Most companies eventually fail. The only real variable is the speed in which they do so..
While the slow declines of Blackberry and Nokia (at least, as consumer brands) were agonizing to watch, both were a result of a lack of foresight and an outright failure to recognize the significance of the threat that Android and iPhone devices posed. While they made many extremely questionable decisions, both companies died because their CEO (or Co-CEOs) refused to change with the times. One could say the same of AOL, or Blockbuster, or Radioshack, or any number of businesses that were blindsided by somebody a little leaner and more aggressive, and ultimately atrophied. This is oftentimes how a company fails — not as a result of pure boneheaded decisionmaking, but through a lack of awareness of what the market needs and a lack of willingness (or ability) to provide it.
In many ways, this makes Elon Musk one of the most innovative minds of the 21st Century.
Never in my lifetime have I watched an executive act with such thorough arrogance and ignorance, nor have I seen someone make so many consecutively wrong decisions, both morally and economically. It’s time to face the fact that Twitter is, as we know it, a dying company, one that has had so much damage done both to the core product and its user base that it likely will never recover. The death spiral has begun, turning the place that unquestionably played a part in making me who I am today, a place that was once an indispensable global hub for information, into a barely-functional septic tank full of spam bots and bigots.
This week, Musk implemented a change that Fortune had scooped back in August that removed the headlines from links on the platform, meaning that links are now simply pictures with absolutely no other information. As a result, it’s hard to tell whether you’re looking at a link or a meme, once again damaging the fundamental value of a post on Twitter, a site that makes money by making you look at posts. The move was made specifically to reduce the height of tweets (according to Fortune’s Kylie Robison), which truly makes it the platonic form of an Elon Musk “innovation” — a short-sighted attempt to make people see more posts and ads that also actively muddies the value of consuming information on the platform. The entire fabric of Twitter is one built upon it being the place to see stuff, and Musk continually fails to understand that every cretinous moodswing he has damages the fundamental value of what a tweet is and why an advertiser would want to be seen next to one.
It’s important to contextualize this change. It’s one of many that has rendered Twitter a fundamentally unreliable source of information, with its deficiencies most evident at a time of crisis. The horror inflicted upon Southern Israel this weekend wasn’t just exceptional for the grotesque brutality inflicted on innocent noncombatants — which included children, young people attending a music festival, and even a wheelchair-bound holocaust survivor. It was a stress test for how the new Twitter handled a highly-publicized humanitarian catastrophe. And it failed dismally.
Take Twitter Blue, for example. Anyone with $8 can buy a verified checkmark, giving them priority in comment threads, search results, and the algorithmically-generated “For You” newsfeed. As news about the conflict broke, “verified” accounts began posting fake or misleading footage purporting to come from Southern Israel. Many examples were documented by Shayan Sardarizadeh, a counter-disinformation reporter at BBC Verify, who noted the unprecedented flood of misinformation and lamented that “neither fact-checkers nor Community Notes [could] keep up with this.”
One clip, allegedly showing an Hamas air assault against Israeli positions, was actually footage from the video game ARMA 3, as was a video posted by far-right UK politician and convicted criminal Paul Golding (whose once-banned account was reinstated after Musk’s acquisition of Twitter) that claimed to depict Israeli air strikes in the Gaza Strip. Another, this time showing the launch of a rocket barrage towards Southern Israel, was actually taken in 2020 from Syria.
Open-source intelligence (OSINT) is a legitimate and often revealing tool used by journalists and investigators alike, as proven by the success of sites like Bellingcat. In a heated conflict zone, it’s often the only way to get reliable on-the-ground information. This is true for journalists as well as the families and friends of those on the border with Gaza — who, no doubt, have spent the past three days scouring social media for information on the fates of their loved ones.
And Twitter Blue has made that job infinitely harder, compounded by the fact that the new revenue-sharing model incentivizes people to publish sensationalist, false information in search of virality — and thus, money.
To be clear, social media disinformation isn’t a new phenomenon. While it wouldn’t be accurate to say that Musk democratized it, his changes to the platform have certainly played a role in facilitating and amplifying it, as well as changing the incentive structure. There’s now a monetary incentive for ordinary people to lie, sensationalize, and distort, and Twitter will give you the tools to distribute your triangulations and rage-bait to the most amount of people.
