It is a market system: you win some, you lose some. But just make sure that you win most of the time. It is looking like Musk will waste more than 50% of Nigeria’s annual budget on Twitter; he paid $44 billion and the business is now worth $20 billion, as revenue continues to drop. Yet, I posit that Twitter will be a great company in the near future. It has no competitor in its category, and because of that, it will  find a way to make money. Indeed, category-king companies always do. 

Twitter CEO Elon Musk has put the current value of Twitter at $20 billion, less than half of the $44 billion he paid for the social media platform late last year.

The current value of the social media platform was disclosed by Musk through an internal email seen by American news media.

According to reports, the email to employees addressed issues of Twitter stock compensation program and the attribution to employees of stock in X Holdings, the microblogging app umbrella company since Musk purchased it in late October.

The valuation of the platform in the compensation plan is $20 billion, which is slightly higher than that of publicly traded companies such as Snap, the parent company of Snapchat, valued at $18.2 billion, and the social network and creative website Pinterest, valued at $18.7 billion. Notably, Twitter is not publicly traded unlike these two companies.

The challenge for Musk is this:  how to avoid scoring own-goals which may annoy people and advertisers to leave the platform.  And part of it comes down to how he treats his people and the ecosystem. In this beautiful America, despite all the free markets and individual liberty which are preached by conservatives,  the fact remains that LIBERALS dominate economically.

In the ranking of the top 20 universities in America, more than 15 are possibly in democratic CITIES (I did not say states). In the chronicle of America’s largest cities, more than 70% are democratic cities. In short, when you get into a Republican enclave like Texas, check their highest ranked university, it is possibly in one blue city island (here, Austin Texas). From airports to anything, America’s wealth is in blue cities or islands.  Check it: more blue cities host more Fortune 500 than red cities.

Where am I going? The largest American companies and those who are potential Twitter advertisers  are largely headquartered in blue cities, and they share some of their values. In other words, big money America is blue in its DNA. Not understanding that fact will alienate them. Musk must modulate how he annoys those liberals (people and firms) if he wants to keep them and monetize them on Twitter!

The Twitter evolution

There is a big redesign: “In order to fight off “AI bot swarms,” Twitter CEO Elon Musk says that from April 15th, only tweets from verified users will show up in the platform’s “For you” feed. Users will need to subscribe to Twitter Blue, which costs around $11 a month, to be verified by April 1st, when free legacy blue checks end. Musk added that only verified users will be able to vote in polls. Yet, some celebrities and Twitter household names have scoffed at paying: Monica Lewinsky shared a paid verified account impersonating her, while William Shatner pointed out that he’s been providing content on the platform for years for free. The “For you” tab shows recommended tweets based on Twitter’s algorithm, instead of only from those you follow. It’s worth noting that Musk has a history of tweeting changes to the platform that don’t end up happening”.

Read well, this is a request to pay for the checkers. In other words, all posts are not the same: the verified person has an edge.

Comment on Feeds

Comment 1: You are right that Elon Musk faces a significant challenge in avoiding own goals that may alienate people and advertisers on his platforms. As a public figure, Musk’s actions and statements can have a significant impact on public opinion and the perception of his companies.

To avoid scoring own goals, Musk can take several measures: Think before tweeting: Musk is known for his active presence on social media, particularly Twitter. However, he should take the time to think carefully about his tweets and their potential impact before hitting the send button.

Listen to feedback: Musk should be open to feedback from his followers and take their concerns and criticisms seriously. This can help him avoid making mistakes that may offend or alienate people.

Keep a professional tone: Musk should maintain a professional tone in his public statements and interactions. This can help him avoid making off-the-cuff remarks that may be misinterpreted or taken out of context.
Be transparent: Musk should be transparent about his company’s policies and decision-making processes. This can help build trust with users and advertisers and reduce the likelihood of misunderstandings.

Apologize when necessary: If Musk makes a mistake or says something offensive, he should be willing to apologize and take corrective action. This can help to mitigate the damage caused by any missteps.

In conclusion, to avoid scoring own goals that may annoy people and advertisers, Musk should think before tweeting, listen to feedback, maintain a professional tone, be transparent, and apologize when necessary. By taking these measures, he can help build a positive reputation for himself and his companies.

Comment 2: Prof, the places you mentioned were mostly republican cities that later turned blue. For instance, California used to be Republican and even New York. New York almost turned red in the last mid term elections but for the money bags.

Again, some of the Universities were also conservative until recently…

My questions:

From the perspective of policy, whose policy (Republican or Democrat) do you think catalyzed those economic growth?

What role do you think immigration played in turning those cities blue? I suspect a fowl play in this regard..

The economy is not looking good in the hands of the blue guys and the mistakes are obvious. All one needs to understand why the economy is wobbling is high school economics. Do you think the blues are really economic giants or hijackers or giant economies…

Finally, the use of race to emotionally influence voters seems to favor the blue guys. Do you think America is not being blackmailed by the blue guys to stay on to power?

Should Elon Musk do the right things or simply do what they want him to do so as to grow revenue from adverts?

My Response: I only shared data and in the last 30 years, blue has outperformed red on per capita income in the US. Elon moved Tesla HQ to Texas. In a few months, he relocated it back to California. The irony is this: without blue states, especially California, his Tesla business would have done well. California’s tough environmental regulation and emission mandate are the reasons Tesla is viable. And liberals who believe in climate change are the highest buyers of his car.

Then he moved to a space where most people do not believe in EV cars (I said he was not reading perception well). Magically, in the car pack, everyone came with petrol cars because the whole EV car idea is a liberal agenda. It took him months to understand why HQ’ing EV cars in a red city makes no sense.

