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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWhy Elon Musk's Quest to Revive Twitter Is Likely to Fail
Elon Musk is treating Twitter like a startup. The thing about startups is, most of them fail.
At Twitter, as is typical at tech startups, Mr. Musk is making or has promised to make a great many changes quickly. This makes a lot of sense when a company is small and burning investor cash. Few operators in tech are as familiar with this well-worn playbook as Mr. Musk, who is almost unrivaled among entrepreneurs in the total market value of all the companies he has helmed or helped foundincluding SpaceX, Tesla; and PayPal.
But Twitter isnt a startup, its a mature company with a lot that Mr. Musk could squander if he moves too quickly and breaks too many things at once. Twitter has thousands of employees, even after the company announced significant layoffs on Friday, a mountain of code with all the technical debt that implies, about $5 billion in annual revenue, and nearly 240 million daily active users with strong opinions about the service. Also unlike a startup, it has more than $1 billion in annual debt payments, on top of other expenses, thanks to the money Mr. Musk borrowed to help fund his takeover.
Twitter is already threatened with what could become an existential crisis, as Mr. Musk tweeted Friday that the company has suffered a massive drop in revenue as advertisers pause their spending on the site, weary of what Mr. Musk will do next and how it could reflect on them. While Mr. Musk has in the past accomplished what many deemed impossible, Twitter is a completely different sort of challenge than he has dealt with before. His often-touted first principles thinking is great for creating new physical products. But he has demonstrated something like the opposite of a talent for the extremely tricky diplomacy required to run a social network, where a leader must balance the needs and desires of advertisers and users, not to mention regulators and politicians. All this, while overseeing what amount to editorial decisions about what content is and isnt allowed.
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First, Musk-owned Twitter is starting in a deep financial hole. The billionaire agreed on a price in April amid a tech-market rout that has only worsened since, especially for social-media stocks. Rivals Meta Platforms, which owns Facebook, and Snap, which owns Snapchat, are currently valued around two-to-three times last years revenue. The $44 billion Mr. Musk paid for Twitter amounts to nearly nine times its 2021 sales. And the interest on the debt to finance the takeover will make it harder to turn a profitsomething Twitter has long struggled to do consistentlythat might justify a lofty price. On top of that, given how crowded the social media space is already, its not clear anyone, even Elon Musk, can turn Twitter into a company that grows quicklyor at all. The bear case for Twitter is, therefore, that Twitter is sort of a stagnant and troubled business that just took on a ton of debt, says Mr. Novak.
Of course, troubled business that just took on a ton of debt could also describe Tesla and SpaceX at various points in the past. Those companies and Twitter are all tech companies in that they all require a lot of programmers and code. But social networks are only nominally in the same business-school case study universe as companies that build rockets or cars. And Mr. Musks prior successes were largely about wrestling with immutable laws of physics and materials science, while running a social network is about managing humans, whose behavior is infinitely more complicated and difficult to predict.
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https://www.wsj.com/articles/why-elon-musks-quest-to-revive-twitter-is-likely-to-fail-11667620832 (subscription)
moniss
(4,249 posts)that allowed Tesla and SpaceX to survive financially was massive amounts of government money by way of subsidies and contracts. He will have none of that with Twitter. It could be that there will be a bankruptcy coming at some point. All the while he uses the platform to hammer the propaganda of the cons.
dalton99a
(81,513 posts)Crowman2009
(2,497 posts)Cuz it's trainwreck time!