The Rise and Fall of Social Media Empires: Twitter (X), Part 3 Podcast Transcript

Twenty-one-dimensional chess or a massive mistake?  A brief summary of the Twitter sale saga and a discussion of what came after and what it all means.

Taryn Ward  Hi. I'm Taryn Ward,

Steven Jones and I'm Steven Jones,

TW.  and this is Breaking the Feed, Social Media: Beyond the Headlines. 

SJ.  We're taking a closer look at the core issues around social media, including the rise and fall of social media empires, to better understand the role social media plays in our everyday lives and society.

TW.  Over the past two episodes, we've traced the history of Twitter from the beginning through to Elon Musk's purchase. Today, we'll turn to Twitter's transformation to x. We'll start as always, with the core question was Elon Musk's purchase of Twitter at the beginning of the end, it certainly has been a chaotic and often baffling ride since Elon turned his attention to Twitter. The purchase price alone was a hot topic of conversation for some time. At the start of 2022, Elon was a force to be reckoned with on Twitter. He already had over 115 million followers. Now he's up to 154 million, and in late January, he started buying Twitter stock. 

SJ.  Right, then on April 4, Musk disclosed his stake in Twitter, and based on the price of Twitter shares at the close of the previous day's trading, his stake was worth $2.89 billion. Twitter shares rose more than 27% on that announcement, and the next day, Twitter announced that Musk would join the company's board of directors. But in the move that set the tone for the next few months, on April 10, Musk said he would not join the Twitter board after all. 

SJ.  Of course, his next move on April 14 was to offer to buy the whole thing at a price of $54.20 per share, which translated to a valuation of $43 billion, 38% above where the price of the stocks the day before Musk's investment in Twitter became public. On April 15, Twitter considered this a hostile move and adopted a poison pill provision to make Musk's acquisition more expensive. But undeterred, on April 21, Musk announced that he had commitments for about $46.5 billion in financing to make possible the Twitter acquisition (that was the cost of the company and the closing costs), and to be honest, it felt a bit like Twitter was calling his bluff when on the 25th, they accepted his offer to acquire the company for the $44 billion.  Taryn, we were already working on Bright and watching all of this with something like a macabre fascination.  Elon had a reputation for being mercurial beforehand and had got in trouble with regulators in the US about the things he said about Twitter. But moving to social media didn't really appear to be a logical move for someone who really said that he wanted to move humans to Mars and was building batteries and cars, tunnels and rocket ships. So what, what did you think was going on?

TW.  Hoooo, I think a lot of his followers, you know, felt like he was playing 21-dimensional chess or whatever it is that they say, I think it's a little bit simpler than that, but I do think he had, and has, a really deep understanding of how important social media is, and how important it is to control a social media network, and I think last episode, we talked a lot about President Trump and the way he used Twitter. You know, Elon Musk was watching all this. He's very active user of Twitter, and I think see all this, it stopped being about the money and the price point, started to be about a lot of other things, which I won't, I'm not going to psychoanalyse Elon Musk, at least not this episode. But I think one of those things was a deep understanding of the potential that this purchase would open up. 

SJ.  Yeah, I mean, certainly it has provided him with a mouthpiece, and I guess, with President Trump being banned in early 2020, and Elon thinking that he has the right to say whatever he wants, and being a fan of free speech, particularly if it's him that's got free speech, based on some of the things that happened, I guess it makes sense to take over, but there also seem to be in this whole thing of sort of doing it because he could and he was irritated by the board and the decisions they've made, and it was sort of like, you know, if it had the feel of the most expensive playground fight in history, at some points with the back and forth between, you know, the Twitter CEO at the time, and Elon, and in a very public and frankly, sort of horrifyingly embarrassing way, and interestingly, it also impacted the the the Tesla shares that are the foundation of his, you know, being the richest man of the world. Anyway, it wasn't over.