It’s impossible to dismiss this as the mere result of Musk’s incompetence and hubris — though both undoubtedly played a part. Musk is a man that is avowedly antagonistic to the truth, and to the legacy media institutions that — although flawed — have historically served an important role by providing accurate information during moments of crisis. That is why, just two weeks ago, he removed the ability for people to report tweets on the basis of political misinformation. And why, in a since-deleted tweet published during the most frenetic hours of violence, he decided to promote two “citizen journalists” as reliable sources of information — with one an unapologetic cheerleader for Assad and Putin, and a track record of casually slinging antisemitic epithets at online sparring partners.
Twitter is, ultimately, a markedly worse place because of Musk. While the last three days demonstrated its newfound deficiencies on a macro level, this decline has been evident for months, and likely explains why an in-depth analysis of X/Twitter by Media Matters found that the top 100 advertisers have reduced their spend on the platform by 90% in the last 12 weeks compared to the 12 weeks before Musk took over. Even considering the rocky economy and shaky ad industry spending, Twitter’s advertisers have all but fled the platform, with the company earning 42% less revenue along with a 28% contraction of individual monthly advertisers from before Musk took over.
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X CEO Linda Yaccarino was telling the truth that 90% of these advertisers had returned, but left out a few brutal truths, like HBO (who spent $28.3 million on ads in the 12 weeks before Musk took over) reducing their spend to $23,500 over twelve weeks, or the fact that Visa, who Yaccarino specifically called out on stage, had spent ten dollars in the last 12 weeks, compared to the $77,500 it had spent before.
These are not “embarrassing” numbers, but the hallmark of a dying company incapable of keeping the business of even its most loyal customers. Companies were already spending relatively small amounts on Twitter based on the size of their budgets (Visa has a global media spend in the neighborhood of $200 million, and HBO spent $100 million on marketing House of the Dragon alone) meaning that the site is far from an essential part of any global advertising strategy.
This exodus likely explains the declining caliber of Twitter advertisers. Gone are the “Blue Chip” brands touting products you might actually want to buy. In their place, you’ll find ads promoting self-published courses on growth hacking or the best way to use ChatGPT, or misleading advertisements for rapacious microtransaction-based mobile games (often with clarifying community notes underneath, as with Evony, which The Guardian described as “the most despised game on the web” in 2009). In many respects, Twitter finds itself in the position of Fox News towards the end of Tucker Carlson’s tenure, where low-rent companies selling dietary supplements and Mike Lindell’s MyPillow filled the void once held by household names like T-Mobile and Disney.
When you add in the possibility that advertisements would be displayed next to the tweets of white supremacists and other harmful content, it’s hard to imagine why any advertiser would stay. Even Walmart (which has historically been a core advertising partner of Twitter) reduced its spend to $100,000 across the last 12 weeks, a 91% decrease from the $1.1 million it spent in the 12 weeks before Musk’s acquisition.
Twitter is a uniquely fucked company in that it is almost entirely reliant on advertising revenue without ever owning a large part of global advertising spend. Twitter accounted for 0.9% of global digital advertising revenue in 2021, with the expectation that the number could potentially have dropped to 0.7% by this year, as opposed to Facebook, which accounted for 19% in 2022. Musk’s desperation to move away from an advertising-support business model may have been an acknowledgment of these circumstances, but Twitter Blue has been an astronomical failure, and by turning the verified checkmark into an eight dollar dunce cap, tweets are simply less valuable, making advertisements next to them even less so.
Now, Musk is desperate to try and juice advertising revenue, not by making the product better or policing hate speech, but by finding more obtuse and annoying ways to cram more tweets into your feed. Musk has now stated that he intends to remove counts for likes, retweets and replies on posts to “greatly improve readability,” while also removing any way to judge the global sentiment on a post — one of the last “useful” bits of information left on a website increasingly lacking it. Though it’s unclear whether Musk will actually implement this change, doing so will only serve to make your feed more boring, cluttered and unremarkable.
