AndLon Musk’s takeover of Twitter set a new standard for disruption. Without meaning to, Musk turned Twitter into a soap opera, relying on the main role. The central premise of the show appears to be, “what crazy thing is the billionaire going to do next?”
Despite having around 240 million users, Twitter is tiny compared to Facebook, Instagram, YouTube, TikTok and Google. But Twitter punches above its weight.
Twitter derives its power and value from three communities that depend on it: politicians, celebrities and journalists. Politicians and celebrities love that Twitter allows them to broadcast directly to an estimated 240 million people without guardians. Journalists love that Twitter gives them an opportunity to build their own personal brands, while also revealing a consensus on which stories are newsworthy and which aren’t. For the rest of its 240 million users, Twitter offers the illusion of direct access to otherwise unreachable VIPs. Trolls love Twitter because its algorithms give their content disproportionate weight in the conversation.
While it’s tempting to characterize Twitter as a public square, the company is a profit-seeking business with business priorities and practices that have often undermined democracy, public health, and public safety. This was true for many years before Musk took over.
We shouldn’t be surprised how quickly and easily Twitter fell apart; its flaws have been clear for years. Twitter required thousands of hard-working people to keep the site functioning imperfectly. In his first two weeks of ownership, Musk fired many of those people and ignored best practices for operating internet platforms. It appears to be flying, supported by a team of Tesla venture capitalists and engineers who are either clueless, reluctant to challenge Musk, or both. How big this problem is and for whom remains to be seen.
The reactions to Musk on Twitter are almost as extreme as the behavior of the new owner. On one side are the Schadenfreuders who rejoice in the idea of the world’s richest man vaporizing $44 billion in the most outrageous and public way imaginable. On the other hand, there are people who depend on Twitter—politicians, activists, celebrities, and journalists—many of whom see Musk’s actions as a threat to democracy and public safety. They are not wrong. Musk’s notions of free speech seem to apply mostly to him. He lashed out at Kathy Griffin and others who mocked him. He has revealed a sympathy for Vladimir Putin and the far right. According to an insider, foreign agents were working inside Twitter before Musk acquired the company. There is no reason to believe that Musk prioritizes the public interest.
Twitter’s original design was elegant in its simplicity: a 140-character blank space optimized for broadcast messages. The company positioned its platform as a microblogging site, and the conversations that developed captured the public’s imagination. Monetizing microblogging proved a challenge, so the platform gradually evolved to its current model of broadcasting unmediated to mass audiences. Monetization improved, but it never matched Twitter’s unique audience and cultural significance. As a result, many people, including Elon Musk, figured they could do better.
Today the issues are very different. With the current course and speed, Musk could break Twitter in ways that can’t easily be fixed. Absent aggressive regulatory action, which seems unlikely, there is no way Musk can be forced to change course until the company files for bankruptcy.
Read more: Musk inherits Twitter’s India problem
Failure is a very real possibility. Musk justified Twitter’s layoffs by saying the company is losing $4 million a day. The headcount reductions will make a huge difference on the expense side of Twitter’s P&L, but Musk’s actions have alarmed some advertisers, which could offset the expense savings.
The debt taken on by Musk as part of the go-private deal has an interest expense of about $1.3 billion a year. Its maintenance requires Musk to generate cash flow far above historical levels. Peak EBITDA in recent years was $993 million in 2019, while the most recent quarter before the acquisition saw negative EBITDA, which makes me wonder what the lenders were thinking.
Twitter faces an existential crisis. Bankruptcy normally wouldn’t be a headwind for a Twitter-scale company, but Musk’s approach to running Twitter creates a risk that goes far beyond insolvency caused by an inappropriate capital structure. Musk may be tempted to monetize Twitter data in a way that would have been unthinkable for his predecessors and remains so for users. The platform may not survive.
For the people who care about Twitter most—the politicians, activists, celebrities, and journalists who practically live on the site—life without Twitter is hard to imagine, but they have to. Replacing or replicating Twitter would be much more difficult than it seems. Journalists flocked to an open source platform called Mastodon. The benefits of Mastodon include distributed governance and federation. The platform is actually a federation of individual servers, each with its own rules. Mastodon’s downsides include a clunky interface, lack of scalability, and privacy issues. Politicians and celebrities have been slow to embrace Mastodon, recognizing that the platform wasn’t designed for their use case: unmediated broadcasting to hundreds of millions of users.
Politicians and celebrities yearn for a Twitter that works like it did pre-Musk, but with less hate speech, disinformation, and conspiracy theories. The challenge is that advertising business models like Twitter’s depend on attention, and hate speech, disinformation and conspiracy theories are particularly effective at generating attention and profits. An ad-based “safe” Twitter would be much less profitable. And a subscription-based one would likely be much smaller. Even assuming that Twitter isn’t damaged beyond repair, there’s no evidence that Musk would sell at a price that would allow for “safe” Twitter. Starting one from scratch would be challenging for many reasons, but primarily the difficulty of building a mass audience for a secure product and finding the capital to finance it. People with money can reasonably conclude that the value of a “secure” Twitter doesn’t justify the risk involved in trying to create one.
This leaves us with two real risks we didn’t imagine a few months ago: the life without Twitter that so many have become addicted to, and an end game full of privacy and national security risks. So much for the notion that billionaires are always brilliant and wise.
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