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Wednesday, July 13, 2022
Twitter should ditch Musk
Twitter (TWTR) has asked a Delaware court to force Tesla (TSLA) CEO Elon Musk to stick to his agreement to buy the social network for $44 billion. But the company’s own lawsuit illustrates exactly why the Tesla chief is possibly one of the least suitable people to own Twitter.
Turning Twitter over to Musk would damage a social media site that’s already reeling from the mercurial CEO’s own public attacks against the firm. After all, Musk wants to limit Twitter’s ability to moderate content — opening the doors to unfettered speech and making exceptions only when something is illegal. Think Twitter is a hostile place now? Just wait for Musk to own it.
But beyond his obsession with being allowed to say whatever he wants on the platform and cutting down on fake accounts known as bots, Musk offered little in the way of constructive ideas on how to improve Twitter.
“I think they'd be better off without him,” said Ari Lightman, professor of digital media and marketing at Carnegie Mellon University’s Heinz College. “For all intents and purposes, he doesn't want it at the price. We don't know whether he ever wanted it, or whether it was just a PR stunt.”
That’s why instead of sticking Musk with a $44 billion bill, Twitter should focus on expanding its user base, and figuring out how to monetize its existing users.
And without the noise from Musk, Twitter could do just that.
Musk has already damaged Twitter
Musk’s biggest gripe with Twitter is his assertion that it’s lying about how many bots run rampant on its platform. Bots and spam accounts are automated profiles designed to cram users’ feeds with disinformation and phony get rich quick schemes.
In the past, bots impersonating Musk hawked fake cryptocurrencies, bilking users out of their cash with the promise of big investment wins.
Twitter maintains that less than 5% of its monetizable daily active users are bots, though it heavily couches that number by saying it “applies significant judgment” in measuring such accounts. Musk, meanwhile, estimates the number of bots could be as high as 20%, though he doesn’t cite a source.
In his break-up letter, Musk says Twitter is holding out on data related to bots. But Twitter, according to its lawsuit, says it furnished Musk with what it calls its “firehose” of data including likes, tweets, retweets, and information about the devices those interactions came from.
Twitter also claims Musk has repeatedly attacked the social network via his own account. In one instance Musk tweeted a poop emoji in response to CEO Parag Agrawal’s statements on bot numbers, and in another he created a fake poll asking his followers about their experiences with bots.
The sniping, which Wedbush analyst Dan Ives describes as a “fiasco and nightmare,” has helped push Twitter shares lower, and put a hurting on Twitter employees’ morale.
“The real victim from all of the drama that's going on right now is Twitter itself,” Forrester research director Mike Proulx told Yahoo Finance. “Twitter now has an acquirer who no longer wants it. It has a CEO and a board who wants to get rid of it. And it has an employee base, who's caught in the middle of all of this, and their morale continues to plummet. So none of this is good for Twitter in the short and medium term.”
It’s not just employee morale. Musk also gave advertisers reason to distrust the social network by claiming in his break-up letter that the number of bots is “wildly higher than 5%.”
Advertisers want their ads to reach as many users as possible with the hopes that those people will buy the product they’re selling. And bots, well, don’t care if you’re offering used cars or tubs of foot cream — they’re not actual users.
By claiming that Twitter’s bot numbers are higher than the company has reported for the past several years, Musk is making it look like the company has lied to advertisers for years. And if those advertisers pull their ads from the social network as a result, it would directly impact Twitter’s bottom line.
Leaving Musk behind would let Twitter get to work
Without Musk, Twitter could switch its focus from going private and having to change its leadership and instead look into growing its user numbers.
Twitter is still relatively small, with just 229 million monetizable daily active users, compared to Meta’s 2.87 billion daily active people (its measurement) across Facebook, Instagram, and WhatsApp.
Still, Twitter continues to grow. User numbers increased by 15.9% in Q1 2022, up from 199 million in Q1 2021. In other words, it’s adding new eyeballs. Instead of focusing on Musk, the company should figure out how it can better monetize those users and bring even more onboard.
Twitter would be better served by moving forward on its own, rethinking its corporate strategy, and even taking some of Musk’s advice when it comes to reducing bots — rather than continuing to engage with a former suitor who’s relentlessly attacking the network.
Twitter could make a number of practical improvements, from letting users edit tweets in case they mistweet, to making the service easier to use for those new to the platform. It’s not exactly welcoming as is.
If Twitter does force Musk to take over the company, it would have massive implications for the social network by allowing hate groups and disinformation factories to post freely on the site.
Naturally, giving hate groups and their ilk a platform on Twitter would push away advertisers, the company’s main source of revenue.
For Twitter, the move is clear. Cancel the relationship with Musk and try to build out the platform on its own. Otherwise, Twitter’s future looks bleak.
By Daniel Howley, tech editor at Yahoo Finance. Follow him @DanielHowley
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