Is Twitter Dying?

  • Nov 18, 2022
  • Anand Sheth

    A 90-year-old businessman once told me why do I need to pay for a business to fix their problems, when I asked him what he thought of turnaround situations.

    Elon Musk, the richest man on the planet, begs to differ.

    Chief executive of Tesla, SpaceX and four other companies, Musk was ready to take over and fix the social media company to “save the humanity.”

    Musk was so confident that he led an investment group and ponied up $44 billion.

    How one of the most celebrated entrepreneurs of recent times came to acquire the popular but financially struggling social media platform and stumbled to mold it in his image and cultural priority may haunt him for years to come.

    The rise and rise of Twitter thrust the social media platform in the crosshairs of body politics of the United States, leaving its management unprepared for life in the limelight.

    The platform, that no politician can ignore, became the preferred place for leaders of all beliefs to connect with their followers and provoke opponents, reminding days of Roman gladiators.

    How Twitter became a target of Musk and his cohorts and why acquiring the social media platform at all costs became so important, is slowly becoming clear in the weeks after the deal.

    But first, what Twitter is and how it became a leading social media platform in a span of a decade, a company worth more than half the companies listed on the stock exchanges of the United States.  

     

    Rise and Rise of Twitter

    From its humble origin in 2006, Twitter began as a service to post messages in 140 characters or less on a small device, which was still a primitive cell phone.

    The rise of Twitter and social media platforms mirrors the fast evolution of cell phones to a full-fledged computer with capabilities beyond communication.

    In the fast-paced world of instant communication, these devices offered a convenient way to post and discover messages from like-minded people.

    People who were just spectators or bystanders and felt excluded or ignored from the national or global conversation could now tap on the interactive screen of these devices and in a few keystrokes participate.

    Almost from the get go, Twitter attracted those who were eager to share their opinions and connect with others who were ready to share and participate.

    What happened in the next few years not only revolutionized the way we define and consume information but also began to impact how we connect with each other.

    Digital connections began to dominate in-person acquaintances, online identities became the norm and the road to celebrityhood.

    As cell phones became smartphones, these hand-held devices were the first choice of many to connect with friends, discover and purchase products and search content and consume news.

    With the emergence of social media platforms, people for the first time had the power to not only consume but also publish content in many formats - news, opinion, blog, comment, review, rebuttal or dissent.

    Now one can like or dislike a post and quickly boost the power of the argument up or down in a matter of minutes. The marketplace for opinions and arguments was evolving rapidly and technology was available to all those possessing what came to be known as a smartphone. And, smartphones were only getting smarter. 

    Twitter was ready to capitalize on this rapidly evolving hardware and software and became the place for those who were eager to express their opinions and post comments on wide ranging issues and topics.

    Now on Twitter and other social media platforms, one can not only consume information but also post at the same time, facilitating rapid exchange of information and connections with others.

    The lone voices of readers and viewers, generally ignored by legacy newspapers and television channels, were gathering electronically and for the first time were in a position to shape conversations.

    Communities were forming fast on Twitter, where people exchanged information, shared views and approved or disapproved comments, all with the help of 140 keystrokes. The digital gulch was open all hours and soon became an addiction to many.

    Twitter and other social media platforms were fast becoming popular and rapidly spreading reliable and high-speed Internet networks were drawing more people in the online social spheres.  

    With the number of users in millions and still growing in leaps and bounds, personal views and opinions traveled with speed of light on these platforms.

     

    Characters, Communities and Tribes

    Soon, people were confronting not only messages that were conforming but also contrasting with their views of the world.

    Arguments collided, disagreements turned to threats, tribes began to form and what was once a genteel and civil discourse quickly evolved into anything but polite.

    With communities forming rapidly and the tone of the published content evolving at a dizzying pace, Twitter became a dynamic place with a need to set ground rules and boundaries that were once not needed.

    The town where everyone was nice to one another, politeness and respect for others triumphed over the need to score a point, and disagreements were once welcomed and respected, was fast disappearing from many corners of Twitter.

    The digital town was splintering into neighborhoods with distinct identities and unwritten rules and digital version of populous enforcement.   

    For a traditional magazine or a newspaper, reporters follow beats, a set of guidelines and editors ready to shape the content.    

    But the situation online was highly fluid and often wild, where opinions of all kinds flourished. None of the traditional measures of moderation and oversight existed, in the early days of social media, and that was the appeal of the platform and the reasons to be repelled.




     

    Where is the Sheriff?