TW.  No, of course, it wasn't over here. Because in May, Twitter shareholders launched a class action lawsuit against Musk over alleged stock manipulation linked to the purchase, noting that Twitter stock had fallen more than 12% Since Musk made his offer.

SJ.  Yeah, and possibly getting buyer's remorse and some of the most expensive cold feet in history. In June, Elon threatened to pull out of the deal if Twitter didn't provide enough additional information about the number of bot accounts on on Twitter and bots, apparently don't deserve free speech. But Twitter claimed that it had been sharing information with Musk in accordance with the terms of the merger agreement, and things got a bit difficult.

TW.  Hmmm. Yes, and in fact, in July, I think it was July 8, Musk terminated his acquisition, largely blaming fake accounts. So his claim at the time was that this had not been disclosed or had not been honestly disclosed. Of course, anyone who knows anything about what was happening understands that Twitter themselves don't know how many baht or fake accounts they have. Partially, I would suggest, because they don't want to. But whatever the reason, there was this back and forth over whether they had been honest about the number of those bots or fake accounts or not.

SJ.  Yeah, I'm glad you said that. So that I didn't have to, because I think you were absolutely spot on with the with your assumption of what was going on. But four days later, Twitter sued Musk to force him to complete the deal because contracts are real, despite the fake accounts. Who knew? Apparently not that very stable genius.

TW.   Yes, really interesting, sort of swinging back and forth? No, we don't want you to buy Twitter. Yes, we do. You know, it was an interesting, it was an interesting back and forth to watch. Pretty much everyone by no agreed that this was worth watching, and most experts who were commenting on this, agreed that Musk would have to purchase whether that he was going to lose the case and that this was going to be this was not going to go well really for anyone because it was going to affect the the value of the stocks and musk would be responsible, how responsible would be up for determination, but it was going to be a very expensive, very ugly thing, and eventually, Musk must have also come to this realisation because on the 28th of October, he closed the deal acquired Twitter, and this was something that he did, of course, you know, sort of at the last minute, in terms of when the court case would have moved forward. Unsurprisingly, very quickly. So Twitter's top executives were fired. That included the CEO at the time, the CFO, the chief legal adviser and General Counsel, and a number of people were not fired, but left. 

SJ.  Whichever way you slice it. Twitter was a very valuable company with an absolutely massive impact on public discourse, the stock market, as we discussed last episode, society generally, elections, there's all sorts of things that it affects him, and you would hope that when we're talking about the purchase of a company worth $44 billion that's traded on the stock market, that serious people will behave seriously when they make decisions to buy. But this was not, and why did this process get so chaotic? And how did it make Elon appear? And you know, as you said earlier, it's so many of his fans think that he's playing some kind of 21-dimensional chess beyond the ken of us mere mortals. But as we'll talk about probably a little bit later, the it's in sort of work out that way. But what why? Why did this get so weird? 

TW.  I hope you're not asking me I have no idea. This whole..., I never would have guessed for the flight out this way, and I have no justification for any of any of these actions. I think, you know, last episode, we talked about three camps, of three types of responses to President Trump's activities on Twitter, there are people who didn't like it, you know, sort of anti-Trump, and then there were people who didn't really care because they love Donald Trump, and this is just, you know, let's not talk about Twitter, and then there are people who really enjoyed it and thought, yay, he's a Twitter genius. I think something similar sort of happened with Elon Musk, and I think his really core fans who think that he can never do anything wrong or make any wrong decision. None of this made any difference to that, and in fact, the more bizarre things got, the more excited they became, and I think even now, when objectively their events and things going on that it's really hard to spin. They still believe that this is all part of some broader plan that's going to mean that, you know, things, things are great and better, and I think, you know, going back to a point we talked about earlier, Elan Musk really understood and understands the power of social media, not just through Donald Trump, but by this time, we'd sort of come through COVID or a lot of COVID, or we hope, and that the power of that had become really clear too, and as much as he was worried about these bot accounts and fake accounts, maybe he started to understand the role that those could play too, and you know, in terms of the chaos with people leaving, I think a lot of them didn't have a choice, and some of them had a choice, but only really in theory, and I think that all added, you know, the way this went down meant that there was never going to be a smooth transition, and everybody internally and externally, to some extent had to know that. 

