Tue. Dec 6th, 2022

Elon Musk, who has changed his Twitter handle to “chief Twit,” late Thursday proclaimed that “the bird is freed” as he took control of the social media platform. The question now is whether the billionaire Tesla CEO can grow the business while fulfilling his vow to transform it into a bastion of free speech.

Balancing those goals will present an “Everest-like uphill battle,” Wedbush analyst Dan Ives told CBS MoneyWatch, noting that he gives Musk a “less than 50% chance to really turn this around.”

Musk has offered a range of statements, some seemingly contradictory, about his vision for Twitter, while sharing few concrete plans. But some of his challenges are clear, according to analysts. 

First, Musk paid a hefty premium in buying Twitter for $44 billion, which will put pressure on him to slash costs. Second, Twitter is struggling to attract advertisers, which is unlikely to get any easier as the economy slows and possibly enters a recession next year.

“He is buying this asset at the worst possible time,” Ives said. “We are in a the middle of a massive social media slowdown.”

He added, “The easy part is buying Twitter — the hard part is fixing it.”

At the same time, the New York Stock Exchange began the process Friday to delist Twitter, which means much of Musk’s moves won’t be transparent to investors and observers. And without a share price and big institutional investors to answer to, Musk may feel emboldened to put his stamp on the company, Erik Gordon, a professor of business at University of Michigan, posted on The Conversation.

Here are three issues facing Musk as he takes the helm at Twitter. 

Winning over advertisers

Musk has criticized Twitter’s dependence on advertisers, but made a statement Thursday that seemed aimed at soothing their fears. He assured marketers that he wants the service to be “the most respected advertising platform in the world.”

But advertising has slowed sharply at Twitter, with the company blaming the “macroenvironment” amid uncertainty surrounding Musk’s acquisition. Ad sales rose 2% in the second quarter, a marked decline from a 23% jump in ad revenue during the first quarter. 

There’s a lot riding on whether Musk can not only maintain current advertisers, but convince new ones to sign up for the platform: About 90% of the service’s revenue stems from advertising. 

Opening the free-speech floodgates

Musk has said he wants to promote free speech by loosening how Twitter moderates content. Wall Street analysts say that risks unleashing a tide of online toxicity that drives away users and advertisers. 

Musk said Thursday he doesn’t want Twitter to become a “free-for-all hellscape.” But he has previously signaled that he may restore the accounts of some former Twitter users who had been banned for violating the company’s standards and policies. On Thursday, a conservative commentator tweeted to Musk that he was “still Shadowbanned, ghostbanned, searchbanned, and Twitter removed 1200 followers today – as usual.”

Musk on Friday said Twitter would form what he called a “content moderation council with widely diverse viewpoints,” adding that no one whose account has been banned would be reinstated before that group has a chance to meet.

For now it remains unclear if former President Donald Trump will return to the service, something that Musk has said he would allow if he bought Twitter. Trump was permanently banned from the social media site three days after the January 6 attack on the Capitol because of “the risk of further incitement of violence.”

Musk may view Trump’s return to Twitter as helping to increase engagement with other users, Ives said. But he would be walking a “political tightrope” in doing so, he added.

For his part, Trump said Friday in a post on Truth Social, the conservative-leaning social network backed by his media company, that he is “very happy that Twitter is now in sane hands, and will no longer be run by Radical Left Lunatics and Maniacs that truly hate our country. Twitter must now work hard to rid itself of all of the bots and fake accounts that have hurt it so badly. It will be much smaller, but better.”

Mass layoffs to come?

Although Twitter is going private, Musk overpaid for the money-losing business, which will put pressure on him to streamline, Ives said. Musk has said Twitter has more employees than it needs, with the Washington Post recently reporting that he may cut up to 75% of its workforce. 

Ives thinks the job cuts could range from 30% to 50% of the company’s headcount. Yet while Musk can cut costs, “he can’t cut his way to growth,” he added.

After taking control of Twitter, Musk fired CEO Parag Agrawal, Chief Financial Officer Ned Segal and Chief Legal Counsel Vijaya Gadde, according to the Associated Press, citing people familiar with the deal. Segal confirmed his departure in a series of tweets Friday. 

Musk is likely to recruit a seasoned social media executive to take the helm of Twitter, although he will remain deeply involved with the company, Ives predicted. “With Musk, never count him out,” he said. “He’s been able to defy the skeptics again and again.”

—With reporting from the Associated Press.





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