Transcript
Emma Atkinson (00:05):
You're listening to Radio Ed.
Matt Meyer (00:07):
The University of Denver podcast.
Emma Atkinson (00:09):
We’re your hosts Emma Atkinson…
Matt Meyer (00:11):
And Matt Meyer.
(00:13):
What happens when a divisive tech maven swoops in to buy one of the largest social media platforms? The days after Elon Musk acquired Twitter, it was pure chaos. Parody accounts and hate speech exploded. More than half of all staff were either fired or left willingly. The entire accessibility team responsible for coding associated with alt text and video captions was dismantled. Entire industries were disrupted with journalists panicking and academics fleeing to other social networks like LinkedIn and Mastodon. But Twitter still stands and remains in the news, whether it's because of Kanye West's antisemitic tweets or Musk's latest trolling.
Forbes estimates Musk's Wealth is just shy of 200 billion, making him the world's richest person. He can afford more than a few bad business ventures. Is his purchase of Twitter just a billionaire buying a larger megaphone, the modern equivalent of a railroad tycoon scooping up a newspaper? Or is it part of his seemingly never-ending quest for relevance?
For this episode of Radio Ed, we examine Twitter's acquisition and current business model with Daniels College of Business professor, Michael Nalick. If you're here for more the social media side of the story, make sure to stick around. I'll be intercutting some of the communication theory that has made these last few weeks so interesting.
When you or your colleagues were kind of teaching the future CEOs and managers of the world how to handle layoffs, what's the broad playbook for something large scale, like what happened with Twitter?
Michael Nalick (01:31):
Our department head, Charles Dhanaraj, sent around an email about Snap CEO, and how he approached the layoffs, which was a much more humanistic sort of way. You know, not only like these other CEOs saying, ‘oh, it's our responsibility,’ which now they're all saying, ‘it's my responsibility, we grew too fast.’ That's kind of like the buzzword of Silicon Valley right now. ‘My responsibility, but yeah, you still are being laid off right before the holidays, so haha.’
The Snap CEO was going into the detail on what happened, and then giving the employees much more compensation and more training opportunities, and search opportunities, and really transitional opportunities than I've seen in these other companies. So it's a much more sympathetic, moralistic way of which to approach layoffs of saying, ‘yeah, this is a necessary evil in our business, but this is not something I want to do, and because of that I'm going to do it in the best way I can, which is here's money, here's insurance, here's transitional resources, so I'm not putting you out in the cold, and you know, this won't take into effect until really after the holidays, even though I'm informing you now to get you prepared, you know, the money and all that and the bonuses - I'm still giving those out through mid-year.’ And, so I think that's a much better way, at least from a public relations/reputation, even moral/ethical perspective way to handle layoffs than not just Twitter but many other companies do so as well.
Matt Meyer (03:06):
And with Twitter, it didn't really play out that way. So, were the speed of the layoffs kind of a cause for concern or is it just another example of Elon Musk kind of cutting through the corporate red tape? Can it be a little bit of both in that type of situation?
Michael Nalick (03:20):
Well, it's not even really Elon Musk. It's a typical acquisition strategy. I mean, this is what you see in acquisitions. Now, the funny thing is, in acquisitions, it's usually companies that are involved. So one company trying to restructure the acquired company to fit into its space, presence, market, and things like that. This is an individual buying a company and basically doing the same strategy as an acquisition strategy. And part of that is just swift layoffs, in order to remake the culture in the image of the acquirer.
Matt Meyer (03:57):
For a long time, Twitter was the premier source of news as it happens. In my decade as a newspaper journalist, the use of Twitter was part of my performance review. Audience engagement was a huge part of a journalist's job, not just gathering and presenting the news. It was also a space for like-minded folks to gather, for better and worse. Academics, hobbyists, marginalized communities, and more, all found a sense of comradery there. But there were also spaces for white supremacists and all other kinds of hate speech, sparked by agitators and politicians alike. Twitter famously banned former US President Donald Trump in the wake of the riots to the US capital on January 6, 2021. That ban alongside many other barrings undone by Musk, a self-professed free speech absolutist. This was put to the test early in December, when Twitter banned Kanye West for tweeting a picture of a swastika blended with the star of David, an especially extreme example of the hate speech that has bloomed on Twitter since the change in ownership.