SJ  Yeah, I mean, it's hard to imagine something like the purchase of NBC or CBC or, you know, one of the other major media networks going this way. But anyway, it happened, and it's reported the author 44 billion that he paid for Twitter, $13 billion, was debt taken on to finance his takeover, and this results in interest payments of $1.5 billion per year, according to the Wall Street, the Wall Street Journal, and some of that debt carries an annual interest rate of almost 15%, which is a staggering amount of debt to go into for a platform, particularly on based on what's gonna happen next.

TW.  Yes, and especially at the time, I mean, we've seen interest rates really go up recently, but 15%, whoa, that that has to stay, especially given how things have actually gone since since Musk took over. Now, there do seem to be long-term plans to build a super app. So this is sort of a, you know, well, we'll talk more about this when we when we get into super apps more in depth. But the idea would be to bring payment functionality to Twitter or to "X" and to compete with Pay Pal, potentially, and some other some other alternatives that are out there and just sort of bring it all under one umbrella and to create different different potential revenue streams through that. Pay Pal, obviously, turned out very well for a lot of people, and you could say, maybe slightly cheekily, that if you can't innovate, you repeat, and that may be some of what we're seeing here. Despite plans to come up with a super app instead of something that is, you know, a bit dysfunctional or has been dysfunctional since since Musk took over. Right now, "X" or Twitter still largely depends on advertising revenue, there's some subscription revenue, but it's been a it's been a little dicey for them.

SJ  That's right, and partly because almost immediately after taking over he he changed the meaning of the blue checkmark. So it no longer meant that you were a verified entity or famous person, and they were transferred to people who willing to pay $8 And that earns you slightly enhanced Twitter service and the derision of all of those people who decided they weren't going to pay for that subscription. Possibly the most consequential event happened very shortly afterwards when somebody paid $8 and got their verification mark. Sorry, subscription mark, and created a parody account of Eli Lilly and tweeted out that Eli Lilly was henceforth making insulin available for free. Now, full disclosure, I think that insulin probably should be free. But I come from a country originally with socialised healthcare and I live in one now and it doesn't cost us anything at the point of care. But that isn't Eli Lilly's business model. In fact, they had egregiously increased the amount of insulin cost for all sorts of reasons. But this single tweet, this one, one-line tweet, caused their stock to lose 4.37% of its value and erased billions in the market cap for Eli Lilly, which is, you know, pretty devastating for the company, but also for all of those people whose pension plans and other investments were holding Eli Lilly stock, but it was Eli Lilly wasn't the only target of fake "verified accounts" and I was making definitely air quotes around "verified accounts" there must himself, who was the target of parody accounts monster his annoyance, as was Tesla, the Pope, Rudy Giuliani, and I think, you know, I think it would be really difficult to parody Rudy Giuliani right now, but someone managed it. OJ Simpson, Dave Chappelle who became supportive of trans rights, and for me most amusingly, and pointed chiquitos, who claimed that they had overthrown the government of Brazil. Some of that is quite funny, but also really harmful, and if you build a brand, as we've discussed, is what made Twitter, Twitter was like, it was pointed, it was tight, it was very quick, and it was great for sharing news and, you know, perspectives of current events, and if you build your brand on sharing news and current events, surely you have some responsibility, if not legally, morally, to prevent this kind of thing happening on your network.

TW.  I mean, only if you want to continue to live in a democracy.

SJ  Awesome. Yeah. No, I mean, I'm laughing. But that is obviously you know, funny, because it's completely true.

