Last week, we talked about the cratering ad revenue on Twitter, and then, just after I wrote about it, another major ad agency paused spending on the social networking site. Last week, I wrote a column about the long-term plan to make Twitter less dependent on advertising.
There is no doubt that Musk can turn this around quickly and make it a lot of money. It wasn't quite right when he said it. The failure of Thud, which apparently never had a plan to be profitable, was already a part of the media. I feel like I am dunking on Calacanis just by quoting him. We are less than a month in, and it is possible that Calacanis is correct, so I will do my best to take this all seriously.
Calacanis said that I am trying to take seriously.
I think making everything verified and a path to verification, which Elon has talked about publicly many times, and payments, which he has talked about publicly many times, just those two things alone could make the experience of being on Twitter absolutely delightful. If everybody could verify themselves, this thing could turn around quickly.
Musk has a history with people who use verification. He wasn't good at it.
I think we all know how the experiment ended, but Calacanis doesn't think that's the same thing as verification. Later, Musk is going to try again. I would prefer not to see Gen Xers drive it into the ground because they aren't ready to deal with two generations of internet zoo borns. On the other hand, there is something correct about the fact that the world of social media has ended.
Let's talk about verification. Musk has a history with people who use verification. He wasn't good at it.
Musk started a business called X.com in 1999 and the entities that bought it were references to that. Musk wanted to hone his trademark style of entering an ultracomplex business and not letting the fact that he knew very little about the industry bother him. He knew that the bankers were doing finance badly and that he could run the business better.
It sounds like a super app with electronic payments, checking accounts, stock trades, and mutual funds. A lot of X.com's ideas, like using an email address to send payments, seem to be ahead of their time. There were no overdraft fees and customers got a bonus on their cash card when they signed up. That sounds like a business that's losing money.
There is a fraud problem.
The "know your customer" rule requires banks to make sure you are who you say you are. Max Chafkin writes in his biography that X's customers lied about where they lived and who they were when they signed up for an account.
The office space was shared by the two companies. In a speech at a 2015 conference held by the Center on Capitalism and Society, Peter Thiel said that a runaway fraud problem was caused by the merger of the two unprofitable companies.
Years ago, I was thinking of doing a book on PayPal, and the working title I had for it was Risky Business, and the whole thing was how we went from one frightening, insane risk after another. The chapter title on Elon — at the time, Elon Musk was working with us very closely, we sort of combined two companies — was going to be entitled “The Man Who Knew Nothing About Risk” ... We had decided to give credit cards to absolutely anybody who wanted them. You got a up to $10,000 credit limit. Elon had told the woman who was rolling the service out that he wanted a million people to be using the new credit card by the end of the year. Fortunately, it was about two levels down from the front page, and so not that many people were able to discover this. Some people did; they wrote us back and said, “This is fantastic, I haven’t had credit in years. I can’t believe you’re offering me credit. I haven’t even had a checking account in 10 years.” These were people who wrote so many bad checks that banks wouldn’t allow them to have checking accounts. It turned out we ended up with something like a 50 percent charge-back rate. The worst subprime companies were like 4 to 6 percent. Then, happily, we rolled that product back very quickly.
Musk was ousted from the CEO job in 2000. The company was renamed for its success.
We have learned a lot since that time. I have a driver's license after having a learner's permit. What has Musk learned about payment companies?
At his first meeting with the employees of the company, Musk talked about his desire to make a place for payments on the site. The priority is a high one. There's more to it.
I think there’s this transformative opportunity in payments. And payments really are just the exchange of information. From an information standpoint, not a huge difference between, say, just sending a direct message and sending a payment. They are basically the same thing. In principle, you can use a direct messaging stack for payments. And so that’s definitely a direction we’re going to go in, enabling people on Twitter to be able to send money anywhere in the world instantly and in real time. We just want to make it as useful as possible.
Musk said in the speech that he was aware of the possibility of people buying credit card information and scamming. In order to acquire users, he will give them some amount of money, like 10 bucks, that they can send anywhere in the system.
