The simple part was overspending $44 billion on Twitter Inc.
Now that he has spent months disparaging Twitter, Tesla (NASDAQ:TSLA) Inc. Chief Executive Elon Musk must demonstrate why he thinks the social media site is worth ten times as much.
The outspoken billionaire remarked earlier this month: “It is clear that I and the other investors are now overpaying for Twitter. I believe that Twitter has much better long-term potential than its current price.”
Musk hasn’t disclosed many specifics about his goals, and what he has said seems improbable or contradictory.
Here are some of the problems that Musk, who calls himself “Chief Twit,” will have to deal with, according to analysts, investors, and current and former Twitter employees who were thinking about putting money into the deal.
ABIDE BY THE LAWS
Musk has said he will protect all kinds of free speech, but he has also become more flexible with world leaders who want to limit Big Tech, which worries activists and former Twitter executives.
Three hours after Musk tweeted, “The bird is released,” he received a retort from European Commissioner Thierry Breton, “In Europe, the bird flies by our laws.”
He reposted a video from May in which he expressed his support for the European Union’s new digital media regulation, which will force Big Tech to take more action against illegal content or face fines of up to 6% of global revenue. This is one of the strictest ways to control online content anywhere in the world.
On Friday, Musk was also reminded about the law by authorities in India. India’s state minister for electronics and information technology, Rajeev Chandrasekhar, said that the rules and laws for intermediaries are the same no matter who owns the platforms.
A former board member, Jason Goldman, says that if Musk was in charge, Twitter’s “complex battle” with the government to protect free speech online would be in danger.
Twitter may also be at risk due to Tesla’s growing business in China, where it made $14 billion in revenue last year, according to Goldman.
He also said that it was “very scary” to think that he might be talking to the Chinese government and giving out user information.
He said that Twitter hires experts to look at government data requests, but Musk has shown that he doesn’t like them.
Whether or not (former U.S. President Donald) Trump will return is a “parlour game,” according to Goldman. However, the IP address of a dissident will actually be dropped on the ground.
MANAGEMENT OF CONTENT CUTS
According to current and former employees who spoke to Reuters, Musk’s ambitions to remove the guardrails that apply to all social media platforms could result in a flood of offensive, probably illegal, and potentially destructive content on Twitter. It has already had trouble locating and eliminating child porn.
Employees fear that some of Musk’s largest job cuts may affect the trust and safety team at Twitter, which includes content moderators.
One of the workers stated, “Consider a world where all those individuals are gone. It will be a hellscape, she said.
REDUCE THE CHANCES OF ADVERTISERS FLEEING
Musk tweeted, “I despise advertising,” in 2019.
He tweeted an open letter to advertisers on the eve of the anticipated transaction closing: “It goes without saying that Twitter cannot devolve into a free-for-all hellhole where anything can be said without repercussions!
“Twitter wants to be the most reputable advertising platform in the world—one that helps you build your brand and expand your business.”
Marketers are not embracing it.
They cite Musk’s intention to restore Trump’s account as a significant barrier to paying for Twitter. After the attack on the U.S. Capitol on January 6, 2021, Trump was permanently banned from Twitter because he might incite more violence.
Mark DiMassimo, who started the marketing firm DiMassimo Goldstein, said that welcoming Trump back could turn off moderate and liberal users and drive them away from big companies that try to promote their products and appeal to people of all political views.
At a presentation for advertisers in May, some ad agencies and businesses showed doubt and fear about Twitter’s future.
Musk can’t afford to upset a group that brings in 90% of Twitter’s income until he finds other ways to make money.
SUPER X APP
The biggest wager made by Musk uses songs from China’s best hits of the decade. Musk wrote earlier this month on Twitter, “Buying Twitter is a step toward making X, the app for everything.”
The concept of an all-purpose app, also known as a “super app,” first gained traction in Asian firms like WeChat, which allows users to not only send messages but also make payments, shop online, and hail a cab. Users who had fewer options in an area where Google, Facebook (NASDAQ:META), and other websites were restricted were drawn to the all-in-one solution.
A source who knows about the situation says that Musk has told investors that he wants to make one that allows payments. This would let content creators get paid for their work and reduce the need for ads.
Scott Galloway, co-host of the technology podcast Pivot and a professor of marketing at New York University, said that there are no “super-apps” in the United States because there are so many apps and it’s hard to get into the market.
According to Galloway, Apple Inc. (NASDAQ:AAPL) and Google, which operate the app stores for Android and iPhones, respectively, perceive themselves as super applications and are unlikely to permit the development of more super apps. One example of entry-level restrictions is Apple’s recent denial of Spotify’s (NYSE:SPOT) attempt to sell audiobooks.
Twitter has made it easier for people to be anonymous, which makes it a powerful tool for political engagement in tough situations. However, Goldman warned that adding payments, which often require proving who you are, could make a service harder to use.
“Super applications” at this stage in the development of the mobile internet “are not viable,” he continued.