TW.  It's there is a responsibility to prevent this kind of thing happening, and it is a huge problem, and one that was so avoidable. It was avoidable, and you know, we've had so many years of move fast and break things we know it doesn't work. We know that this is dangerous. We know, we just know now, you know, it's like it's like cigarettes, we are not in the early days of smoking, where it's like, oh, maybe it's good for me, maybe it's good for my health. We know running a social media network this way means and the dangers it presents for people and I'm saying all of that. I quite enjoy the Musk parody account. Sometimes I will admit I have to read it twice to double check to make sure it's not actually Musk himself sending these things because you never know, sometimes may think Musk's actual account is weirder than the parody account. But you know, all of that entertainment value aside, that's not Twitter. Twitter was never just about entertainment. Twitter was always about getting information and engaging in a meaningful way, and I think, particularly in that context, they have a responsibility to make sure that people are who they say they are.

SJ  I agree with absolutely everything you said, and not only was it right, it was absolutely hilarious. So thank you for that. But you know, we think that verification is key to running a safe, successful civil, social media network and, you know, ideally, verification, which is tied to an id rather than a dodgy Gmail account that you can set up in seconds, right? I mean, so we take verification very seriously, and it least Twitter even though they didn't take it as seriously, as we want to at least, they had it, and you couldn't get an Eli Lilly or Tesla account if you weren't in a Tesla or Eli Lilly. So yeah, it is it wasn't. It was a spectacular and goal, and one, which was, as you say, entirely foreseeable, and and actually had real world impact on other people, and interestingly, on Twitter.

TW.   Yes, and we're not the only ones concerned about this. I mean, you and I have had conversations with advertisers and brands who were very concerned about some of these changes in pulled advertising or thought seriously about pulling or reducing their advertising. So actually, by December of 2022, advertising revenue had fallen 40% year on year, and they found that 70% of their top advertisers had reduced or cancelled advertising altogether, and you know, whether this was directly a result of Musk's takeover and changes or not, you know, we can debate what percentage of this was the result of macro conditions in which per cent were lost directly. But, you know, that's a huge reduction in a relatively short period of time. You know, bear in mind also that in eight of the 10-years between 2012 to 2022, Twitter posted a loss. So it was not a profitable company, then, in fact, they haven't posted a profit since 2019.

SJ  Yeah, and as we mentioned earlier, Elon has to service quite a lot of debt in actual fact, it is not Elon it is Twitter. He made it their responsibility when he structured the way that it was put together. But that's a lot of debt with a lot of interest to pay on a decreasing advertising revenue stream, and that makes the subscribers with their blue checkmarks. More important, so how did that go? Well by, by January of this year, the revamped Twitter Blue service had 180,000 US subscribers, which was about 0.2% of the US user base, and that 180,000 users were 62% of the global total of subscribers, which is a very long way away from Elon's goal of roughly half of our revenue coming from subscriptions, and boy, does he need that revenue. So I think, Taryn, this is another area where, in theory, we sort of agree that subscription is likely the best way to build a social network for different reasons than Elon for sure. But can you give us a quick summary about what you think he did wrong? And maybe we can have a better chat about that? 

TW.  Sure, so when you and I first started working on Bright, we told people, largely investors that our plan was to build a social media network that was subscription based, rather than based on ad revenue. They thought we had lost our minds, even even respected colleagues of ours who have known us for 10 years and know that we're serious people thought we had just lost the plot, and, you know, as we sort of talked them through why needed to be this way, many of them came around, thankfully, and to their credit, maybe more than ours. But one of the questions that came up a lot at the time was, if it's such a good idea, why aren't the other social media networks doing it? And our answer, then? And our answer now, is, there are several reasons one, it would be a huge change, they'd have to basically shake up everything that they're doing and rebuild the very core of their offering from, from the beginning. The other thing is people don't want to pay for something that is already terrible and was free yesterday. Why would I pay for Twitter, when not only is it not better than it was a year ago. It's worse. There's, there's really no motivation there, and I say that as somebody who has subscribed to Twitter, so that I could fully experience to experience it to prepare for these episodes. So I do pay for Twitter, I've seen the benefit their advantages, I can't tell you what they are. Because for me, the way I use Twitter, it's not any different than it was when it was free, and I would say again, that my experience on Twitter today is still notably worse than it was two years ago when it was free, and I used it daily.

