Overspending on Twitter Inc (TWTR.N) for $44 billion was the easy part.
Now, Tesla Inc (TSLA.O) 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: โMyself 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.โ
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 โChief Twitโ, according to current and former Twitter employees, analysts and investors who considered funding the deal.
X SUPER APP
Muskโs biggest bet borrows from Chinaโs greatest hits of the 2010s. โBuying Twitter is an accelerant to creating X, the everything app,โ 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 (AAPL.O) and Alphabet Incโs (GOOGL.O) 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 Appleโs recent rejection of Spotifyโs 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, said Jason Goldman, a former Twitter board member.
โItโs not possible at this point in the evolution of the mobile internet,โ Goldman added.
CUTTING CONTENT MODERATION
Current and former employees who spoke with Reuters said Muskโs 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 Twitterโs trust and safety team, which includes content moderators, are expected to be among Muskโs deepest job cuts, employees fear.
โImagine a world where all those people are gone,โ one employee said. โItโs going to be a hellscape.โ
PREVENT ADVERTISERS FROM FLEEING
In 2019, Musk tweeted โI hate advertising.โ
On the eve of the dealโs expected closing, he appealed directly to advertisers in an open-letter tweet: โTwitter obviously cannot become a free-for-all hellscape, where anything can be said with no consequences!โฆ Twitter aspires to be the most respected advertising platform in the world that strengthens your brand and grows your enterprise.โ
Advertisers are not buying it.
They point to Muskโs plan to reinstate the account of former US President Donald Trump 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 US 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.
Until Musk finds new sources of revenue, he canโt afford to trigger a backlash from a group that contributes 90 per cent of Twitterโs revenue.
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.
In May, Musk said in a Twitter video that he agreed with the European Unionโs new digital media regulation, which will force Big Tech to do more to tackle illegal content or risk fines of up to 6 per cent of global revenue, in one of the worldโs most severe approaches to regulating content online.
Regulators across Asia are also toughening legal stances against social media platforms and ordering the removal of content they deem illegal, which includes speech by political dissidents.
In India, Twitter has waged a โsophisticated battleโ with the government to protect free speech online, and this battle would be at risk with Musk in charge, Goldman said.
Teslaโs expanding business in China, where it generated $14 billion last year, could also put Twitter at risk, Goldman, the former Twitter board member, said.
โThe idea that heโs going to be the one liaising with the Chinese government and potentially turning over information on users, thatโs very scary,โ Goldman said.
Twitter is staffed with experts who review data requests from governments, but Musk has shown his contempt of these experts, he said.
โWhether or not Trump is going to come back on, I think thatโs a parlor game,โ Goldman said. โBut whatโs actually going to happen is a dissidentโs IP address will be dropped on the floor.โ
