Elon Musk could disrupt the social media industry with his purchase of Twitter and move the company away from social media's traditional reliance on advertising revenue.
Elon Musk's $44 billion purchase of Twitter signals change coming to the way the social media platform traditionally operates -- change that could be both good and bad for businesses.
In his announcement, Musk said Twitter has "tremendous potential." He aims to enhance the platform by adding new features, making algorithms open source and tackling security issues like spam bots. Musk has also promoted the idea of making Twitter more open to free speech, tweeting that he is "against censorship that goes far beyond the law," as well as making the platform less dependent upon advertisers. Much of Twitter's revenue today is generated by advertising.
Musk's entrance to the social media industry points to potential disruption of the way Twitter operates, said Alan Wink, managing director of the business advisory organization Eisner Advisory Group LLC.
It could mean Twitter moves to a subscription-based model to make it less reliant on advertising dollars and enhancing Twitter's platform for commercial entities for tasks like hiring rather than a mostly consumer platform, he said.
"When you look at Elon Musk's career, he has really disrupted several industries already, whether it was Tesla, whether it was SpaceX, whether it was PayPal, so you know that social media is going to be disrupted by Elon Musk," Wink said. "I guarantee there are business cases for Twitter that we haven't even thought about."
Musk will seek to make Twitter more profitable
Wink said Musk is going to run Twitter to "maximize the profitability and valuation of the company," meaning he will likely try and change the way the social media company works.
I guarantee there are business cases for Twitter that we haven't even thought about.
Alan Wink Managing director, Eisner Advisory Group LLC
Though Twitter ranks as one of the largest social media platforms, it has struggled to monetize users, according to research firm Statista. The company's annual revenue was $3.72 billion in 2020, compared to Meta's $86 billion. Meta owns and operates Facebook and Instagram.
Making Twitter a subscription-based service like streaming service Netflix could be one way around strictly earning advertising revenue, Wink said.
"It's entrenched in so many people's lives and so many people use it as a source of information that I think there is a price that people will pay to use it every month," Wink said.
Indeed, Twitter is "poorly commercialized" compared to companies like Meta or Google, said Marcel Hollerbach, chief innovation officer at Productsup, a Berlin-based e-commerce firm.
Hollerbach said he expects Musk will find a "solid and scalable business model" aside from an exclusive reliance on advertising upon which to increase Twitter's value, whether that's a subscription model or charging influencers and brands to reach audiences.
Elon Musk purchased Twitter for $44 billion. He has proposed reducing censorship on the platform, as well as moving away from strict reliance on traditional advertising revenue.
"Considering Twitter hasn't lived up to its full potential, I expect this to be a win for the company," Hollerbach said.
Ray Wang, founder of Constellation Research in Cupertino, Calif., said he expects Musk to make improvements to Twitter's overall platform.
"His ownership will probably lead to more innovations in the platform, including the use of AI to improve the removal of fake accounts, the ability to edit, and a faster release cycle of user-driven features," he said.
Some of the biggest concerns with Musk's ownership of Twitter stem from his promises to make Twitter a free speech platform.
Over the last two years, policymakers have begun to challenge social media platforms like Twitter and Facebook for spreading misinformation and inciting violence, leading to both platforms censoring content and banning accounts, particularly former U.S. President Donald Trump's following the U.S. Capitol riot on Jan. 6, 2021.
Musk has made it apparent that he believes Twitter's content moderation policies are too strict, yet when brands consider using and investing money in social media platforms, brand safety and suitability are "crucial evaluative measures," said Forrester principal analyst Kelsey Chickering.
Content moderation, particularly when it comes to misinformation, is something not only policymakers but brands and agencies are pushing social media platforms on, she said.
"If Twitter becomes a Wild West platform similar to Gab, where the promise of free speech allows disinformation to run even more rampant than it already does, brands might choose to invest their dollars elsewhere," she said.
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.