Musk’s ignorance will turn Twitter into the comment section of the world’s least-trustworthy newspaper, including the persistent and unavoidable spam of low-quality advertisements. The platform has started to roll out a new kind of ad that can’t be blocked and doesn’t identify the advertiser in question, featuring clickbait headlines like “if you suffer from ringing ears you’re going to love this recent breakthrough.” And as I’ve said, this is the exact kind of narrowminded, shortsighted thinking that makes a Musk product. In theory, this will increase how many people see an ad (because they’re unable to avoid doing so), but in turn lowers the quality of the advertising product and the network the advertisement is being shown on. People either stop using Twitter, or use it less. For a website that remains primarily reliant on advertiser revenue, this is the exact opposite of what you want to happen.
Moreover, as a social media platform, Twitter is inherently reliant on the network effect to survive. In essence, the more people that use Twitter, the more useful it is. The more that leave, the fewer reasons for peple to hang around. Musk’s quest to juice advertising revenue will potentially accelerate the ongoing exodus of users, creating a snowball effect that won’t be easily stopped.
Elon Musk is simply not good at this. He is not a good businessman, and every other success he has had has clearly been the result of somebody else’s actions and choices. I believe that Tesla, Starlink and SpaceX have thrived only because people have found ways to mitigate the influence of an arrogant moron who has uniquely bad ideas, and my proof is based on the extremely public way in which he’s turned $44 billion dollars into $4 billion dollars. He has saddled the bankers that financed the deal with poisonous, impossible-to-sell debt in a contrived deal based on the misguided belief that everything that Musk touches turns to gold, and that has burdened Musk and Twitter with onerous interest payments of $1.45 billion a year — ballooning costs that are a result of the variable rates of the debt he took on to acquire the site, and will only increase as Federal Reserve interest rates do.
Elon Musk isn’t a mastermind, a genius or a firebrand — he’s a supremely incompetent deal-maker whose number may finally be up. Twitter has never been a great business, and only managed to generate revenue by becoming an important realtime gauge of global sentiment, something that Musk has happily violated again and again in his directionless pursuit of non-specific success. Social networks are horrible businesses, and yet Musk chose to tie massive amounts of money and mental energy to an already unstable business, one where (at least theoretically) an incredibly smart and well-resourced person could turn it into a rocket ship.
Except this is one of his rocket ships, meaning that it exploded in a violent, destructive and avoidable way. Twitter has become Musk’s real legacy — the public destruction of a good thing at the hands of a greedy and incompetent monster, the summit of a mountain climbed by standing on the shoulders of others. Musk leveraged the value of companies that enriched him through the work of others to tell the world he was a genius, and then used that same leverage to con bankers into funding the world’s worst acquisition.
The result might be quite strange. Musk has to pay $1.45 billion a year (at this point) to keep up with the vast interest on the debt used to purchase Twitter, a website that only loses money. The two $3 billion bridge loans used as part of the leveraged buyout of Twitter are due on October 27, at which point they become extended-term loans that mature in seven and eight years respectively — meaning that Musk will likely have to purchase the debt from the banks, assuming he can get it at anything approaching a reasonable price.
While Musk may be one of the richest men alive, he doesn’t have unlimited capital. The debt on Twitter is obscene, and while he could theoretically pay the bridge loans off, he is so illiquid that he had to borrow $1 billion from SpaceX to buy Twitter in the first place. The majority of his wealth is tied up in Tesla stock, and further multi-billion dollar selloffs threaten to both crash the stock and weaken his position at a company and markets already concerned with his acquisition of Twitter.
Musk lives in a continual state of deranged failure, buoyed by his past successes and an army of ignorant dopes with blue checkmarks. He cannot save Twitter other than entirely handing it to somebody else, and every day that he spends at the helm damages a company already on life support. I predict that Linda Yaccarino will be gone by Q1 2024, sacrificed as an example of “elite institutions that poison innovation,” and her exit will galvanize Musk to make more and more destructive and idiotic decisions.
And the result will be a worse world for everybody — Musk included. One does not piss off this many banks and get left unscathed.