.

Apple Inc and Alphabet Inc's Google, which control the app stores on iPhones and Android phones, see themselves as super apps and would be unlikely to allow other super apps to develop, Galloway said. Consider Apple's recent rejection of Spotify's plan to sell audiobooks as one example of barriers to entry.

Adding payments, which generally require identity verification, could complicate a service which has allowed anonymity to flourish, making Twitter a powerful tool for political activism in hostile environments, Goldman said.

"(Super apps are) not possible at this point in the evolution of the mobile internet," he added.

(Reporting by Sheila Dang in Dallas, aditional reporting by Hyun Joo Jin in San Francisco; Editing by Kenneth Li, Matthew Lewis, Nick Zieminski and Deepa Babington)

Back to top