    On its sixth birthday in 2012, Twitter announced that it had 140 million users and 340 million tweets a day, a vastly different place from 50,000 daily users in the first year of its existence.

    The free-for-all platform had to grow up fast and Twitter began to implement rules of engagement, online behavior and the manner of speech. The vast platform was generating millions of tweets a day from its millions of daily users, but Twitter’s efforts were always few steps behind the fast-changing community.  

    The social media platform designed for the simple and quick communication also attracted attention of emerging politicians, those who were eager to grow their followers and sympathizers to their opinions.

    The platform became the preferred tool for politicians looking to promote their views and ideologies, marketers searching for customers, publicists searching for an audience and influencers ready to influence.

    Soon, the electronic platform began to mirror real-life communities where the starker the view and extreme the comment, the more attention it garnered. The envelope for extreme stretched far beyond the horizons of in-person communications and the electronic oblivion emboldened many to express with impunity.

    Those who were shy in-person were not always that reserved online, especially on Twitter.

    For many, the shock value became the only reason for their online engagement and greater the shock value, higher the likelihood of getting your message discovered and heard. For a few Twitterati, as they came to be known who post frequently, there were no boundaries and what was considered unspeakable, rude, or hate in-person became accepted and in some online neighborhoods a new normal.

    For some, limits were there to be crossed not respected.

    To many, Twitter became the tool to divide and unite the dividers. In fact, the political discussion on the platform often turned hostile and the hostile it got more attention it garnered.

    Twitter had to act and act fast, not without banning many and angering many more. The platform also became the go to place for sowing the seeds of doubts against the established institutions and extreme views ran wild on both sides of the political spectrum. 

    Political discourse evolved when the nation transitioned from the cold print media to vibrant television channels and once the readers of written words now became the viewers of spoken words but they were still not able to participate.

    On social media, viewers were publishers and commentators at the same time.

    Politicians also came to embrace Twitter and used the platform to burnish their identities and deepen and enlarge their envelopes of reach.

     

    Twitter Arrives at the White House

    The arrival of Donald J. Trump in the White House was a double-edged sword for Twitter. The first president to use Twitter, provided a non-stop free endorsement of the platform that no company can buy. The endless tweets from the president kept millions glued to the platform.

    In fact, Trump’s reliance on Twitter was so complete that most people felt he was running the nation on Twitter. Hiring, firing, policy announcements and changes and cancellation all happening in real time within the confines of 140 characters.

    Twitter became many things to many people; former president Trump saw no need for formal meetings and press conferences, important decisions arrived on Twitter first.

    Trump’s tweets also raised stakes for Twitter’s management and every time his tweets were qualified, it drew his followers’ ire. If Trump’s extreme tweets were let go live without scrutiny, that was certain to enrage people on the left. 

    No matter what Twitter did, it always angered half the audience reading Trump’s tweets.

    Just as Twitter attracted the good in the society, it became a magnet for the angry and fringe elements who were ready to bend rules.

    Twitter developed its own ways and processes to deal with this growing threat to its platform but disappointment was widespread.

    It was not exactly Twitter’s fault, because the country had never experienced this flood of real time information exchange. People on the left felt Twitter was not doing enough to silence extreme views from the right, and those on the right felt Twitter was too harsh on them.

    Twitter always struggled to keep the delicate balance.

    On January 7, 2021, things came to a boil when Twitter silenced the president of the United States, an account with 88 million followers, politicians of all views took note and realized that Trump’s voice traveled on the road controlled by Big Tech.

    In one second, Trump, once the most powerful person on the planet, was silenced with no recourse. The head of the most dominant military on the earth and the leader of the largest economy was rendered powerless in just a few strokes by an unknown group of individuals who could not be forced or pressured to change their minds.

    Source: Twitter.

     

    Target Twitter

    That silencing act enraged the people on the right and set forces in motion to deal with the Twitter problem. As if Twitter didn’t have enough enemies already, but now enraged leaders of the right were planning to do something about the social media platform; seek an alternative platform more sympathetic to their causes and some aspired to shut down the platform entirely.

    Politicians on the right for long complained about the perceived bias Twitter held, but more about the fact that social media platforms had the power to muffle and silence anyone, especially politicians who didn’t follow their rules.

    Politicians used to set rules for others were now angry to follow rules set by others.

    The social platform, that never posted its own content but was a mere facilitator of exchanging messages, became the target from all those who disagreed with its moderation policies. Naturally, every group wanted to have policies that favored their views.