SJ  And I think that that's that's all absolutely true. The key thing here is that he's not the Elon has no intention to not collect the data on people to use that to create complicated graphs and data analysis to profile and Ad, it's not that he's not going to advertise to you, he just wants to be better at advertising to you, and also for use pay for the privilege, and he recently he's talked about extending that.

TW.  Yes, as recently as September of this year, 2023. He's talked about having everyone pay, and making it making it subscription mandatory, and as far as I know, he has not mentioned removing ads, maybe reducing their frequency, or even improving the quality of the ads, which, which means they have to know more about you. Because their version of better doesn't necessarily mean what you think it means, and, you know, we've seen some other networks do this LinkedIn. You know, if you pay for a premium account, and you pay a lot, in some cases for a premium account, they are still collecting your data and still advertising to you, which annoys me very much I haven't yet mentioned. But Twitter is something different. It's a different offering, it doesn't necessarily have the same obvious professional benefits, especially now. It's unclear how he intends to make this happen. 

SJ  And it turns out that $8 is actually a reasonable amount of money because Investor's Business Daily, and I was very happy when I found this, this web page, did a fun back-of-the-envelope calculation that if you have 1.5 billion tweets per month, and they're being produced by 400 million users who are paying $8 for a subscription, then each tweet is costing you 20.6 cents, which is actually put it back in the realm that it was when we talked about 2006 When you were being charged for SMS messages, and you know, I don't know about you, but I don't read a lot of tweets, which are worth 20.6 cents anymore.

TW.  No, definitely not, and I would at least like to be able to choose which ones I'm reading or not at that price, and I don't want to see ads as part of my calculation. Another problem and this is related because it's it all comes down to money is how to keep Twitter running smoothly with a much smaller staff. So one of the things Musk started doing quite quickly is this cost cutting initiative across the board, and he's on record complaining about the quality of the code, saying things like Twitter's This is a quote by the way. Twitter's code stack is extremely brittle for no good reason, and that it will need a complete rewrite, and certainly when an API change apparently broke all of the links on Twitter for 45 minutes back in March, things, things were really not looking good, and again, Musk chimed in, as he often does, and wrote that "A small API change had massive ramifications". No kidding.! You know, I'm not a technical person, even I understand that, and the problem, of course, here is when you're working without half of your developers forget all the other stuff that that are missing. But you're working with half of your developers and without half of your developers, you're missing some of the key people who were integral in keeping that system functional, and who have institutional knowledge that Elon Musk failed to appropriately value in didn't have himself because of course, he didn't. That's not that's not a criticism, he couldn't have had it because he wasn't there, it was new to him, and rather than taking the time to understand what he didn't understand, he started making these cuts all over the place, and the consequences were serious,