Money transfer licenses are needed for that, according to Musk. He wants a high-yield money market account so that he can have a Twitter balance. Debit cards, checks, and possibly loans are included. Payments would make it more friendly to e- commerce.
The creator economy is one way to make payments make sense. Tips and Super Follows exist and may be a way to make money on social media.
Hank Green is the CEO of Complexly and he knows a lot about the business end of it all. He told me that if I thought about it in a rational economics way, I wouldn't use it. A lot of people with reputations are leaving over the last 10 years.
If it is more than a minute, you need to give me a reason to watch that.
The conversion rate is terrible if you have a large enough audience, but if you have less, you can't market on the social networking site. That is also the case of regular marketing. He says that the customer acquisition costs on the social network are higher than on the photo sharing site.
Musk wants to build a new video platform to compete with TikTok. It is possible to make it easier for content creators to make money through payments. The videos are not long enough for it to be good for that. It's because you can make 10-minute videos, run preroll and midroll advertising, and make money on it.
If it is more than a minute, you have to give me a good reason to watch that.
Musk could possibly create a tab within the app. That has its own issues. If you don't have a content ID system you are in trouble with the record labels. Users won't like banning all Britney on the platform. Users are going to set videos to Britney no matter what. It's better to allow users to create videos with snippets of music. Is the label into it? Green doesn't think they'll take a meeting until they build something big.
He needs to figure out a way to beat the 55 percent revenue split while also making money to pay off the $1 billion in annual interest payments that Musk saddled the company with.
People need to be able to build businesses on the micro-blogging site.
The creator economy has never been through a recession. The creator economy began to take shape in 2009. The cocaine of zero percent interest rates has been on the rise since that time. The days are over. It is not known what a recession will do to people who build businesses on social media.
There is a place whereTwitter has an advantage. You can pay for access to the creator's Discord with a plug-and-play setup. Do-it-yourself moderation is the problem with Discord. It's a one-to-many service. It may be more attractive for people who don't want to spend a lot of time on moderation.
If Musk can figure out a way to make inroads into the creator economy, that could bring people to the platform in a way that is cheaper than the $10 sign up bonus he is proposing. Fans of creators want them to be able to make stuff and are willing to pay for it. If there is a way to keep the most fun, prolific users on the platform, either by paying them directly or by allowing their fans to pay them, I can imagine a world in which the platform is less dependent on advertising.
The chaos of the last few weeks is frightening for any business owner, but it also has to be stable to allow people to build businesses there. The creators complain about the changes to their businesses on social media. The product change was reversed because it was bad for the business of theKardashian clan. Musk has a different set of people that he wants to please.
I thought it would be nice to end on a positive note. I was going to talk about the growth of the social media platform. In texts to his brother Kimbal, Musk said that he thinks a new social media company is needed that is based on a ledger.
Users pay a small amount to register their messages on a block chain. Musk thinks this will cut out the vast majority of junk mail, but I don't think he's right. Part of the fun is watching other people make transactions. It would be great to make aUI that is friendly and on board the normies.
Investing in the products you use is the way to go. It's not financial advice.
One of the investors Musk persuaded was Changpeng "CZ" Zhao. Zhao wrote in a thread that he uses a lot of the social networking site. Investing in the products you use is the way to go. It's not financial advice. He said not to ask about a plan. I never had a plan for it. Entrepreneurs don't make plans.
When FTX melted down, I think that changed the risk/reward profile of the kind of network Musk is proposing. I'm pretty sure that regulators will be very focused on anything that is related to cryptocurrencies. The debacle has made Zhao a target for regulators in the US. It is riskier to rely on his expertise to develop the kind of network Musk proposed because any regulators looking to put him on a spike will start by investigating any US-based entity close to him.
There is still hope for the social networking site. FTX's Sam Bankman-Fried was trying to get into the business of investing in social networking sites. Musk wasn't sure if Bankman- Fried was good for the money. It was a smart decision. It seems like Musk's judgement is not as good as it could be.
All Rights Reserved © 2024
