Tweet Trouble: Is There A Happy Ending For Twitter? - 7investing 7investing

Want access to stock ideas and free investing content? Join our free 7investing email list today!

Tweet Trouble: Is There A Happy Ending For Twitter?

Twitter is a powerful idea but the business itself was never outstanding. It was poorly run and its serviceable market seems to be relatively small compared to services such as Facebook or Instagram. Will Elon Musk be able to transform Twitter?

January 6, 2023

Elon Musk’s acquisition of Twitter has resulted in tweet-storms brewing. The CEO of Tesla and SpaceX has long been known for his love of Twitter. Musk’s stated goal for this acquisition was to “free the bird app” by enabling free speech. However, free speech comes with limits, and it’s unclear if Musk fully understood this when he signed on the dotted lines foregoing due diligence!

Twitter has had its fair share of issues even before Musk’s acquisition. User growth had mostly “flatlined,” and the platform was struggling to attract users. This shouldn’t come as a surprise, as the universe of people interested in writing short, “tweet-sized” messages is relatively small compared to the massive audiences of platforms like YouTube and Instagram.

If you are a regular Twitter user, you know what I am talking about. Twitter is dominated by news people, both the traditional and the freelancer/blogger kind. There’s a growing FinTwit community. Then there are politicians, scientists, techies, and other influencers. The teenagers on Snapchat or Instagram aren’t flocking to Twitter.

As a company that had potentially hit its limit in terms of serviceable audience, Twitter’s cost structure was just too high. Musk indicated that Twitter was on track to lose close to $3 Billion this year. That definitely meant cost structure needed adjustment. No wonder, the Musk regime dramatically shrunk Twitter’s headcount. In a recent Twitter Spaces interview, Musk indicated that the business was now on a breakeven trajectory, although not yet fully out of the woods.
Following the turmoil of the cost structure adjustment, Musk and his team seem to be engaging in experiments in boosting engagement. This includes stirring up controversy, such as investigation of the suspension of President Trump’s account and the demands made by intelligence agencies on Twitter. These controversies, while interesting to a section of Twitter users appear more of a distraction and elevation of so-called “extreme” positions to others.

It remains to be seen if these tactics will enable Twitter to “tweet up” and become a much larger social network. I have my doubts. The current format doesn’t lend itself to usage by the masses. If Twitter does become a bigger social media or as Musk likes to think of it – the townhall of the world – then I would bet Twitter will be morphing well beyond what it is today.

I wouldn’t bet against Elon Musk but transforming and growing Twitter might be a more challenging problem that it may appear at first glance. Musk has his hands full with Tesla and SpaceX, and has committed to finding a CEO for Twitter. Much will depend on the CEO succession and their ability to work alongside Musk.

Will Musk fail at the altar of social media? Only time will tell.

Join 7investing's Free Email List

Already a 7investing member? Log in here.