SJ  Couldn't agree more, and obviously, Twitter was losing money, there was probably a staff that could be caught is just I don't.., there was no apparent logic applied to it, it was just done, and then, of course, a lot of people left because it was it became sort of a hostile workplace. For a while, I have no idea if it still is. But you know, as far as I can roll recall, back in the day during development, Twitter had a problem with technical debt that accumulated as the program grew and got more sophisticated on, and I seem to remember other couldn't find the reference for it, that they, they actually had to raise quite a lot of money to fix that. Because fixing these things is really expensive, and, you know, the challenge facing him now is, even if it is true that the boat code is brittle, he's going to have to find a couple of 100 million dollars to rewrite it. At a time, the platform is looking more like it's going to lose money, and it's going to take years, possibly to the end of the decade or beyond. So complete a rewrite of of that magnitude. Because obviously, it's quite a lot of work, and I know that he doesn't appreciate that because he isn't the developer, and he's an investor and, you know, PR guru, let's be honest, he's very good at the PR but this is, this is a really difficult project to take on, and that is something that you probably should have worried about more than the number of fake accounts on Twitter, because at least everybody knew that there were a whole bunch of fake accounts on Twitter, and if I was an investor, I would not only want my money back, I would also be really worried about the prospects of actually getting my money back right now, and I guess that brings us to the to the next question, which is, what do we think is next and can this be recovered? Or does that depend on whether a rival appears that can actually really challenge Twitter's sort of niche? Or, you know, is there a possibility that suddenly it's going to turn around for Elon and Twitter will, sorry, X, formerly known as Twitter will suddenly sort of reclaim a new market or get back to its old self? What do you think, Taryn?

TW.  That's a great question. I think it's, they're in a tough spot, and I think one of the things that maybe they've underestimated is the loss of warm feelings that people have had about this platform for a long time. So that in the past, even when it was a little bit, let's say, not great. People remembered their earlier experiences on Twitter and Twitter on their brand new smartphones, the first time they had a smartphone, and there was this nostalgia element that, that sort of carried through, and I think after the saga of the purchase, and after everything else that's happened with Elon Musk, I think a lot of people are really just watching and waiting for something better to come along. Some people have left already even they've taken that leap, even though there's no clear, easy transition to something else, and I think there are a whole lot of other people who are just waiting for that thing to capture their attention and, and to have a reason or to have an opportunity to go to something, something else. I think Elon Musk, there's a lot of money at stake here, and if you never underestimate the power of that, they may decide to do something completely different and then figure out a new, a new way to approach this. But I think it's going to be hard. I think it's hard when your initial users really don't like you anymore. Because you basically, you don't have to start over exactly, but you have to figure out how to capture new people, and right now, Twitter seems to be headed in, in a in a strange direction, and it does not feel like a place for for you to be able to discuss viewpoints with people who disagree. I agree with you, or a place to connect with experts and to learn new information. It feels like watching cars crash or trains crash one after another, and while there's some entertainment value in that, it's a different, it's different, and it's not it doesn't have the kind of staying power.

SJ  Yeah, I mean, if Twitter was the, the local square or you know, if your English perhaps the local pub, where people would get together and socialise and have a discussion, sometimes heated.  It's like somebody brought bought your village pub, courted specifically the Hells Angels, got them to come to the pub, but then also wanted you to keep taking your kids for a Sunday lunch in the beer garden, you know, these things are not compatible, and, and, you know, I think that there's a lot of reason to worry about the lack of moderation and the lack, the lack of safety systems, which were deliberately torched by Elon along the way, and, and it is absolutely true that free speech and free freedom of expression is extremely important. But it works where the discourse can be civil. I mean, you can shout at one other occasionally when feelings get heated, but if it's going to work, you have to really make this you have to collaborate, right, and whilst it is difficult to bet against Elon, mostly because he has a great deal of money at his disposal, even if much of it isn't readily available. Because it's tied up in Twitter stock. It does seem right now like X is in a bit of a spiral, and one that was you know, to be honest, entirely avoidable i's unfortunate.

TW.  It is unfortunate, and for the record, I would take my children to a pub, or share a meal with Hells Angels any day before I would let any of them spend time on Twitter. So just for context, in terms of what we're talking about, I think it is really not a good situation. Next time, we'll turn our attention to some of the newer social media offerings beginning with a closer look at Tiktok. In the meantime, we'll post a transcript of this episode with references on our website. You can find this and more information about us at TheBrightApp.com.

SJ  Until next time, I'm Steven Jones,

TW.  and I'm Taryn Ward.

SJ  Thank you for joining us for Breaking the Feed, Social Media: Beyond the Headlines