Faced with Elon Musk’s hostile takeover bid, Twitter’s board and management will have to show their plan to address longstanding problems.
John Raoux/AP
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John Raoux/AP
Faced with Elon Musk’s hostile takeover bid, Twitter’s board and management will have to show their plan to address longstanding problems.
John Raoux/AP
Another year, another rich executive trying to take over Twitter.
This time is different, of course, because the wealthy suitor is Elon Musk, the erratic tech superstar who has the world’s largest fortune and legions of fans and enemies.
But Musk’s bid to buy Twitter and “unlock” its potential makes him the latest in a long line of people who have kicked the company’s tires since its inception in 2006, fueling renewed excitement and speculation. only to walk away empty-handed.
“It feels like Twitter has been for sale for a while. It’s just that nobody wanted to move forward because of the challenges,” says Bloomberg Intelligence technology analyst Mandeep Singh.
Facebook founder Mark Zuckerberg reportedly tried to buy Twitter twice in the early years. Google, Apple, Disney and Salesforce reportedly considered bids in 2016 but walked away. (Disney’s then-CEO Bob Iger later said in reference to the platform, “Evil is extraordinary”).
In early 2020, hedge fund Elliott Management took a stake in Twitter and pushed to replace then-CEO Jack Dorsey, blaming his lack of focus for the company’s sluggish growth and low stock price.
Now, it’s Musk’s turn. Tesla’s CEO last week launched a hostile takeover bid that has sent the company’s board and management into crisis mode. With Musk’s progress getting more serious every day, Twitter will be forced to confront its long-standing problems like never before.
It is used by politicians and journalists, but fails to penetrate more widely
Since Twitter went public in 2013, it has reported an annual profit only twice, in 2018 and 2019.
Analysts say this reflects Twitter’s fundamental business struggle: getting people to use its service and getting advertisers to spend their money there.
Facebook and Google have grabbed the lion’s share of online advertising dollars by letting brands target people based on their interests and what they’re searching for. Twitter, on the other hand, hasn’t been able to convince many advertisers that it’s worth buying into the site’s quick and often acidic reaction to the day’s events.
Twitter dominates political discourse and shapes the news, thanks to its presence among politicians, world leaders, celebrities and journalists. But its popularity is limited. About 80% of US adults do not use Twitter. Globally, it is not ranked among the top 10 social networks by monthly users. (Facebook and YouTube are the most popular platforms.)
Twitter has 217 million monthly active users — a fraction of the roughly 3 billion who use Facebook each month, and fewer than Pinterest, at 431 million.
It has also failed to grab users’ attention and hold it for long periods of time. While the average TikTok user spends 48 minutes on the short video app and Facebook users spend 33 minutes on the site, Twitter users spend about 10 minutes a day on the platform, according to recent estimates by Angelo Zino, an analyst at CFRA Research.
“The engagement levels aren’t there,” Zino says. “If they’re not in the eyes and ears of the user out there, obviously advertisers aren’t going to invest as much money in that platform as they could.”
Last year, Twitter brought in $4.5 billion in ad revenue, compared with $115 billion at Meta, the parent organization of Facebook and Instagram, and $28.8 billion at YouTube.
While Twitter has managed to attract big brands around major news moments, it hasn’t wooed the smaller advertisers that form the backbone of Facebook’s ad business, says Bloomberg Intelligence’s Singh.
“[Facebook has] breadth of advertisers, while Twitter is highly concentrated among big brands. And that’s why Twitter does well when you have big events like the Olympics or elections,” but at other times it struggles, he says.
And while other social networks share similar problems, Twitter’s long battle to curb harassment, abuse and spam — what Disney’s Iger called “disgusting” — may also be weighing on its prospects. his growth, say some critics.
“I know a lot of people who say, ‘I use Twitter because I need it for my work or to promote the work I do, but I get it done and get out of there as soon as I can,'” says Ellen Pao. former CEO of Reddit and a tech investor.
Can audio chats and subscriptions help Twitter break out of its niche?
There is a new urgency to address these issues. After Elliott Management began agitating for change two years ago, Twitter struck a deal with the hedge fund that included aggressive growth targets. By the end of 2023, it aims to reach 315 million daily active users – up from 192 million in 2020 – and at least double its 2020 revenue to $7.5 billion.
To achieve these goals, Twitter is rolling out product updates, from live audio chats to subscription services for power users to the long-requested edit button.
This accelerated pace is a big change for the company, which took years before it decided to double the length of a tweet.
But despite all this work, Twitter is lagging. It has been adding users, but not at a pace to reach its target of 315 million by next year. And like other businesses that depend on digital advertising, its revenue has been limited by Apple’s recent privacy changes, which make it harder to target smartphone owners with ads.
This has led some observers to question whether Twitter can ever be successful as an advertising-dependent company.
“There’s a lot more to it than just improving the product,” says CFRA analyst Zino. Twitter “is just a niche offering” that may never reach the scale of other social media companies, he says.
While Musk says his interest in Twitter isn’t about making money, he has floated the idea of leaning more toward subscriptions, including removing ads for paying users.
A new word: “decentralized”
Others say more sweeping changes are needed. Dorsey, the former CEO of Twitter, has advocated for one “Decentralized” Twitter.. The idea is, essentially, to make Twitter more like email: a communications service that developers and other companies can build products to access. Think Gmail and Google’s Microsoft Outlook.
When Dorsey resigned in November, he handed the reins to then-Chief Technology Officer Parag Agrawal, who also favors Twitter’s decentralization. The company is supporting a project called Bluesky that is working towards this goal.
This week, analyst Ben Thompson argued that Twitter should be split in two. A company would run its own core service. A separate one would build apps and ads. The major service provider may also allow other companies to build their own Twitter apps, as was common in the company’s early days. Thompson says this could take pressure off Twitter over the rules it sets about what people can post and could shift its business model away from reliance on advertising.
All eyes are now on Twitter
But Musk’s entry into the picture has thrown everything about Twitter’s future into question.
“It’s a distraction from work,” says Pao, the former CEO of Reddit. “A distraction from doing the work of running the company and building a product and trying to deal with all the hate and harassment that people experience using the product.”
In his first few months as Twitter CEO, Agrawal, who is relatively unknown outside the company, has been pressed to meet targets set by Elliott Management and a homegrown newborn.
Now, he and the rest of Twitter’s leadership must devise a plan to respond to the company’s newest threat — someone who also happens to be one of the platform’s most influential users.
The board’s decision to approve a so-called poison pill, which would make it harder and more expensive for Musk to try to buy more of the company, suggests it is unlikely to accept the billionaire’s $54.20 per share offer , at least at the present time. form.
But the board will have to explain why, given that Twitter shares closed Friday at $48.93.
“As a board member, you can’t deny that there is an offer that is much higher than where the stock is currently trading,” Bloomberg’s Singh says.
If Twitter rejects Musk’s offer, he says, it will have to give “a very good reason and really show shareholders your plan in terms of how you think the company will be better off on a independent, which none of the previous CEOs have been able to do.”