    Twitter was forced in the difficult position to set rules, post guidelines and determine and ban unacceptable behavior on its platform. Setting rules alone was not good enough, those rules had to comply and always enforced according to a byzantine list of local, regional, national and international laws and regulations.

    Even though the platform is a private corporation, politicians saw it as a social institution, especially when they disagreed with the management action.

    Of course, if a user disagreed with Twitter’s way of handling his or her account or messages, one can simply move on, but most users chose to stay engaged.

    Such was the power and influence of Twitter. 

    Politicians ramped up attacks in the media and turned up regulatory heat, and Twitter had its own problems enforcing the 2010 consent decree with the Federal Trade Commission.

    As if this was not enough, bots from foreign spy agencies and bad actors also found homes on Twitter and many were active in spreading false and misleading messages to gullible Twitter users.

    Twitter’s algorithm driven newsfeed became the haven for fake messages during the 2016 U.S. presidential election.

    In bizarre situations, politicians competed to defend fake messages that appeared to boost their views and lamented the ones that put them in bad lights.

    The turf battle between politicians and political ideology driven channels turned Twitter into one of the most hated and loved social media platforms.

    Twitter became the punching bag for all.

     

    Big Tech, Big Problem     

    The revenge mode was setting in, especially for those on the political right. Twitter had to be either silenced or punished or forced to become more sympathetic to their views and speech.

    But the question was how.

    Right-wing political leaders and commentators stepped up media campaigns against Twitter’s Big Tech status, privately urging business donors to find a solution for Twitter-problem.

    For months, business leaders, sympathetic to conservative political views and the right-wing politicians, avoided the issue and gave cold shoulder to the growing chorus against Big Tech.  

    Though widely popular with users, Twitter was a crummy business and highly reliant on mercurial advertising dollars from a limited number of large corporations.

    Twitter had a loyal user base but lacked a loyal advertiser base and a reliable revenue stream big enough to generate earnings.

    On top of that, Twitter rarely made money, generated annual losses in millions of dollars and sported a $30 billion in market capitalization on the stock exchange.

    Unless you had billions of dollars lying around and were ready to finance a stream of continual losses, a rational businessperson would not even think about acquiring this money losing pit.

    Moreover, owning Twitter would be a political liability to most businesses in a polarized nation; even if it made financial sense, which it didn’t, no business leader was ready to take on.

    But Twitter was vulnerable in one very important way.

    Twitter, Inc, unlike Google’s parent Alphabet, Facebook’s parent Meta Platforms and Microsoft, had no controlling shareholder to fend off hostile takeover. In other words, Twitter was a low hanging fruit for a person with enough financial reach and patience.

    In addition, Twitter’s business model is also not profit-friendly either if one opens the gates for free speech wider.

    All that began to form an equation when a young, dynamic and very rich Elon Musk began to think about Twitter and the possibilities.




     

     

    Musk On the Horizon

    Business leaders, political strategists and media owners saw Musk as the only man who can save their version of “free speech,” when others tweeted Musk thundered.

    Most of us had 140 characters to work with, Musk had $140 billion and more to spare.

    In private discussions, Musk was constantly urged by other business and political leaders to apply his resources and smarts to Twitter and in the process make it more sympathetic to their views.

    If Musk can send rockets to faraway places, make electric cars that wow the world, then he can certainly turn Twitter into a preferred destination. As if all management skills are easily transferable, and domain expertise is irrelevant.

    With seemingly unlimited money, boundless energy and tech savviness, Twitter could only get better under Musk’s care.

    Musk in charge and with his management skills and vision, Twitter could only get better. And along the way acquiring powers strong enough to shut off an irritating president, was too enticing to ignore.

    With Musk in control, nothing could go wrong with Twitter.

    Soon, Musk saw Twitter as a place where he can use his tech skills and clean the platform from the bot influence, develop a product that is technologically advanced and liberate it from pesky liberal moderators.

    The vision was getting clearer and opportunities to turn Twitter into something that no one could resist was tempting. Despite Twitter’s popularity, the platform still lagged other popular social media platforms Instagram, WhatsApp and YouTube by a wide margin. 

    Musk took on the mission to build Smart Twitter, a social media platform that could become a super app - a place to post messages, a digital wallet, a digital game console, to network and beyond – but with a more accommodative sheriff.

    Musk started focusing on Twitter in early 2021 and began accumulating a stake in the company from January 2022.

    On April 4, Musk disclosed a 9.1% stake in Twitter, Inc, catapulting stock 27% on the announcement.    

