Where’s the business case?
I’m seeing an incredible amount of talk about the Elon Musk Twitter acquisition from every angle other than a business potential and product roadmap perspective. Did he do it to create a home for free speech? Meh. The world’s richest man didn’t just raise the GDP of several small countries so that he could provide a better marketplace for ideas. Let’s discuss the bigger picture here.
Missing the Twitter forest for the Elon tree
There’s a lot of noise in the industry about this acquisition about things like free speech and whether Trump is going to get Twitter his account back, Musk as a man, and whether it’s okay for millionaires to keep buying up media companies. All of this is so deliciously distracting that there’s not a lot of talk about whether this deal actually makes business sense. Why buy a “broken company” that has not turned a profit?
I’m a futurist. I’m quite proud of my track record. I’m going to focus on facts and provide some analysis about what I am convinced is going to happen.
Either these will be ideas that were obvious to you, in which case, you’re welcome – now you can just forward it to people as a summary – or if it wasn’t, it will hopefully be a fun and thought provoking ride. Either way, let’s go!
You don’t get $44 Billion without a business plan
My obsession is omnichannel. Omnichannel is about zooming out and looking at the big picture, and asking how everything fits together. How could it deliver new relationship value and experiences?
Let’s look at basic facts.
The kind of people who can help raise that kind of capital in that kind of time will expect return on investment. It’s almost easy to think Musk got it because, you know, he’s Elon Musk. But obviously there’s more.
Regardless of what you think of him as a person, it is a demonstrated fact that Musk has the ability to think transformationally and strategically along multi-year trajectories.
This is a man who took on brands that were considered by many to unchallengeable. Brands we just took for granted as the leaders of their industries. In automotive, he’s gone head-on with brands like GM, Ford, Volkswagen and Mercedes in an industry where it was incredibly difficult to take any automotive company to profitability. He’s created a global monster – Tesla – in record time.
How did he get there? He got that money to start that because he took on the banking system! I think we’ve collectively sort of forgot that. Elon Musk is now known as “CEO of Tesla” (Google him), and SpaceX, etc, and his other current exciting projects. But he got the money to start Tesla as a founder at PayPal. PayPal!
Musk knows more about making money and taking on unchallengeable monopolies or oligarchies than just about anyone, and specifically has a history in scaling up businesses in record time in an environment based on microtransactions at web scale.
So if we include the PayPal context and we relook at what Musk is potentially doing with Twitter, the picture completely changes.
Twitter’s current profitability is irrelevant
Twitter is, on a good day, maybe a 10th the value of Meta, aka Facebook. Meta owns Facebook, Instagram, WhatsApp, Oculus, and various other brands, which I probably don’t even know about. So, we’re talking about a massive, massive global enterprise.
Twitter, is not profitable, and comparatively, is quite small. What’s the point? Why not only buy Twitter, but at a premium price? Rather than seeing it as a not-profitable business, which doesn’t do either social media or ads as well as the dominate players (Google and Meta), we can see Twitter being actually comparatively quite lean and mean. Meta has a huge bloated platform, enormous technical debt, and a branding image problem that makes Musk’s many foibles seem trivial. Meta is synonymous with fomenting conflict at the personal level and revolutions and misinformation campaigns at the global level. Twitter, although a major contributor to misinformation, is spared a lot of the public’s rage. Most people can’t name Twitter’s CEO, but Mark Zuckerberg is a target of our jokes and ire.
Rather than weakness, Twitter’s lack of growth and diversity becomes opportunity. When you take Elon Musk – who knows exactly how to challenge the unchallengeable brands, exactly how to take something from being nothing to being a global Titan – then the future of Twitter looks quite different.
Data and potential are worth more than money
Although, it’s not well leveraged, Twitter does sit on enormous amounts of data. Their strength is in their user base, their brand, and that data. Data is the new oil. It is the most second-most valuable resource on the planet besides intelligence itself. So underleveraged data isn’t a weakness, it’s a goldmine.
And ROI is about change in value from point A to B. It doesn’t matter what Twitter’s financials look like today, it matters what the potential delta is between the buy price and the eventual return.
People can question how can he make money if he gives away the “secret sauce” and opening up the algorithm? Like the free speech angle, this is a distraction. The growth potential is not by making Twitter better at what it’s doing, but fundamentally transforming what Twitter is.
Twitter is a social media network. Facebook is a platform. Facebook has gaming and applications and events, and on and on and on. Just by turning Twitter into a platform there’s already huge potential for growth.
Twitter + PayPal + Platform = WeChat for the West
The West has been ripe for a WeChat-level of functional and service integration. For those of you who are unfamiliar, WeChat is the dominant Chinese “instant messaging” application. But WeChat has no equivalent in the west today. We don’t even have a word for an app like it because there’s nothing that does what WeChat can. Besides messaging friends and sharing photos, you can
- make purchases
- book a train ticket
- find a hotel
- pay bills
- book a doctor’s appointment
- book and pay for taxi
- apply for a loan
- and, much, much more.
WeChat is an all encompassing portal for commerce and services across the web. Twitter could become a similar platform.WeChat is an all encompassing portal for commerce and services across the web. Twitter could become a similar platform. Click To Tweet
Trust is an e-commerce enabler, fixing the broken ad revenue model
Opening up the algorithm, if done properly, will earn trust. And Musk and his backers are going to capitalize on the trust by making Twitter a vehicle for doing business. Not a LinkedIn-style social platform, but actually doing the transactions.
Forget what Twitter is and imaging what it could be: Taken private and allowed to build out functions and alliances quietly in the background, Twitter could explode into a competitor for eBay, Craigslist, Kijiji, Venmo (or the dozens of equivalents we have in Europe, in Spain, for example, we have Bizum), Ticketmaster, JustEat, Uber/UberEats, all their non-Chinese copycats around the world, and yes, eventually even Amazon, Meta, and Google.If @ElonMusk opens the Twitter algorithm & leverages increased trust for #ecommerce, we'll have a social media revenue model besides outrage/engagement-driven ads. That alone could make the acquisition world changing. Click To Tweet
Possibly most impactful, integrating e-commerce into social will take revenue pressure off straight advertising, making Twitter what the world is asking for: a social platform where humans aren’t the (only) product and the company isn’t forced to tune it’s algorithm to drive outrage and division in the name of ever greater “engagement”.
Do you even Crypto, Bro?
I’m not going to get into the details of defending or criticizing cryptocurrencies and blockchain, but Musk understands them, and understands how to make a business off micro-fees and transactions. As a man with a track record of doing the unthinkable in business, could Twitter be the vehicle that takes cryptocurrency e-commerce transactions mainstream?
What I promise is going to happen
Musk has long been a master at driving narratives and getting us all very excited. The social benefit and free speech angle, and the open-source algorithm bit, could all be true. But the point is, it’s noise. That is not what got him $44 billion in funding. He has a vision for where this is going to go, and how Twitter could become a powerhouse revenue vehicle.
We’ve seen the history with Tesla having been the most shorted stock in the history of the stock market. Going private allows Musk to go into his innovation hidey hole, strategize, take his time to come back with a transformed Twitter that is something totally different than what we know it as today: A WeChat-like omnichannel, services-based platform with multiple new revenue streams. I’d bet my whole follower-list on it.