Elon Musk has turned Twitter’s business upside down. Here’s how I could fix it | CNN Business

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Much of Twitter’s ad sales team has been fired or pushed out. Big companies from General Mills to Macy’s have stopped advertising on the platform, with more likely to follow suit after new owner Elon Musk’s decision to restore the account of former President Donald Trump and other figures controversial And any shallow scrolling of the platform will likely show you fewer ads from big brands.

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

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

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

Successfully turning Twitter into a thriving subscription business would buck the trend of many other media properties that have struggled with the model. And Musk’s attempts out of the gate have failed. An upgraded $8-a-month version of the Twitter Blue subscription service that allowed users to buy a verification badge had to be suspended after just two days when it was abused to impersonate prominent people (notably Musk himself), companies and government agencies. . Musk initially said he would relaunch the service on Nov. 29, but on Monday suggested he might delay it further “until there’s a lot of confidence in stopping 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 subscription service could widely adopt Even if the 217 million daily users Twitter reported by the end of 2021 signed up for Musk’s $8-a-month subscription, annual revenue would still be less than a quarter the size of rival Meta .

Still, some industry insiders have reason to think he can pull it off. “Twitter over the past month has been far more entertaining than Netflix and easily worth $8,” Roy Price, the founder of Amazon Studios, 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 is “likely to survive (and potentially thrive!)” in part because, unlike some high-profile users who have announced their exit from platform, most regular users probably don’t care who leads the platform and how.

Indeed, Musk’s move away from advertising and toward a subscription model could work if Twitter can survive with all of its revenue decimated up front, keep its systems running, avoid violating copyright laws author and hate speech and also stay in good standing with Apple. and Google, which control the app stores on which Twitter depends.

The stakes to achieve this are high for Musk. After borrowing billions of dollars to finance the acquisition of Twitter, Musk is racing against the clock to turn what was already a struggling business into a company that can generate enough cash flow to pay off its debt. It may also risk his reputation as “a gifted and bold entrepreneur who made Tesla work against widespread doubt and the contrary,” said Robert Breuner, a professor of business administration at the University of Virginia’s Darden School of Business .

Whether he likes advertising or not, the business accounted for 90% of Twitter’s revenue before Musk’s acquisition, and replacing him won’t be an immediate change.

In the wake of the chaos on Twitter in recent weeks, there has been talk of brands leaving the platform out of concern that their ads could end up alongside objectionable content. But that may not be the only or even the main reason why advertisers have left, or why attracting new ones could be difficult. Advertisers are also likely to be on the sidelines of Twitter’s stability, as users and former employees express concern that the mass exodus of staff could leave the platform vulnerable to failures and disruptions.

Brands may also be upset that many of the Twitter ad sales employees who managed their campaigns have been fired or pushed out, even 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 that was as veteran as Twitter and there’s no one to answer to [brands]you basically reduce the value of the ad platform.”

By bringing Trump and other controversial figures to the platform, Twitter may have more appeal to right-wing advertisers who do business on alternative platforms like Trump’s Truth Social. While there is a market for advertising to “people who buy gold, people who buy home survival kits, guns and guns,” Twitter has long been known as a more politically neutral platform, if not a a bit left-wing, and may have trouble attracting these companies. , said Michael Serazio, professor of communication at Boston College.

Musk will also have to face potential pressure from regulators, as well as app store operators Apple and Google, if he wants to turn around Twitter’s business. A group of US senators has already asked the Federal Trade Commission to investigate Musk’s Twitter for possible violations of the company’s 2011 consent decree. And Europe’s Digital Services Act may impose limits on Musk’s Twitter free speech.

In an op-ed published in the New York Times last week, Twitter’s former head of trust and security Yoel Roth, who left the company earlier this month, said the failure of the company to comply with Google and Apple’s app store rules could be “catastrophic.” .” App stores have previously removed social media apps for failing to protect their users from harmful content, and Roth suggested that Twitter had already started fielding calls from app store operators following Musk’s acquisition . Over the weekend, Apple’s head of the App Store, Phil Schiller, has deleted his Twitter account.

Most 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 need to attract new people to the platform, which has long struggled to break out of its niche and grow its user base, making sure it’s full of mandatory reading content.

In the weeks since Musk took over Twitter, which was immediately followed by a surge in hateful content, there has been a lot of threats from users about switching to other platforms, with several high-profile accounts announcing their departures, including director Shonda Rimes. and model Gigi Hadid. But it is not clear that there has been a huge decline in the user base; instead, Musk has stated in tweets that the use of the platform is at its maximum.

As long as Musk can keep Twitter running smoothly despite having fewer employees, many users are likely to stick around, perhaps even more so after the return of controversial accounts that tend to make news with incendiary comments on the platform. Musk himself has noted that while people are worrying about the demise of Twitter, they are doing so on the platform itself. And the billionaire has proposed making it easier for creators to earn money on the platform, which could also boost usage.

However, there is no guarantee that continuing to capture the attention of the online world will translate into subscription payments or other revenue growth.

“While both Musk and Trump are driven by the gravity of the attention economy, that doesn’t mean they can take advantage of it,” Serazio said. He said Musk likely made the decision to restore Trump’s account because “it was going to make headlines, it was going to get attention,” adding that “attention is not going to save Twitter … but I don’t know. [Musk] he has no other strategy than the attention economy, even if he doesn’t know how to profit from it”.