My point is this: Musk can live his dream but respect is key. When he was leaving CA to TX, he said many things about California and the leaders. Interestingly, he returned back https://www.forbes.com/sites/brianbushard/2023/02/22/tesla-engineering-headquarters-will-open-in-california-musk-announces/

Twitter CEO Elon Musk has put the current value of Twitter at $20 billion, more than half of the $44 billion he paid for the social media platform late last year.

The current value of the social media platform was disclosed by Musk through an internal email seen by American news media.

According to reports, the email to employees addressed issues of Twitter stock compensation program and the attribution to employees of stock in X Holdings, the microblogging app umbrella company since Musk purchased it in late October.

The valuation of the platform in the compensation plan is $20 billion, which is slightly higher than that of publicly traded companies such as Snap, the parent company of Snapchat, valued at $18.2 billion, and the social network and creative website Pinterest, valued at $18.7 billion. Notably, Twitter is not publicly traded unlike these two companies.

Twitter has been on crossroad with its finances following its acquisition by Musk. The San Francisco-based company has had to struggle to stay afloat after the $44 billion takeover deal, which was way above its actual value at the time.

Other factors, including mass exodus of advertisers, exacerbated the app’s revenue ordeal. Musk said last year that he was taking Twitter private to grow the company’s revenue – making more money for its shareholders.

In the internal email, Musk highlights the significant decrease in Twitter’s value and describes it as a brutal contraction. He also reveals that the platform encountered severe financial troubles, to the point where it was almost bankrupt.

The Tesla CEO said in a tweet on Saturday that “Twitter was trending to lose $3B/year.”

“Twitter was trending to lose ~$3B/year (revenue drop of ~$1.5B + debt servicing of ~$1.5B) and had $1B in cash, so only 4 months of money,” he tweeted, describing it as “extremely dire situation.”

Musk said he hopes that the return of advertisers to Twitter will change the story in near term.

“Now that advertisers are returning, it looks like we will break even in Q2,” he said.

Musk has created a new avenue to generate revenue for Twitter. Following cost-cutting measures that have seen the company cut workforce from 7,500 to fewer than 2,000 employees, he announced the monetization of the verification marks, charging $7 to $11 per account.

Musk hopes that Twitter has passed the worst of financial woes. He said in the email that he sees a “clear but difficult path” to a valuation of $250 billion.

In the stock compensation programme, Musk said that Twitter would allow employees of the social network to cash in shares every six months.

However, he did not say how long the projected $250 billion valuation would take. Analysts believe that Twitter’s new revenue stream will take some time to yield the needed result and the possibility of total return of advertisers to the platform is not certain.

When it comes to mixing apples and oranges, many things will not compound. If Amazon AWS is a separate company, it would be worth a lot. Yet, without the ecommerce unit, building excess capacity data centers aimlessly may not be a great strategy (refer to my one oasis and double play strategy as explained in Harvard Business Review on click).

From the freemium business model to an aggregation business model, the 21st century digital economy has shown that serving customers well may not necessarily provide sustainability for a company unless the firms actively find ways to capture value in the process. It sounds obvious, but many media and e-commerce companies have gone bankrupt, despite improving customer experiences through digital channels, simply because they neglected to capture value.

Founded in 1999 by Billionaire entrepreneur Jack Ma and a group of friends, Alibaba last year reported a net profit of 46.8 billion yuan (US$6.8 billion), up 69% from the previous year, on revenue of 247.7 billion yuan ($35.9 billion)

When Ma criticized Chinese regulators in 2020 for impeding innovation, they abruptly canceled the IPO of the company’s Ant Group fintech business, the first move in a broader crackdown on the country’s powerful technology sector.

It would be recalled that in 2021, Alibaba was fined $2.8 billion by Chinese regulators for anti-competitive tactics, as it tightens control over fast-growing tech industries. Alibaba was reportedly fined for abusing its dominant position to limit competition by retailers that use its platforms, hindering the free circulation of goods.

Is this a better playbook for a digital conglomerate – splitting instead of combining? Look deeper, Alibaba has no choice than to do this since New York has battered its stock. And when companies struggle like that, they resort to split. Check, from GE to eBay to HP to IBM, splitting conglomerates happens when companies underperform. And most times, markets like this for a while!

Alibaba’s Six Business Groups

1.) Cloud Intelligence Group: This unit will be headed by Alibaba CEO Daniel Zhang and will house the company’s cloud and artificial intelligence activities.

2.) Cainiao Smart Logistics: Wan Lin will continue as CEO of this business which houses Alibaba’s logistics service.

3.) Local Services Group: This business will cover Alibaba’s food delivery service Ele.me as well as its mapping.

4.) Digital Media and Entertainment Group: This unit will include Alibaba’s streaming and movie business.

5.) Taobao Tmall Commerce Group: This will cover the company’s online shopping platforms including Taobao and Tmall.

6.) Global Digital Commerce Group: This unit includes Alibaba’s international e-commerce businesses including AliExpress and Lazada.

Featured in LinkedIn Editors’ Pick

Our piece on Alibaba was selected by LinkedIn Editors and featured on the mainboard. The piece is here 

Comment on Feed

Comment 1: Great insights! It’s interesting to see the trend of companies splitting off into smaller, more focused entities. This strategy allows each business group to have its own management, which can lead to more streamlined decision-making.

However, as pointed out, splitting up a company is likely a last resort when it’s underperforming in the market. It will be interesting to see if this strategy becomes more common among digital conglomerates in the future.

Comment 2: Was this the same story with GE when it broke up the conglomerate?

My Response: GE splitted. You can buy the shares of GE HealthCare on The Nasdaq under “GEHC”. GE continues to trade on NYSE under “GE”. Sure, they sold and shut down some units but they also took GEHC to the market.