Hey Elon, the media business isn’t rocket science. It’s harder

Elon Musk points up

While Musk took the right approach by buying an established media brand, what’s missing is a description of his new Twitter strategy.

Getty Images

How well does Elon Musk understand the media business? His proposed $44 billion acquisition implies he has a better plan to monetize Twitter than current management, but that’s unlikely given what he’s said about his plans so far. .

Multi-talented Musk has proven his leadership skills in building successful businesses as an executive at Tesla, SpaceX and a former executive at PayPal. These companies weren’t media companies, and media companies are in a different industry – a market with declining revenue and declining quality.

The business model of the media industry continues to evolve – there is no reliable and sustainable model based on advertising. It has been steadily declining for two decades.

The advertising industry has successfully disintermediated media publishers through technologies that can directly target consumers, almost anywhere on the Internet, repeatedly. There’s no reason to pay high ad rates to target the wealthy New York Times readers online when your ads can follow them wherever they go.

But these advertisers don’t want their ads to appear alongside controversial content, fake news, or on fraudulent websites. Twitter has attempted to weed out controversial content and remove people from its platform and news feeds. And that allayed some advertiser concerns.

Musk, however, criticized Twitter’s policies in banning certain controversial content and people. Under Musk’s ownership of Twitter, we can expect these standards to be revised and controversial content and personalities to be allowed.

Advertisers will not be happy with such changes and there will likely be an exodus. And Musk’s version of free speech is unlikely to comply with European Union regulations, which aim to prevent the publication of harmful content – and the penalties can be severe.

Musk has the ability to offer a paid subscription service that doesn’t require advertiser support and won’t have to conform to their social and moral standards.

But that would create a much smaller Twitter, as it would likely become a place where extremist views are freely shared and therefore less appealing to the majority of users.

While Musk needs to find a viable revenue strategy, he took the right approach by not launching his own Twitter-like service. It would have taken him two years or more to build such a brand and with a high risk of failure. It is a much better strategy to acquire an established brand.

Jeff Bezos, co-founder of Amazon, chose a similar strategy buying an established media brand, when he bought the Washington Post in 2013 for $250 million.

In the same year, fellow billionaire Pierre Omidyar, co-founder of eBay, launched his media company First Look Media – a new venture. Omidyar’s strategy was to launch well-known journalists into their own online media ventures. Journalists would come with a ready-made audience and therefore there should be no need to pay a premium for an already established media company.

It didn’t work out that way for First Look Media, which suffered greatly from not knowing how to build a media business from scratch. There is a description of his disastrous story here on Wikipedia.

While Musk took the right approach by buying an established media brand, what’s missing is a description of his new Twitter strategy. So far, Twitter employees have not been told of any changes associated with the acquisition beyond that they should proceed as normal, as it will likely take around six months for the deal to close.

With Twitter as a private company, Musk’s management team will have the advantage of being able to plan for longer-term revenue goals because it won’t be tied to a public company’s quarterly financial reporting cycle.

Wall Street’s scrutiny of publicly traded companies affects their stock prices, which acts as a check on what management can do, forcing short-term focus on the company. Privacy will give Twitter management more freedom and also prevent them from having to reveal key metrics.

Free speech has never been free from serious social responsibilities — it’s something Twitter has struggled to learn — and it’s a lesson Musk will need as well.


Comments are closed.