Elon Musk learns the hard way that a Twitter troll is way more fun than a mod

I honestly didn’t think chaos would flood Twitter so quickly, but I have to admit: this rules. This owns so hard. Awoooou (wolf howl), Twitter is good again. We are no longer locked in here with Elon Musk – Elon Musk has locked himself here with us.

Musk took control of Twitter on October 27. From that moment on:

Okay! So I have some thoughts about what the hell is going on. First, Musk often changed his mind about Tesla, such as when he decided to close all physical Tesla stores, then reversed himself, or the time he decided Tesla would accept Bitcoin until, uh, it didn’t. Teslas were supposed to be built by an ‘alien dreadnought’, which didn’t work. The rapid reversals are not unusual for Musk. It’s just that Tesla is a company that Musk has built around his fandom, who are more understanding of this kind of behavior.

However, Twitter is an asset and is not necessarily full of Musk fans. That means it’s a much less forgiving environment for Musk. like, and early subset of Twitter users to be Something terrible forumgoons – of whom Dril is the most prominent – and her? love fuck with people. Additionally, Musk’s Twitter Blue plan to devalue verification checks motivated some people who didn’t enjoy dating Musk by impersonating him, largely because they knew it would drive him crazy. And it probably did! That would certainly explain why his very first policy change was to increase the penalty for impersonation.

Shenanigans are fun, but here’s the thing to keep in mind: Twitter is full of debt from the acquisition and has to pay about $1 billion a year on it. in 2021, Twitter made $5 billion in revenue and made no profit. “This isn’t complicated,” said Mike Roberts, a professor at the University of Pennsylvania’s Wharton Business School. “He owes a lot of money, and he has to raise money somehow, somehow. What I wonder is Twitter’s ability to pay this debt.”

So Musk has to figure out how to make money while people yell at him and imitate him. Nice job!

One way to free up money is by firing a lot of people. The problem with this though is that you lose some engineers who can build cool shit to make Twitter more appealing. This may not be a big deal considering all tech companies are firing people right now, so Musk can hire new talent cheaply if need be.

But this doesn’t solve a bigger problem, which is revenue. Last year, 89 percent of Twitter’s revenue — about $4.5 billion — came from advertising. The rest of the company’s revenue came from other streams, such as data licenses.

Let’s focus on the advertising problem for a moment. Many brands have paused their spending, and an ad manager who was talking to Musk called his behavior “stimulating and thoughtless”.” This is a immediately problem because the fourth quarter is the most important for any business that depends on advertising, including this website. So many major advertisers are shutting down Twitter during a pivotal time for the company to monetize, something Musk himself has acknowledged. “Twitter has had a massive drop in revenue,” he tweeted.

It’s getting worse, and this part isn’t Musk’s fault. When the economy slows, companies spend less money on advertising. So even if Musk wasn’t doing wild things to alienate advertisers, like tweeting conspiracy theories about Paul Pelosi, Twitter would still be in trouble. But Musk has essentially identified himself and his company as a loose canon, meaning anyone looking to cut ad spend might be tempted to cut Twitter first.

Now Twitter has set up Tips – a way to send money to people you like – but it won’t be long save on that money. It does cost a portion of Super Follows’ revenue, a way to turn your tweets into a subscription service, but Twitter’s share dwarfs Apple’s fees for in-app purchases.

This is the internet and there is forum drama

So in terms of revenue, at least for now, the action revolves mainly around Twitter Blue, a premium version of Twitter that allows users to edit their tweets, among other things. Musk raised the price of that product to $8, which may not be enough to cover the cost. Let’s do some math, shall we? A year of Twitter blue is $96, which I’m going to round up to $100 for easier math. If 10 million people sign up for a year, that’s $1 billion in revenue there. Easy, right?

Well no, because this is the internet and there is forum drama. Blue users get a blue checkmark, which looks exactly like the checkmark that verified users get – but Twitter Blue customers don’t need to verify their identity, as an account with a blue checkmark and the display name “Nintendo of America” ​​managed to get a tweet of Mario flipping the bird. To an unwary user, that might seem enough like the factual Nintendo Account to do brand damage.

But Musk doesn’t mind. When our very own Tom Warren took a screenshot of the tweet, one user replied: “The great thing about this is that every account that gets verified pays $8. Twitter keeps the money and suspends the account. It’s genius and I hope more people do this. It’s free money for Twitter.” Musk himself replied: to that user with a rose emoji, a smiley face with sunglasses and a bag of money emoji.