(04:47):
The Center for Countering Digital Hate, a watchdog group, said the daily use the N-word under Musk is triple to the 2022 average, and the use of slurs against gay men and trans persons are up 58% in 62% respectively. One of Nalick’s areas of expertise is activist CEOs. What happens when a company's leader brushes up against the sensibilities of the board shareholders and customer base? For Musk and Twitter, the situation is somewhat different. Musk is one man leveraging his business holdings to buy a company. This isn't Jeff Bezos using Amazon to purchase the Washington Post. This is Elon Musk, front and center in the day to day operations of Twitter.
Some kind of call Elon Musk a champion of free speech, some call him a trolling narcissist. Either way, Twitter has made a bunch of headlines because of Musk's consistent comments kind of throughout this process. How does somebody like Elon Musk potentially help a company like Twitter with his personality in the way he handles that, and how does it potentially hurt a company like Twitter?
Michael Nalick (05:44):
Well, I've seen data actually yesterday that Twitter's download, Twitter’s participation rates, you know, those sort of things that indicate activity at Twitter, have actually increased substantially, outside the kind of the margin of error there. And so I think the public relations part, the PR part of this, what is going on Twitter has created kind of – I don't want to call it excitement –, but it's created more recognition, name recognition kind of, you know, there's an old saying, ‘any publicity is good publicity,’ right? And that's kind of what's going on with Twitter right now, is they are benefiting from the publicity that Elon Musk has created, and he tends to do that. On the other hand, what's the long-term effect of that? Is this a short-term boost within the long-term trajectory of Twitter still is negative because the business model really hasn't changed, or the business model's changing too radically,
(06:43):
or, you know, as you've talked about activist CEOs, that happens when they get involved in activities that their stakeholders are for or against, and they are split into two. And there's a lot of people that don't like Elon Musk. You know, he's created such a persona for himself that he kind of has that split camp as well, where you have people that are really for Elon Musk and think he's brilliant and like his ideas and like what he's doing. And then you have people that really dislike him. And I believe, in long term for a company, that's never a good thing because that trumps the amount of supporters, amount of customers, amount of advertisers that will be on your side.
Matt Meyer (07:25):
The model for Twitter is changing and Musk is at the forefront. Since its founding in 2006, the social media giant has been at the center of public discourse. Everyone, from pop stars to presidents, have lent their thoughts to the platform. But even with an audience base as high as 450 million users worldwide, it's not a company that's made money. Advertising has been inconsistent and has dried up at times, particularly during recessions. Musk has shifted towards the membership model, christening Twitter Blue, shortly after the purchase. He charges $8 a month for the once coveted blue check mark, previously a symbol of legitimacy for public figures. The initial rollout had disastrous and predictable results, with parody and impersonation accounts of famous public figures, sprouting like weeds. NFL Insider Adam Shater, right wing pundit Ben Shapiro, and even Musk himself were notable targets and the program was suddenly shuttered less than a month after launch. The membership model, however, is at the center of Musk's plans to make Twitter profitable. Nalick explains.
Michael Nalick (08:19):
I mean, they seem to be trying to change that business model because when you realize, strictly on advertising revenue, you know, obviously it can fluctuate a lot. You know, advertising is one of the first things to go during a recession, and most CEOs out there think we are approaching a recession. And so, you can see him changing kind of the business strategy of Twitter relying purely on advertising revenue, which, frankly, didn't work in the past. You know, Twitter hadn't really turned much of a profit, so their business model hadn't proved itself. And so he's trying to add more what I would call membership. You know, somethings kind of like a Costco model, that you're part of the membership club and you buy into it so that it provides consistent revenue on top of other revenue that's more discretionary.
Matt Meyer (09:07):
And then can happenings in Twitter influence his other companies like Tesla? Is this something that can spill over and kind of his other ventures? Or is it fairly limited to what's going on with Twitter and kind of that social media space?
Michael Nalick (09:19):
Well, I think specifically what he's doing at Twitter is confined to Twitter. However, there's various views of Elon Musk. So if you have the view of Elon Musk, that he's a brilliant person, that his presence adds to the company, you know, then if you look at his other companies, then you have to say, ‘well, how much is Elon Musk really participating in Tesla right now? How much is he really participating in SpaceX? How much is he participating in these other companies?’ Given that most of his attention is on Twitter and there isn't that economy of scope between his companies that have spillover effects between these companies. These are very much unrelated companies. And so if you have attention on one company, it really doesn't produce any benefits for these other companies.
Matt Meyer (10:08):
For the user base, Twitter's doomsday moment came late in November. Rumors of Twitter's demise, following layoffs and attrition that cut the company's workforce in half spread like wildfire across the platform. Twitter keeps trucking along and it seems like it will for the foreseeable future.
