Analysts observe nervousness
Musk’s involvement poses challenges for Twitter
By Hannah Schwar
04/09/2022 11:02 am
Twitter can use fresh impetus. In terms of user numbers, the network is still a dwarf compared to Facebook. Tesla boss Musk’s new commitment is an opportunity for the company. But his creative will could also be tricky for Twitter.
Elon Musk has a tumultuous love-hate relationship with Twitter. Sometimes the tech entrepreneur lets his approximately 80 million followers know that the service is “corrosive” and complains about the “gloomy” discussion climate. Only to return a short time later with a staccato of posts about his innermost thoughts, product announcements and internet jokes.
In the past few days, Musk’s relationship with Twitter has reached a new level. The Tesla boss, previously one of the most influential figures on the platform, is now also becoming an influential co-owner. According to a mandatory announcement by the US Securities and Exchange Commission, Musk has acquired almost 9.2 percent of the shares in the US group. He should also get a seat on the board of directors.
Twitter CEO Parag Agrawal recently made efforts to sell Musk’s new role as a profit for the company. His enthusiasm for and criticism of the platform is “exactly what we need on Twitter and on the Board of Directors”. In short: Musk will create “great added value”. But will he really?
Product innovations and convincing marketing
Elon Musk has already stated on Twitter that he wants to get actively involved in the company’s strategy in the coming months. One thing is clear: Twitter can really use new impulses. In terms of user numbers, the social network is still a dwarf compared to the approximately two billion daily visitors of its competitor Facebook.
The goals set to increase daily users to 315 million by 2023 and at the same time to double annual sales to 7.5 billion US dollars are considered very ambitious. The user growth would have to be 20 percent annually for this – it is currently at 13 percent. Achieving such growth requires product innovation and strong marketing. Both are disciplines in which Elon Musk is known to be a master. In this respect, his commitment could be an opportunity.
The Tesla boss has already indicated which points he would start with to ensure more traffic. On the one hand, he apparently wants to take stronger action against bots. From his point of view, they are one of the most annoying things about Twitter. On the other hand, he wanted to restore “the principles of freedom of expression”. He’s concerned that what he sees as “factual bias” in the Twitter algorithm is influencing public discourse.
Apparently what is meant is the moderation and deletion of content. If Musk prevails here, it could open the way for disinformation and hate speech. Musk’s creative will could also be tricky for Twitter for other reasons. So there is a danger that he will turn the service into his personal hobby project in order to reshape it for his own purposes.
“There is a risk that users will then migrate”
Susannah Streeter, an analyst at British wealth manager Hargreaves Lansdown, observed, for example, “a certain nervousness that Mr. Musk is being given too much influence over the leadership of Twitter to strengthen his personal brand and that of his companies”. From the investor’s point of view, it is therefore important that the company strictly adheres to all control mechanisms. Otherwise, Twitter’s independence could be called into question, says Streeter. “There is a risk that users will then migrate,” says the analyst.
Ultimately, however, the question is how much influence Musk can exert in practice. With a stake of 9.2 percent, the entrepreneur is the largest single shareholder. In order to effectively put pressure on the management via the voting rights, however, he would have to ally himself with other investors for a majority. He is also only one of twelve members of the Board of Directors. So he will not be able to implement his ideas on his own.
And even if Twitter CEO Agrawal will coordinate closely with the entrepreneur, it remains to be seen whether he will even have enough time to really get involved in a meaningful way. As CEO, Musk steers the businesses of the automaker Tesla and the aerospace company SpaceX. He is also involved in the tunnel boring company The Boring Company and the brain chip developer Neuralink, in which he holds the majority. The tech billionaire has often emphasized in the past that he would like to push more projects, but simply lacks the capacity to do so.
The article is first at capital published.