I don’t think many advertisers would want to come back to someone with that attitude toward imitation, even without an economic downturn. The open question for me is whether? users wants to stay in that environment – one that just got another layer of hoaxing and scammers. Billionaire Mark Cuban has already complained that the influx of new users with a tick made his listings miserable. Cuban’s thoughts are one of the reasons people stay on the platform – driving him away and Twitter is less valuable.

You can see how that turns into a death spiral pretty quickly

Twitter is under a consent decree with the federal government requiring full documentation, in writing, of all foreseeable risks of “any product or service affecting commerce.” The changes to Twitter Blue were rolled out less than two weeks after Musk bought Twitter. To do you Do you think there is full documentation on the risks? Sounds like Twitter’s lawyers are concerned!

And that’s before we get to Musk’s paywall ambitions. Essentially, he’s been telling advertisers that he wants to de-rank people who use Twitter’s free product and charge users for reach. Your average person won’t pay for reach, but people who pay for newsletters, crypto scams, and other annoyances will. That power Musk getting the revenue he wants, but it also degrades the site and potentially means fewer users stick around, making it less valuable to marketers, making them less likely to pay their $8… You can see how that pretty quickly turns into a deadly spiral.

But I don’t know if he’ll stick to that plan, because he’s not exactly known for sticking to his plans. What I do know is that Musk has a lot of money, and he can give himself a runway to turn Twitter around by simply paying Twitter’s debt itself. So when Musk sold $3.9 billion in Tesla stock this week, I thought he was putting some money aside for Twitter’s loans.

There is a plausible world where Musk will just keep selling Tesla stock to fund his Twitter experiments. (This may not be a great outcome for Tesla shareholders.) After all, he doesn’t to have to keep advertisers happy, and as long as he pays interest, no one cares where the money comes from. As long as he has the billions to pay off Twitter’s loans and whatever, he has a runway to remake the app what he wants — whatever that is.

Musk owns hell and has his quite hostile user base the tools to effectively troll him out of billions of dollars

Let’s talk a little bit about the loans. Twitter debt is currently in the hands of the banks that facilitated this deal – unusual in that they are generally trying to find buyers for the debt. But Musk’s lawsuit and the delayed closure made that more difficult, and they’re stuck with the loans on their balance sheets. When they got into this situation, interest rates were lower. However, by the time the deal was made, the appetite for debt had changed, said Anant Sundaram, a professor at Dartmouth’s Tuck School of Business.

And it’s a risky debt to boot, B1 rated, which is “at the lower end of the junk rating spectrum,” says Roberts of Wharton. “Investor interest in this debt is clearly not as high as it was four months ago.” And when Moody’s assessed Twitter’s debt, called the board of Twitter – that is, Elon Musk – as a major risk factor.

So for the banks, paying off Twitter’s debt now means taking an immediate loss. Banks may choose to hold the debt for a while to see if market conditions change. But when Twitter is clearly shitting, paying off that debt becomes even more difficult. Now Musk is the richest man in the world, so banks may be willing to negotiate debt repayment with him. But I do wonder how long they want to hold these loans and who could buy them. If banks can’t place the debt, it probably makes it difficult for other leveraged buyouts in technology to get done.

“Sometimes I feel like people underestimate him, and maybe some of it is deserved because he always seems to live on the financial edge with every business he’s involved in,” says Sundaram. “But I’m willing to give him the benefit of the doubt.” Sundaram notes that none of us know what Musk’s financial model is for Twitter; perhaps he was considering the loss of a third or more of his users. Moderation issues that make Twitter a ghost town, such as Truth Social or Parler, are the worst-case scenario, Sundaram says. “Then he’s ready.”

Look, I’m sorry, but this is extremely personal for someone who likes Twitter. It’s the funniest thing possible, and it’s perfect for Twitter. Musk owns hell and has his quite hostile user base the tools to effectively troll him out of billions of dollars. While users hated Jack Dorsey, he wasn’t the kind of person you could effectively troll – and his slow approach to product rollout made it a lot harder to tank the site just by shitposting. Elon Musk’s Twitter, on the other hand, is arguably the best show in the world, not least because every poster knows it’s entirely possible to drive him crazy online.

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