Background Information
In July 2020, tech mogul and founder of Tesla Motors, SpaceX and the Boring Company, Elon Musk proposed to buy out Twitter in a tweet. It began when he posted asking “how much does the twitter cost?” and stirred a number of financial pundits, industry insiders and online speculators to speculate on the potential takeover.
Musk, although known for unorthodox stunts, had been struggling to make a cohesive and successful social media platform of his own. In 2011, he had established an ambitious multi-user platform called Tesla Motors, but it was quickly shut down before takeoff. Later, he attached a fan page to the Tesla Motor official site, which was quickly overrun with spam. This led him to explore the possibility of buying out Twitter.
Twitter is a publicly traded company, and according to the company’s balance sheet for the second quarter of 2020, its market capitalization was $21.68 billion.
Experts’ Perspectives
Financial pundits weigh in on the chances of Musk succeeding in actually acquiring such a large social media platform such as Twitter. Dr. David Smith, a finance professor at the University of Pennsylvania, remarks that the idea is “utterly ridiculous” as it would require a massive amount of capital and significant restructuring. Although seemingly viable in theory, the multiple complexities likely make the takeover of Twitter a success only in fantasy.
Social media expert Mark Johnson adds that for Musk to be successful in such an endeavor, he needs to build trust with Twitter’s board of directors, with investors and with the users of the platform. Johnson points out that despite Musk’s notoriety, the trust needed to succeed in the takeover may be far out of his reach.
Musk’s previous venture into the world of social media was met with failure and a large loss of capital, leading some to believe the Twitter proposal to be another flop. Investment advisor Charles Harris says it is easy to see why investors are skeptical of Musk’s Twitter offer. From investors’ perspective, there’s simply no real upside to Musk acquiring the company – it’s a multi-billion dollar social media platform that is already thriving and a successful exit of the asset would be unlikely.
Data and Analysis
According to reports from Accounting Principles, buying Twitter would cost Musk upwards of $26 billion. That would mean that he would have to raise the necessary funds through some form of financing. Furthermore, acquiring Twitter would also mean that Musk would need to either pay for it in cash or use debt to finance the purchase. In order to remain competitive with Twitter and other competing social media companies, Musk would need to make substantial and ongoing investment in order to maintain its value.
An analysis of Twitter’s balance sheets suggests that the company, although wildly successful, is not as profitable as some of its competitors such as Facebook, LinkedIn, and Instagram. Twitter’s current market capitalization is $21.68 billion, but sales revenue and operating income have only increased 4.9% and 6.3% respectively since the beginning of 2020. This means that while it is a valuable asset, it might not be worth the amount of money musk is proposing to pay.
Social Media Oversight
The development of social media has raised questions on the regulation of freedom of expression and the right to privacy within such platforms. These restrictions create a rift between the freedom of expression and the need for adequate safety guidelines and security of data. While some sites such as Twitter are increasingly creating new safety protocols and developing systems meant to identify and implement negative content, there is still a lack of global oversight which leads to a lack of accountability.
Thus, a regulation body with representatives from each country should be established to ensure a consistent security of data, freedom of expression and user safety. Such a body would prevent unchecked power and would provide a safe platform for users to express themselves without worry. However, Musk would need to take the initiative to get this body established and ensure that it works in a trans-national fashion.
The Extra Mile
It is no secret that Twitter has a reputation of being hostile to its customers. The mere fact that the platform allows bullying and hate speech is enough to give potential buyers cause for concern when considering a purchase of the company. Yet, with the right investments and partnerships, Musk has the potential to turn Twitter around by implementing a comprehensive customer service model similar to the one built by Southwest Airlines.
The airline model focuses on making its customers a priority and emphasizing on ‘hourly happiness’. Such a model would enable Musk to enhance social media interactions while building relationships with customers. This would help build a more positive image of the platform and encourage more people to join in on the conversation.
Improving User Experience
In order for Musk to make a successful acquisition of Twitter, he would need to look at the overall user experience and improve it. From the very crafting of content to the accessibility of options, Musk would need to ensure that user experience is enticed.
He would need to put in a serious effort to streamline user features, bring about cross-platform interactivity, establish more engaging content, and create a more relaxed platform for enhanced user experience. Improving the user experience could lead to a significant increase in the number of active users using the service and make the social media monetization cycle more efficient.
Digital Branding Strategies
A successful acquisition of Twitter would also require Musk to consider digital branding. This is because Twitter is mostly used as an engagement tool and one scoops out numerous opportunities to reach out to customers, and build social relationships with them. To this end, Musk would need to come up with strategies that are conducive to increased interaction, responsiveness and engagement.
A good digital branding strategy should include collaborative advertising campaigns, use of highly creative content, and interactive features such as polls and surveys. Additionally, designing algorithms aimed at identifying trends and creating events related to the Twitter platform can help in driving traffic and engagement.
Streamlining Social Media Administration
Thus far, Twitter has been very lax in its administration and many users have voiced their grievances related to lack of moderation and security measures when it comes to online trolling and hate speech. To improve this, Musk would need to provide better administrative services by putting in place legitimate mechanisms to maintain security and user safety.
Serving as the social media ombudsman, he should dedicately work on streamlining the process of moderation to ensure that all inappropriate content is flagged and blocked immediately. Additionally, he should also look into other ways to bolster the security of the platform and ensure the safety of every user.
Data Monetization Strategies
An acquisition of Twitter by Musk could lead to better monetization strategies. This is because the platform is already home to a vast array of data sets which could be put to use for various purposes. Musk should focus on developing a comprehensive data monetization plan by connecting the collected information with interests and preferences of users.
Moreover, the algorithms should be designed in such a way that potential users, businesses, and influencers interested in the platform can be identified, allowing the platform to build comprehensive demographic segments and generate income through insights and data sets. Finally, Musk should revamp the platform to create a unique user experience by leveraging its data and creating new revenue opportunities.