Michael Nalick (10:23):
The best-case scenario is that Elon Musk comes up with a different business model for Twitter that somehow makes Twitter much more profitable, he’s trying to get a linear culture and that it can survive in this hostile industry that it’s in. The worst-case scenario for Twitter is that essentially it just goes out of business because you see that it’s culture has been changed and it may not attract the best employees now because of the culture, and the core infrastructure of Twitter has been gutted, and because of that, if something massive were to happen, such as a data leak or an outage, or something like that, or there’s a proliferation of too much hate speech, or some big moral panic that incites because of something that’s gone on that you can trace back to the layoffs and to the cutting budgets, and to that of Twitter, you’re gonna see advertisers start to flee, and then the consumers flee, and then users flee, and then it’s just this cascading effect that eventually leads to bankruptcy.
Matt Meyer (11:40):
And so this is a very general question, so feel free to answer it kind of however you want. From an academic perspective, you know, looking ahead 10, 15 years from now, what will people be looking at which aspects of Twitter's acquisition, which aspects of Elon Musk will people be looking at and studying in the future?
Michael Nalick (11:58):
Yeah, that is a very broad question. From my perspective, I guess this is the strategy that Elon Musk has done over and over and over again through all the companies he's been a part of. He has this, you know, mentality where he forces crisis and he believes when he forces these crises, he can make these cultural changes, get the employees he wants, you know, does everything else. But it's kind of a manufactured crisis, and that's what he's done at Twitter. The question is, while this has worked in startups, can it work for mature companies like Twitter? And so, from an academic perspective that's what I'm wondering. Does his management style, does his tactics, actually work for mature companies, or is it really just a good strategy on the growth stage of companies?
Matt Meyer (12:54):
With the layoffs, headlines, Musk’s large-than-life personality, the reinstatement of Trump on Twitter, and the subsequent ban of Kanye West, there have been numerous angles to cover, but the most important aspect of this story might not be the what, but the why.
Michael Nalick (13:06):
Well, the story is, is this a business perspective? Why did he buy Twitter? Because if you actually look at from a business perspective, and I teach this – he’s pretty much done everything that I would say not to do, right? So he's bought this company, waived due diligence on it, bought it at a premium without any other bidders in the marketplace. So, he overpaid without any reasoning to do so. Then he takes the company, it hasn't been profitable, so it's a bad business model, he knows that going into it, and he guts it, the company. So it's kind of what to say not to do in acquisitions, whereas you don't want cultural classes, you don't want employees to leave, you don't want key infrastructure projects hanging out there, all these different things, and saying what not to do in an acquisition.
(14:02):
It's been done, he's done it. So from an academic perspective, it's what not to do when you acquire a company, from every stage of an acquisition. And so then you have to think back and think of the rationale of Elon Musk is why did he buy Twitter? Because in every business perspective, it it's not a good purchase. It's not a profit-making company. He didn't get it out of value. He's disassembling it, it's not related to any other companies. It's not part of the portfolio. So it won't add any value to his other companies. So why? And I think that's the biggest takeaways. Was this just a hobby purchase? You know, other people purchase boats and cars and he purchased a 44-billion dollar company. You know, his other companies also have some sort of mission to them. You know, Tesla is kind of electrification of the market. You know, SpaceX is going to Mars. What is the mission of Twitter? I mean, some say free speech, but so it's TikTok, so is these other companies that are already around that are actually more profitable, so why not buy those? And so I think that's the real motivation in question is what is his motivation? Because right now I don't know what it is because, from a business perspective, it's certainly not there.
Matt Meyer (15:24):
Is this something you could compare to Jeff Bezos buying the Washington Post or the, the gentleman who bought the Los Angeles Times? Can it be compared to a legacy media purchase?
Michael Nalick (15:35):
It could be, it could be. But I wouldn't consider legacy media just more legacy. You know, does this just kind of cement that legacy status or does this cement the status of just kind of him being able to dictate what the conversation is in media and society and things like that? And so that could be a motivation, that could have been it, to buy a big megaphone. But again, as I said, the business aspect doesn't add up.
Matt Meyer (16:14):
Thanks to Michael Nalick from the Daniels College of Business for joining us on this episode. For more information, check out the show notes at du.edu/radioed. Tamara Chapman is our managing editor, and Débora Rocha is our production assistant. James Swearingin arranged our theme. I'm Matt Meyer. This is Radioed.