    In a few months, Musk became the largest shareholder of the company with a plan to take full-control and take the company private.   

    On April 14, 2022. Musk launched an unsolicited offer to acquire Twitter Inc and set in motion a sequence of events that no one could foresee.

    In early 2022, optimism was high with tech stocks rebounding from the pandemic lows and scaling new heights and Tesla stock climbing from one peak to the next. 

    Musk adopted a strategy that came to haunt him later, and wanted to make an offer that no company board could refuse. Moreover, he had the financial resources and the desire to spend for his latest project.  

    Musk’s historic $44 billion bid for the money-losing company at a 50% premium to the prevailing stock price could not be ignored by Twitter management and board.

    After initially taking retaliatory moves, Twitter Board accepted the offer on April 25, the offer was just too rich to reject.

    The bold and brash takeover offer backed with real money was wrapped with media baits but potent to silence his critics. But the swift move to take Twitter private suffered a major setback in less than a month of the offer.

    Stock market collapse that began in late March 2022 accelerated, dragging tech stocks in a downward spiral not seen in decades, tanking Twitter stock as much as 50%.




     

     

    Buyer’s Remorse

    Market meltdown that began in March was a double whammy for the richest person in the world.

    If Musk had waited just a few weeks the price of Twitter could have been 30% cheaper, saving billions. Moreover, the deal was debt financed using Tesla stock as a collateral, which was tanking too.

    For months, Musk tried to back out of the deal that was clearly overpriced, blaming the company for its lack of cooperation during due diligence to fake accounts to unauthorized management changes.

    After months of wrangling and court fights, Musk was forced to face a decision to either go ahead with the $44 billion-deal or pay a breakup fee of $1 billion for not doing the deal at the original price.

    Musk had ample opportunities to simply walk away and had months to think over his options.

    Musk chose to be the new owner of Twitter.  

     

    Rich Believers

    During months of negotiations with investors, Musk rarely laid out plans of action and transformation or business scenarios. There were no financial projections, business strategies or discussions on who and how the company will be managed.

    Musk didn’t have to, because he had a group of believers ready to invest billions with him relying on the legend’s credibility and investors’ collective desire to dislodge the current band of people running Twitter.

    Musk’s financial backers are not just known for their financial heft but also for their track record in picking future winners. And, Musk was a winner three times over in the past.

    Qatar Investment Authority, Sequoia Capital, cryptocurrency exchange Binance CEO Changpeng “CZ” Zhao, Saudi Prince Alwaleed bin Talal and co-founder of Twitter Jack Dorsey, all came to back Musk in his quest to acquire Twitter.

    A group of more than ten investors including mutual funds company Fidelity, Oracle Corporation co-founder Larry Ellison, Canada-based private equity firm Brookfield Asset Management and the Silicon Valley based venture capital firm Andreessen Horowitz ponied up $7.1 billion.

     “Elon is the one person we know and perhaps the only person in the world who has the courage, brilliance, and skills to fix all of these and build the public square that we all hoped for and deserve,” tweeted Ben Horowitz, co-founder and general partner at Andreessen Horowitz,

    Banks including Bank of America and Morgan Stanley provided at least $6.25 billion in debt financing collateralized by Musk’s Tesla stock holding. 

    Musk increased his total investment to $27.25 billion.  

    The message was loud and clear, investors were ready to back Musk’s vision and Twitter’s $44 billion value can only go higher under his leadership.

    Publicly, Musk waffled and flip-flopped for weeks, leaving an impression that the eccentric billionaire may scrap the deal anytime. Privately, Musk sounded more certain and expressed confidence in enhancing the platform with his management skills and vision.

    With nearly 15% of his net worth at risk, billionaire Musk was accustomed to tall odds against him. But transforming Twitter and saving “free speech” didn’t seem as complicated as going to space and eliminating gasoline engines.

    Activist investor Carl Icahn, picked up about 12 million shares between May and September 2022, when Twitter deal looked less likely to happen. But Icahn sold his entire stake for a profit of $250 million when the on-again-off-again deal was finally consummated, not before publicly backing Musk in his mission.

    On October 26th, Musk and his investment group acquired full-control of Twitter, Inc.

    The new Twitter had only a one-member board, Musk.

     

    Musk at Gate with Sink

    The bad blood between Twitter management and Musk was obvious and in full display during six months of negotiations and neither party shied away from airing their views in public.

