Musk's Twitter gamble

What's going on at Twitter from a marketing perspective.

I love Twitter. I'd go as far as to say I'm almost addicted to it. It's often my second most used app (in Malaysia, WhatsApp is almost always the most used because it’s the primary communication channel for business and personal, so it’s ubiquitous, but that’s another post itself).

There's been a lot of talk, and a hell of a lot of insight, recently into what's going on there. We've probably learnt more in the past few weeks about Twitter as a company and how it works than almost all of its existence previously, and I suspect we’ll find out a lot more in the coming weeks. I wanted to look at the situation from a marketing perspective, both as a platform and as a brand.

Twitter is not an ad-money powerhouse like Google or Meta (it makes up less than 1% of total global digital ad spend), but it still relies heavily on ad revenue (just under 90% of revenue in 2021). Ad revenue is bought in bulk by media agencies on behalf of their brand portfolios or directly by some more prominent brands, who often plan their ad campaigns for the year before it even starts. This coming year, Twitter struggled to secure this upfront ad spend due to the uncertainty of the Musk takeover, and media conglomerates such as IPG and Havas have been rumoured to have paused all client ads on the platform for the time being. Not the best start for a new owner. But Musk seems to be gambling on a subscription-first model. Switching from an ad-funded model to a subscription-based model is a tough gig. For one, as influential as Twitter is as a platform, it doesn't have the user numbers (one thing Musk was already super cautious about with his threats of court cases to prove how many actual users Twitter had vs Bot accounts). This is the prime reason for an $8-a-month subscription, although one wonders if he’s pegged that too high for most people. He’d probably be better off going in higher for those who genuinely get value from the platform or, like many companies, have a staggered model where higher fees get you more access (surely he knows what Patreon is?!)

A few things have caught my attention from a marketing perspective. Musk is already a one-person marketing machine. Tesla is a $53b revenue company, and they do almost no traditional marketing, relying on word-of-mouth and word-of-one-very-big-mouth: Musk. His tweets (before he owned Twitter) would lurch the company’s value up and down by as much as 10%, but it seems to be on a continual upward trajectory with little sign of stopping. Musk may be gambling that this approach will continue to work now he owns Twitter. It does seem to be, for now. The number of what they call ‘Monetizable Daily Active Users’ (or mDAU: that’s you) appears to have increased since his takeover. This will be vital when the site does stabilise, and they decide whether to go full subscription model or a mix of subs + advertising. Maybe after the initial craziness, advertisers will return. I guess there’s still a reason Musk is defining the ‘m’ in ‘mDAU’ in that he still sees a particular user as monetizable, and people don’t often refer to a subscriber as such, more a target defining user data for advertisers.

Gorilla marketing. Musk is a case study in this. We used to refer to this as ‘down and dirty’ marketing. Capturing eyeballs by any means necessary. With meme culture, public polls on company strategy and by joining the ‘culture wars’ (sigh), by aiming for the likes of Apple (apparently no one knows about their 30% share of revenue for App Store apps), Musk is giving us a masterclass in Gorilla marketing. The aim seems to create so much drama that people can’t stop watching (except Sam Harris). It is starting to feel more and more like the car-crash analogy. The thing I can’t work out here is what the trade-off is. User numbers will go up, sure, but Musk must still know at some point, he will need ad revenue to run a profitable Twitter. Is he banking on new segments of advertisers who are happy with this sort of behaviour? Or is he trying to raise user numbers to eventually level off the drama and regain some ad money? Every Gorilla campaign I worked on ultimately moved to a more realistic customer acquisition marketing model and eventually to a mature brand-led model. Maybe he’s treating Twitter like a start-up and will follow a traditional start-up marketing playbook.

The other option is he has genuinely decided to kill the ad revenue model, hoping that enough users equal enough subscribers. The model can work, Substack achieves it. But Musk is probably heavily leveraged with the $44b price tag of Twitter. He will need a lot of subscribers. He also faces the issue that $8 is more than most can afford, he’s addressed this by talking about ‘parity’ pricing globally, but that’s often half the amount or less. Only around 14.5m of Twitter’s mDAUs are in the US. The other 239m live elsewhere. Software and news apps tend to get approximately 10-15% of users to subscribe. So let’s assume 15% of users worldwide subscribe (US users at $8, others at $4). That’s still less than $2b in revenue. Last year Twitter made $5m in revenue. The final part of subscription models he seems to be missing is his most recent attacks on Apple. Musk’s Twitter is suggesting a subscription fee (with little to no benefit over a free account, by the sounds of it). Substack takes fees from authors if they make money on the platform, and it’s an excellent form of revenue that works for both parties. They provide the platform to help others earn from their writing, just like Apple does on the App Store and Google on the Play Store with people’s apps, much to Musk’s dismay. But what is different about Twitter charging people for use over Apple’s 30% on the App Store for what is a valuable service? The irony of his latest post is that it came from Twitter for iOS. Maybe Musk will discover Android and side-loading APKs, but then he’ll probably discover cracked APKs, and I doubt he’ll like that, either.

Whichever way Twitter goes. I’ll be watching, waiting… anticipating.