Wednesday October 05, 2022

How will Twitter make money under Elon Musk? Here are the currently proposed options

After week two of the Elon Musk Twitter drama ended, we are now in limbo as we wait for final approvals of the deal. This deal will make Musk the head honcho of a private Twitter. It may or not allow ads anymore and may or not allow any type of homophobic, racist, or abusive speech. In a recent interview, Musk stated that he doesn’t care about the economics of the deal and that his driving mission is to run “a public platform that is maximally trusted and broadly inclusive”. Musk stated that he doesn’t care about economics and that his main goal is to create a public platform that is trusted by all and inclusive. This would allow Twitter to combat bots more effectively (it would be prohibitive to run bot farms), and it would also make the app more transparent, as you would know that you are interacting with a real person who has registered their contact details and payment details in the app. It could be hard to make a profit. Musk charging $1 per month for this would bring in $229m/$2.7b annually if all active users continue to use the app. It would be reasonable to assume that not all users will pay, which would lower Twitter’s revenue intake and reduce its chances of making money in the future. In 2021, Twitter generated $5.08b in revenue.
Twitter going private – Twitter would be free from the financial pressure of shareholders who expect revenue to rise by a predetermined, acceptable amount. Musk believes that Twitter should go private in order to be able to make its own decisions without being influenced by outside forces. This will allow it to become a platform for free speech. This will mean that advertisers may be less comfortable placing ads alongside potentially objectionable content. However, this will lead to the next stage in Musk’s grand Twitter plan.
No more ads – This would have the greatest impact on social media marketing. Musk has stated that Twitter should cease running ads in order to be truly independent. This would mean that Twitter would have to rely on other sources of income. Ads account for 98% of the company’s revenue. Musk may have thought that Twitter could cut costs by removing all staff who work on its ads elements. However, this would still be a significant cost savings. If Musk wants Twitter to become profitable, it will be difficult to make up the difference when you consider its operating expenses and income. Although it’s hard to imagine how this could be possible, Musk may have an insight that we don’t.
The possibility of charging for tweet embeds – Although this seems a stretch, Musk has reportedly suggested that websites could be charged for embedding tweets from verified users. This would allow the money to go back to the users. This would be in line with Musk’s push for more high-profile users to tweet more often. Perhaps, if they can earn a few dollars from tweeting, it could act as a motivator for them to share more in the app. This could generate more activity in-app and spark more engagement with their followers. People could also just take screenshots of tweets, but Musk could make tweets copyright protected. This would make it even easier.
Make Twitter “Pay to Play” for users – This is an even more radical move. Musk has not yet proposed the idea. Musk could consider charging users for a verified tick, which is a different fee than the blue tick for high-profile users. Otherwise, the app would be unusable. This is a common assumption. People can use Facebook, Instagram, or Snapchat instead. So why would anyone pay to log on and read tweets. Although I was skeptical, I realized that Twitter is an important platform for journalists, political, and other media professionals who use it to keep up with the latest news. Twitter is influential despite only having a tenth the active users as Facebook. While its audience may be smaller than Facebook’s, those who use Twitter are among the most active people in their respective fields. Following the latest tweets allows them to follow trends, re-distribute news to their audiences off platform, stay in-the-know, and so on. As such, I suspect many of them would pay. Musk could lock down tweets to make them unavailable to the public, making it easier to charge for tweet embeds and any other re-use of content on-platform.
Cost-cutting – Musk is also interested in cost-cutting. This is a key area because it could reduce costs substantially if Twitter stopped running ads. Twitter spent $1.7b last fiscal year on sales, marketing, and general admin costs. It also spent $1.2b on research, development, and $2b for infrastructure. These costs could be reduced if Musk is able to reduce them in a significant way. He could theoretically make enough money from his subscription proposals over time to generate positive cash flow for Twitter while also allowing it to remain independent and better able to operate with a free speech’ approach.
Musk made these pitches again in meetings to secure funding for his Twitter bid. However, he did not have any internal insight into the company’s current structure and what is possible within it. It seems like Musk will make these big changes. This is especially true considering that Twitter doesn’t have many other options based on its historical performance. Parag Agrawal, the current CEO, stated this week in an all-hands meeting that he could have done things differently. This is something I think about a lot. I feel responsible for the actions I have taken in the past decade. Although I have only been in the job for four months I’ve been with the company for a decade. Yes, we could have done more. We could have done better.” Maybe now is the right time for Twitter to make big changes. With more freedom as an independent company, and again, many people have pointed out Musk’s genius elsewhere, so maybe he sees something here that others don’t. We know that this will be the most public display of Musk’s genius, and if he is truly the visionary many believe, he will definitely have the chance to prove it.

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