    What appeared to be a gutsy and jaw-dropping move only a few weeks ago. began to unravel right from the first day.

    Most of the top executives were shown exit doors on the first day of Musk in control, including chief executive Parag Agrawal and chief finance officer Ned Segal ‘for Cause’ in a bid to avoid paying out millions in severance. 

    More firings followed the next day, Musk was wasting no time in cleaning the deck.

    To the surprise of everyone, what is becoming clear is that Musk neither had a plan beyond blue sky vision, nor a strategy nor an understanding of Twitter’s user base nor its financial challenges. As if Musk was never present at the time of due-diligence.

    He was single-mindedly focused on getting rid of current staff regardless of the implications on the platform’s security and even its viability.

    Musk fired about half the staff or about 3,750, on the eighth day after acquiring the company and another 1,200 left on November 17, after he demanded employees to commit to a “hard core” work ethic or leave.

    In mere three weeks, Musk was successful in getting rid of about 5,000 of the 7,500 staff.

    Musk believes that Twitter, like a gasoline run car, can be stripped off of all its parts and replaced with parts for an electric vehicle with no implication and no reaction from the car.

    Cars may not react, but Twitter users and advertisers do.

    Musk publicly announced his plan to combat rife fake profiles with his own improved verification system, only after days of thinking about it.

    With only $8 a month, anyone can have a verified profile, fueling a raft of fake impersonators and angry advertisers.

    Only hours later, Musk had to withdraw his “innovative plan” of verified accounts.

    With executive talent gone, engineering staff leaving in droves, and not enough left to defend the platform from cyberattacks, Musk hollowed out Twitter in days what took years to build. 

     Musk’s team was forced to beg many engineers fired only days ago to return to save the platform from more cyberattacks, few bothered to reply.

    With flip-flops by the hour and strategic confusion aired in real time in tweets, advertisers began to halt campaigns, the sole revenue source of the company. 

    Musk’s actions began to resemble autoimmune disease, as if the body was attacking its own organs. 

    After ten days of chaos at Twitter headquarters, it was clear that Musk did not have a transition plan, an immediate goal or a team in place.

    Owning and running Twitter is different from making advanced vehicles and firing rockets, where solving engineering problems take precedence above other challenges.   

    Twitter has many engineering challenges and no one is more capable than Musk in solving them, only if he decides to focus and recognizes that it will take a team to deliver. The team he fired.

    Investors, users, advertisers and hackers were all looking forward to dealing with the visionary, someone with engineering skills and financial resources to take Twitter to the next level, and change the entire landscape of social media.

    Instead of turning around Twitter, most likely Musk will turn the company upside down with little to show for. Once users leave, advertisers follow, the entire process can play out in less than a few months.  

    Twitter is in a crowded field and the value of the platform goes up or down with the size of its user base. Users gravitate to a platform where the accounts are safe and technology is stable, not necessarily the most advanced, with clear rules of engagement. 

    Users may not like the rules of engagements, but as long as policies are clear and not changing by the minute. Yes, Twitter managed to anger many in the past, but the platform still attracted 240 million monthly users. 

    Twitter is heading into oblivion in front of our eyes and the end may come sooner than most of us realize.

    But the question remains, why? Why create a crisis and then play a victim.

    Source: Twitter.

     

    Is Twitter Dying?

    Though $44 billion is a significant sum of money, for Musk and his team of luminary investors, the amount is not material.

    But even the super-rich do not want to lose, and above all, Musk was a winner more than three times over before.

    After acquiring a company, any rational business person would take his time to build a team, understand the business and identify drivers of future growth and profitability. A gradual business transition over a year or two could have given Musk enough time to mold Twitter in his image.

    For now, it remains a mystery why Musk chose this high-risk-no-reward strategy, weeks after acquiring the company.

    Is Twitter a better platform today, is it safer to post and view messages, is it easier to access your account today and is the platform more financially viable. 

    With a list of questions growing and trust in the brand fatally damaged, Twitter’s value proposition is falling fast, even with the reinstatement of the former president Trump’s account.

    The only reason that may keep Twitter alive longer than the current troubles suggest is that there is no clear alternative for frequent users to migrate to. Twitter may limp along and longer it limps, higher the likelihood that another alternative to Twitter will arise. 

    On April 9, 2022, on the day Musk announced his stake in the company he also took former chief executive Parag Agrawal to task in a tweet, that some of the most-followed Twitter accounts “tweet rarely and post very little content,” taunting “is Twitter dying?"

    Time will tell sooner than we think.