The on-again, off-again saga of Elon Musk’s acquisition of Twitter came to ahead last week as he announced he was reviving the deal to buy Twitter as an accelerant to creating the “everything app”. It is presumed this app would act as the equivalent to China’s WeChat – which integrates social media and e-commerce, enabling users to both communicate and carry out transactions both with brands called (social commerce) and with public services.
But with social media heavyweight Meta and e-commerce giants such as Amazon and eBay, the question stands can ecommerce and social media can work in harmony? Des Laffey, Senior Lecturer in E-Commerce at Kent Business School, comments:
“Attempts to pull off the everything app ideas from established firms have proven difficult with even the first case of Chinese social media success in the West, TikTok, facing difficulties as it tries to use its platform for e-commerce.
“Depop, the UK fashion social commerce brand, owned by Etsy lost £85 million in 2021 which further illustrates the challenges faced. There are also very powerful firms, for example, Amazon and eBay in the e-commerce sphere, and Meta in the social media sphere, all better placed to build such an app than Twitter.
“Instagram shopping, along with the popularity of influencers, shows the potential of social media and e-commerce in the West. But maintaining the appeal of the current broadcast model, where major news is released, and building a social commerce model seems to be pulling in different directions. Some think he would need to set up a new brand for the app, which could make use of Twitter’s reach. However, it would take a foolish person to write Musk off and with so much invested in Twitter he will be determined to prove people wrong.”
Desmond Laffey is a Senior Lecturer in E-Commerce at Kent Business School. He has published many papers including topics such as social media, digital transformation, e-commerce and electronic markets. He, along with Professor Ben Lowe, was an early researcher into the use of Twitter publishing a paper in 2011.
About Elon Musk’s Twitter Deal As Explained By Desmond Laffey:
ON OR OFF? THE STRANGE, CONFUSING RELATIONSHIP BETWEEN ELON MUSK AND TWITTER
Last week Elon Musk, the world’s richest man and the most followed CEO on Twitter, announced yet another dramatic twist in his relationship with Twitter. After originally offering to buy Twitter for $44 billion in April 2022 and then attempting to pull out he decided that he would after all go ahead with the deal.
The start of the saga
As an outspoken business maverick Twitter is a natural platform for Musk. As the CEO of Tesla and SpaceX Musk wants to change the world and openly communicates this. Musk views Twitter as an important enabler of free speech and is against moderation of users. Much of his life and his opinions has been lived through Twitter: he met his ex-partner on Twitter, has tweeted against lockdowns, went on trial for defamation through tweets – for which he was found not guilty and has expressed his controversial views on geo-politics.
He had run into trouble, however, when tweets about taking Tesla private resulting in fines totalling $40 million by the Securities and Exchange Commission in 2018. The 2018 incident led to Musk agreeing to get tweets legally approved to ensure they would not affect share prices. However, he did not keep to this agreement and in 2020 a tweet by Musk that Tesla was overvalued led to a $14 billion fall in its value, which affected shareholders around the world.
The Twitter deal
Musk started to quietly buy Twitter stock, and in March 2022 had obtained a 9.2%, without the knowledge of Twitter. After he was revealed as Twitter’s largest shareholder in early April 2022 Musk agreed to join the Twitter board but within a week changed his mind. Around the same time Musk queried Twitter’s future at the centre of social media, a sign of things to come.
Then on April 14th 2022 Musk tweeted that he had made an offer to buy Twitter. After initially resisting the takeover Twitter’s board announced that they would accept.
Musk then announced in May 2022 that the deal was on hold and in July formally pulled out. He had stated that the number of fake/spam accounts was 20%, 4 times greater than Twitter stated. Such fake accounts lower Twitter’s credibility as a source of information and threaten its advertising revenues. Some thought Twitter would offer Musk a discount to push the deal through but they initiated legal action.
The pre-trial hearings went against Musk and embarrassing communications also were made public between Musk and associates. A court hearing was due to be held October 17th 2022 but Musk then announced that he would pay the full amount.
Where does this leave Musk and Twitter?
With the fall in tech stocks Twitter was worth less than $30 billion in July 2022 meaning Musk has ended up paying a premium price of $44 billion. Twitter does not have a track record of consistent profits, losing over $220 million in 2021 and only having 2 years of profit since 2010. In contrast Meta, the parent group of Facebook, Instagram and WhatsApp, has been profitable for many years. Both primarily generate their revenue from advertising.
Advertising models and types of user
Twitter is mainly a one-to-many medium with famous users, for example, celebrities, CEOs, sports personalities, journalists, politicians communicating to their millions of followers. In contrast Meta’s group of social media applications are many-to-many with users both sharing and reading content within their network, making them more suited to advertising.
The solution: the everything app
After Musk announced he was reviving the deal to buy Twitter on October 4th 2022 he tweeted about an “everything app”.
This would offer something equivalent to WeChat in China which integrates social media and e-commerce, enabling users to both communicate and carry out transactions both with brands called (social commerce) and with public services.