Can Twitter Survive Elon Musk?

Leadership Strategy Can Twitter Survive Elon Musk? Len Sherman Contributor Opinions expressed by Forbes Contributors are their own. I write about management priorities for long-term growth. Following New! Follow this author to stay notified about their latest stories.

Got it! Oct 24, 2022, 06:04pm EDT | New! Click on the conversation bubble to join the conversation Got it! Share to Facebook Share to Twitter Share to Linkedin I’ve tried to ignore the endless speculation swirling around Twitter ever since the world’s richest human made an absurdly overvalued offer to buy a company respected (as a business) by virtually no one. But the ironies and lessons learned from this stranger-than-fiction melodrama have proven just too intriguing to ignore. The specter of Elon Musk hangs over Twitter Getty Images For starters, while Twitter is widely viewed as having been mismanaged for years, the company has actually enjoyed greater shareholder value growth over the past 5 years than Google, Snap, Meta, or Amazon — more a reflection of its perceived perennially untapped value potential and Mr.

Musk’s unfathomable recent generosity, than the company’s less-than-stellar past performance. Then too, let’s not forget Twitter’s absentee management issues. After facing criticism for years for being led by a part-time, insouciant CEO (co-founder, Jack Dorsey), and paralyzed for months by Musk’s on-again/off-again gamemanship, Twitter now faces the prospect of being run by a CEO already leading 4-5 companies, depending on how you count CEO, Chairman or lead investor in other endeavors as management distractions.

But besides these intrigues, as a faculty member at Columbia Business School, I am particularly indebted to Twitter for providing such fertile material to illustrate what might otherwise might be considered dry academic theory. Two related topics immediately come to mind. 1.

There’s a difference between Creating and Capturing value. Companies like Twitter and Uber create lots of user value (as measured by largely happy, loyal customers), but are saddled with weak business models that don’t capture value (as measured by profits, or lack of same). MORE FOR YOU They Inherited Billions Upon Billions: Meet America’s Richest Heirs Monday, October 24.

Russia’s War On Ukraine: News And Information From Ukraine As Russia Gets Weaker, Xi Jinping May Forgo Taiwan To Grab Eastern Russia 2. Strategic priorities need to respond to “the hand you’ve been dealt. ” Too often, companies in deep distress wind up merely putting lipstick on their pig, rather than honestly, appropriately, and urgently responding to the severity of their situation.

As a case in point, Twitter’s agonizing deliberations over whether to add an edit button to its anemic subscription offering (Twitter Blue) is not even remotely up to the task of reversing the company’s decline. Lest there be any doubt of the perilousness of Twitter’s current condition, remember that the company is essentially 100% reliant on an ad-based revenue model facing: · Anemic growth, falling further behind faster-growing competitors (hello TikTok) in the battle for user engagement and digital ad dollars · An increasingly hostile environment for digital ad spending, given deteriorating macroeconomics and the bite of Apple’s stringent ad-tracking restrictions · Buyer reluctance to sponsor brand ads on Twitter, given the platform’s unpredictably toxic and polarizing content · Twitter’s relatively poor analytics and targeting capabilities compared to Meta, YouTube and others · Additional deep-pocketed competitors entering the digital ad marketplace (Netflix, Uber) · Chronically low Twitter penetration in market segments attractive to advertisers, notably younger users · . .

. All contributing to Twitter’s negative and declining operating income and free cash flow over the past few years. But all is not lost.

If nothing else, Musk’s impending buyout will shake Twitter out of its strategic slumber, given the urgent need and opportunity to capture more growth and profitability. Where should Musk begin? The starting point is to recognize that Twitter has lost the ad-based revenue model game. Building a global town hall for the exchange of ideas was never an ideal platform to pitch ads, and recent shifts in the market and competitive environment have only exacerbated the hopelessness of relying on ads for the company’s predominant source of revenue.

Twitter Users & Engagement on Social Media Author analysis Twitter needs to stop playing to its competitors’ strengths in chasing ads! The need for a fundamentally new source of revenue growth is has long been apparent, particularly one that competitors can’t or won’t match. Fortunately, Twitter has the unique opportunity to capture the value of the space they currently occupy, by launching a serious subscription business — not unlike the successful transformation the New York Times made to a subscription-based model, when it became obvious a decade ago that print ads would no longer sustain the metro — now global — daily newspaper. Like the Times , Twitter can and should launch a freemium subscription model, where the preponderance of casual users would retain metered access to Twitter for free, to maintain the attractiveness of Twitter’s current user base to advertisers.

Casual users would be limited in the frequency of frequency of posts they could create, but no limit on consumption, thus retaining Twitter’s advertising value. For the majority of consumers, such a metered pricing structure would not change Twitter’s free access, as a recent Pew Research st udy confirmed that 75% of current Twitter users in the US produce only 3% of all tweets. As for the active minority of content generators on Twitter, they currently enjoy enormous value in direct proportion to the number of followers they reach.

After all, what other channel can deliver instant access to a large global audience of users who have opted-in to want to hear from their chosen sources of insight, breaking news, entertainment, provocative ideas, and occasional cute cat videos? The value of Twitter is particularly high for individuals in content-generating professions where cultivating strong personal brands is important, including journalism ( 25% of all verified Twitter accounts), entertainment, politics, academia and, frankly, anyone else seeking personal aggrandizement or ego gratification. In the extreme, Twitter users with 100 million or more active followers — @BarackObama, @justinbieber, @elonmusk, @katyperry, and @rihanna – can and should be willing to pay the top end of monthly subscription fees, with a sliding scale extending down to, say 500 followers or more, which represent 2-3% of all current accounts. Some skeptics have suggested that subscriptions could never generate enough revenue to replace Twitter’s current ad business, but this argument lacks merit on two grounds.

First, there is no reason that subscription revenues can’t and shouldn’t be pursued in addition to Twitter’s current advertising business – just as most “old media” companies have retained their advertising business along with promoting freemium subscriptions. Secondly, even assuming a relatively modest subscription penetration rate of 2% of current accounts paying an average fee of $10 per month would generate about $1 billion in incremental high-margin Twitter revenue. And recognizing that power users would pay a much higher rate, the potential upside for Twitter is probably considerably higher.

The other advantage for Twitter moving in this direction is that competitors are unlikely to follow. Facebook/Instagram, Snapchat, and TikTok are fully committed to a high scale, advertising-driven business, inconsistent with tiered subscriptions. And while YouTube has already established a subscription business reaching less than 1% of its monthly active users in the US (and even fewer worldwide), Twitter enjoys more upside subscription revenue potential, given the nature of its content and users.

Elon Musk has signaled his interest in transforming Twitter into a superapp to become the digital operating system of our everyday lives to rival Chinese leaders WeChat and AliPay. Perhaps Musk can pull off such a stupendous feat with the kind forbearance of Apple, Google, Uber, DoorDash and the entire financial services sector who currently have major stakes in the current world order. But in the meantime, it’s a safer, quicker bet for Twitter to launch a serious subscription model to finally command the space they’ve long occupied.

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