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Quantum Brief

2023: Rise to Twitter, fall to X; A detailed analysis

How Elon Musk picked a $44-billion social media business and what he is doing with it.

By  Aashrey BaligaDec 6, 2023 1:27 PM
2023: Rise to Twitter, fall to X; A detailed analysis
With the acquisition of Twitter, the South African-American-Canadian citizen said that he would make the platform’s algorithm open-source, combat spambots and promote free speech.

“I’d rather have my immortality while I’m alive.” This quote attributed to Jerry Garcia, the lead vocalist of the rock band Grateful Dead, could be the credo Elon Musk lives by. The billionaire, having already made his mark founding SpaceX and being an early investor in electric car and battery maker Tesla, among other things, initiated the acquisition of social media company Twitter in April last year. He had become the company’s largest shareholder with a 9.1 percent share. When Musk proposed to Twitter’s board that he’d like to outright purchase the social media platform, the directors initially resisted a hostile takeover but eventually accepted Musk’s $44-billion all-cash buyout offer.

Finally, in October 2022, the deal went through after a few rough months and between Twitter’s top rung and Musk, the latter took full control of the microblogging site. Longstanding users of the platform weren’t sure how this change in ownership would affect their current UX, considering Musk’s unapologetic and spontaneous nature.

As soon as Musk took control of the company, he fired several of Twitter’s top execs including newly appointed CEO Parag Agarwal. Nearly half of Twitter’s workforce at the lower levels was also let go. Musk took Twitter private and merged it into a brand new company called X Corp. With this, he issued an ultimatum demanding that employees commit to ‘extremely hardcore’ work. As a result, hundreds more from the already thin workforce resigned.

The X-ification of Twitter

In June 2023, Twitter was officially renamed X and Linda Yaccarino appointed as the new CEO.

With the acquisition of Twitter, the South African-American-Canadian citizen said that he would make the platform’s algorithm open-source, combat spambots and promote free speech.

However, the buyout received mixed reactions, not helped by the mass exit. While some praised Musk’s promise of a greater focus on free speech, many were worried over the increase in misinformation, hate speech and harassment.

What came as a relief to many users, including creators/influencers on the app, was the platform’s announcement that select content creators would get a share of revenue from ads displayed in their replies, adding that to be eligible the creators should be verified users with at least 5 million impressions on their posts in each of the last three months and must have a Stripe (an Irish-American financial services app) account.

However, those revenues came under threat with advertisers fleeing amid worries about Musk’s approach to content moderation rules. In a bid to draw more content creators, earlier this year the company allowed users to offer paid subscriptions to their content on the platform.

Change in business model

Musk previously said the company will pass on the entire subscription revenue to creators in the first year excluding payment gateway charges.

Musk also announced plans to introduce a fee for users of the social media platform, according to a Sky News report. Sky News reported that the billionaire entrepreneur revealed that the company would implement a "small monthly payment" in an effort to combat the proliferation of fake accounts and "vast armies of bots". In a livestream conversation with Israeli Prime Minister Benjamin Netanyahu, Musk, who has expressed longstanding concerns about the presence of fake accounts on the platform, did not provide specific details about the new fee, such as how much it would cost or whether it would come with additional features.

This move could potentially put an end to a popular meme on the platform, where users humorously remark, "this website is free", when encountering particularly noteworthy posts, the report added.

Moreover, X already offers a premium subscription—in India, it works out to Rs 900 per month or Rs 9,400 per year on iOS and Android, and Rs 650 per month and Rs 6,400 per year on the website—which includes benefits such as a verification tick, the ability to write longer posts, edit existing ones, and priority placement in search results.

Musk's focus on monetising X's user base has heightened with the drop in advertiser revenue. His long-term plan for the platform involves transforming it into an "everything app" capable of handling various functions, including video calls and payments, akin to China's WeChat.

Consequently, the microblogging platform experimented with a videogame stream feature which is very similar to American video livestreaming service Twitch. This service is currently accessible only to the premium subscribers.

X also plans to include live shopping feature on its app in collaboration with Paris Hilton, the American media personality, heiress and businesswoman.

Musk’s misconduct

But given his colourful personality, Musk has thrown in his own wrinkles. Recently, he endorsed an antisemitic conspiracy theory on X. As a result, Disney, Apple and IBM among 200 others stopped advertising on X. Musk’s post on X accused Jewish communities of spreading “hatred against whites that they claim to want people to stop using against them”.

That earned a typical Musk response. "If somebody's going to try to blackmail me with advertising? Blackmail me with money? Go f--- yourself. Go. F---. Yourself. Is that clear?" the X owner and CTO said during an interview with American journalist and author Andrew Ross Sorkin in response to advertisers pulling out.

Musk did apologise for his inflammatory comments on X during the interview and told Sorkin that a particular post, where he agreed with an antisemitic conspiracy theory, was "one of the most foolish if not the most foolish thing I've ever done on the platform".

"I'm sorry for that tweet or post," he said.

It remains to be seen if the apology works. Meanwhile, there are more storms ahead.

In October 2023, X Social Media, a Florida-based social media ad agency, sued Musk's X over its trademark. The complaint states that the agency has been using its mark in commerce-related activities since 2016.

The complaint, which highlighted that the rebranding was causing “serious irreparable harm”, also mentioned that since Twitter got rebranded as X, it led to confusion among consumers as they misunderstood that the agency was somehow in association with Musk’s X.

What has made the situation worse is that Google search results for 'X Social Media' rank lower than for the microblogging platform that ranks at the top.

Ahead of the lawsuit, a cease-and-desist letter was sent in August to the platform that was Twitter. However, Musk's X refrained from not using the X mark.

A crack in the ad revenue stream

Advertising counts for a large portion of X’s revenue. If brands continue to pull their advertising and refrain from using X, it could cost the company around $75 million this quarter, reported the New York Times.

X has now found itself in deeper soup. The company is now once again dealing with mass resignations. As per reports, the platform has seen major resignations for the sales team.

A report from Business Insider indicated that the resignations include senior as well as junior employees. The staff began leaving shortly after X handed bonus checks earlier in November, said the report.

The micro-blogging platform is currently operating with a skeleton staff at its office as its advertising division continues to lose money.

The collaboration between X and Paris Hilton’s company 11:11 Media too hit a roadblock recently when Hilton's company decided to pull its advertisements from X due to concerns over the platform's alleged anti-Semitic content. The abrupt end to this collaboration seems to have irked Musk, who is now openly criticising Hilton's advertising campaign on X.

The Grateful Dead again may have the right words for the Twitter to X saga: What a long, strange trip it’s been.

First Published on Dec 6, 2023 11:10 AM
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