Elon Musk takes control of Twitter. Wall Street sees an “Everest-like” challenge ahead.


Elon Musk, who changed his Twitter handle to “Chief Twit”, proclaimed Thursday night that “the bird is free” as he took control of the social media platform. The question now is whether Tesla’s billionaire CEO can grow the company while fulfilling his vow to turn it into a bastion of free speech.

Balancing those goals will present an “uphill Everest-like battle,” Wedbush analyst Dan Ives told CBS MoneyWatch, noting that it gives Musk “less than a 50% chance of really turning the tide.”

Musk offered a series of statements, some seemingly contradictory, about his vision for Twitter, while sharing few concrete plans. But some of its challenges are clear, analysts say.

First, Musk paid a big premium by buying Twitter for $44 billion, which will put him under pressure to cut costs. Second, Twitter is struggling to attract advertisers, which shouldn’t get any easier as the economy slows and perhaps goes into recession Next year.

“He’s buying this asset at the worst possible time,” Ives said. “We are in the midst of a massive social media downturn.”

He added, “Easiest part is buying Twitter, hardest part is fixing it.”

Meanwhile, the New York Stock Exchange began the process of delisting Twitter on Friday, meaning many of Musk’s actions will not be transparent to investors and observers. And with no stock price and no big institutional investors to respond to, Musk may feel emboldened to put his stamp on the company, Erik Gordon, a business professor at the University of Michigan, said on The Conversation.

Here are three issues Musk is facing as he takes over Twitter.

Earn advertisers

Musk criticized Twitter’s reliance on advertisers, but issued a statement Thursday that appeared aimed at allaying their fears. He assured marketers that he wants the service to be “the most respected advertising platform in the world.”

But publicity has slowed sharply on Twitter, with the company blaming the “macroenvironment” amid uncertainty surrounding the Musk acquisition. Ad sales rose 2% in the second quarter, a sharp decline from a 23% jump in ad revenue in the first quarter.

There’s a lot to be said for whether Musk can not only retain current advertisers, but convince new ones to sign up for the platform: About 90% of the service’s revenue comes from advertising.

Open the floodgates of freedom of expression

Musk said he wanted to promote free speech by relaxing the way Twitter moderates content. Wall Street analysts say this risks triggering a wave of online toxicity that drives users and advertisers away.

Musk said Thursday that he doesn’t want Twitter to become a “free-for-all hellish landscape.” But it has previously signaled that it may restore the accounts of some former Twitter users who were banned for violating company standards and policies. On Thursday, a conservative commentator tweeted at Musk that he was “still banned from Shadow, banned from Ghosts, banned from Search and Twitter removed 1200 followers today – as usual.”

Musk replied on Friday: “I’m going to dig deeper today.”

At this time, it is unclear whether former President Donald Trump will return to the service, which Musk said he would allow if he bought Twitter. Trump was definitely banned from the social media site three days after the January 6 attack on the Capitol because of the “risk of incitement to violence”.

Musk might see Trump’s return to Twitter as helping to increase engagement with other users, Ives said. But he would be walking a “political tightrope” in doing so, he added.

For his part, Trump said Friday in a post on Truth Social, the conservative-leaning social network backed by his media company, that he is “very happy that Twitter is now in good hands and no longer run by Radical. Left Lunatics”. and maniacs who really hate our country. Twitter must now work hard to get rid of all the bots and fake accounts that have hurt it so badly. It will be much smaller, but better.

Mass layoffs to come?

Although Twitter is going private, Musk has overpaid for the money-losing company, which will put pressure on him to rationalize, Ives said. Musk said Twitter has more employees than it needs, with the Washington Post recently reports that it can cut up to 75% of its workforce.

Ives thinks the job cuts could range from 30% to 50% of the company’s workforce. Yet while Musk can cut costs, “he can’t carve his way to growth,” he added.

After taking control of Twitter, Musk fired CEO Parag Agrawal, chief financial officer Ned Segal and chief legal counsel Vijaya Gadde, according to The Associated Press, citing people familiar with the deal. Segal confirmed his departure in a series of tweets on Friday.

Musk is likely to recruit a seasoned social media executive to head up Twitter, though he will remain deeply involved in the business, Ives predicted. “With Musk, never count it,” he said. “He was able to defy the skeptics again and again.”

—With reports from the Associated Press.




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