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Can Elon Right the Twitter Ship?

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Can Elon Right the Twitter Ship?

Should we be concerned about Twitter?

I mean, Elon Musk is been able to steer his other companies to massive success, there’s no reason, as yet, to believe he can’t achieve the same at Twitter. Right?

It’s impossible to say, of course, because Twitter’s very different to his other businesses, which focus on hardware, on actual physical products, as opposed to Twitter, which is essentially driven by engagement. But as Elon’s vision for the platform continues to take shape, it is worth noting the current state of the app, and where it needs to be to get on, and stay on the right track.

Revenue Status

Twitter’s biggest challenge is on the revenue front, with Elon estimating that the app was losing around $4 million per day when he took over at the helm.

Elon’s main additional revenue push thus far has been subscriptions, via Twitter Blue, which he’s hoping will eventually generate around half of the app’s total intake.

This is a critical peg in his ‘Twitter 2.0’ plan, for several reasons – for one, more direct income from users means less reliance on ads, and Elon is notoriously not a fan of advertising in any form.

Relying on ad dollars also means aligning with advertiser expectations around moderation, which potentially goes against Elon’s ‘free speech’ vision for the app, while getting more users to pay could also help to weed out bots, because if the majority of users are paying subscribers, that then makes it harder for bot farms to create armies of fake profiles, and have them blend in – at least, without having to pay a significant cost for such.

So how is Twitter Blue take up looking?

According to analysis by Travis Brown, as of right now, there are between 275k and 325k Twitter Blue subscribers. Taking the top-end of that estimate, we’ll assume that Twitter is generating around $2.6 million per month from Twitter Blue subscriptions as of right now (325,000x$8).

That equates to $7.8 million per quarter – which is a lot, but it’s still not close to where Twitter needs it to be to be a relevant revenue driver.

To clarify, in Q4 2021, Twitter generated $1.57 billion in revenue. Half of would be $785 million – or around 100x what Twitter Blue is currently bringing in.

Of course, Twitter Blue still has a lot of room to grow – it’s currently only available in the US, UK, Canada, Australia, New Zealand and Japan. But then again, these regions account for around 70% of overall Twitter users, and if these initial take-up figures are indicative, that doesn’t bode well for this being a viable pathway to broader revenue growth.

What’s worse, Twitter has also reportedly lost around 40% of its ad revenue, due to the broader economic downturn and Musk’s decisions, including the reinstatement of previously banned users and revising its rules around moderation. That’s an estimated $642 million hit in Q4 alone.

At the same time, Twitter has reduced its costs, with Elon culling 70% of the company’s workforce, while also shutting down offices, data centers, cutting employee benefits, etc.

We don’t know how significant these cuts will be to Twitter’s bottom line, but Twitter’s staff costs in Q2 2022 were $950 million, and its operating costs were $540 million.

As an estimate, if you assume its staff costs have been reduced by 70% (it could be more than this due to exec salaries being culled), and the operating costs have been halved, that would reduce these from a cumulative $1.49b to $555 million.

Add in owed interest on Musk’s loan to purchase the app, and Twitter’s current operational costs, at a rough estimate, are around $930 million per quarter.

So, to clarify – incoming per quarter (based on estimates):

  • Ad revenue = $942 million
  • Twitter Blue = $7.8 million
  • Data licensing = $150 million

Total Twitter intake, per quarter = $1.1 billion

Twitter outgoing per quarter:

  • Staff costs = $285 million
  • Operating costs = $270 million
  • Interest on loans = $375 million

Total outgoing = $930 million

That’s a pretty thin edge, in relative terms, but once Twitter has paid out staff costs, and settled its current rent agreements, etc., it could be on the right track to generating revenue this year.

But a lot has to go right, and anything breaking or falling apart – which is increasingly likely due to reduced oversight – could put it in a seriously dangerous predicament.

I recently noted that it’s possible that Twitter could go bankrupt within 6 months – which Musk himself has admitted. This is why, and while the company is seemingly in a more stable situation, financially, at present, it’ll be a delicate balancing act until Elon can bring in more revenue for the business.

Future Plans

So, how will he do that?

Twitter’s still working out the details of its next steps, and while it continues to roll out smaller tweaks like updates to Bookmarks and view counts, the real push is revenue drivers, and bringing in more money at the app.

On this front, Twitter’s working on several elements:

Each of these has potential to bring in incremental value, but a lot will depend on how many people and businesses are willing to put more reliance on Twitter – and as its decline in ad revenue has shown, many are not comfortable with the direction that Elon’s currently taking at the app, at least at this stage.

But then again, a lot of big advertisers have re-committed to Twitter spending. And while some will hold off on making investments in the app, if Elon and Co. can increase engagement, and get more people spending more time in-stream, ad spend will follow, whether those brands agree with Musk’s personal stances or not.

Which is the longer-term push, and why Twitter’s comparatively smaller UI tweaks and updates are important – if Twitter can grow its audience, and get more people tweeting, ad dollars will follow, regardless of the media narrative around Musk’s political views and their impact.

The Singular Solution?

With perspective on the challenges at hand, you can see why Musk felt the need to cut thousands of staff, and reduce the app to its bare bones across the board.

Because, really, he had to. Twitter was operating at a loss, and has been since 2019, and the only way to get it back on track is to make drastic changes, whether we like them or not.

Those come with a high level of risk. Former Twitter staff have warned that the app will break at some stage, due to reduced monitoring and oversight, and Musk’s ‘hardcore’ management style, which prioritizes rapid deployments and tweaks, could kill engagement, and sink the ship.

As usual, Elon is flying close to the sun – but then again, why wouldn’t he? It’s worked out pretty well for him so far.

In April last year, former Twitter CEO Jack Dorsey said that Elon was ‘the singular solution’ that he trusts to right the ship, and get Twitter back on the right track.

That, of course, was before Elon cut so many staff, before he started releasing troves of internal documents, which are highly critical of those that operated under Dorsey’s management, and before he relaxed the platform’s rules around what’s acceptable and what’s not, and let all manner of questionable individuals back on the app.

But maybe, despite all of this, despite everything that we’re seeing. Despite Musk’s bravado and confrontational Twitter persona, maybe, he could actually steer things in the right direction.

It would be against the odds, and again, a lot has to go right. Even small missteps will have big consequences, but if anyone can handle that pressure, Elon, and his unwavering self-assuredness, could actually be fit for the task.

Or it could be gone before the year’s out. Either outcome feels entirely possible at this stage.



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Josh Brolin Summarizes Dune 2 in Greatest Instagram Caption of All Time

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Josh Brolin Summarizes Dune 2 in Greatest Instagram Caption of All Time

The Dune: Part Two star took a unique approach to marketing the movie. Dune: Part Two is so close to hitting theaters, and no one is more excited than …

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Reddit’s Exclusive Data Sharing Deal with an Unnamed AI Company Could Mark a Key Industry Shift

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Reddit’s Exclusive Data Sharing Deal with an Unnamed AI Company Could Mark a Key Industry Shift

Is Reddit’s actually data worth $60 million per year?

That’s reportedly how much an as-yet-unnamed AI development company has paid to gain exclusive access to Reddit’s full data set, which will see said AI company incorporate Reddit user responses into its large language model (LLM), with a view to the system providing more human-like answers and insight, and becoming a bigger challenger in online search.

As reported by Bloomberg, after working to restrict access to its data over the last year, in order to stop AI companies from profiting off its content, Reddit has now signed an exclusive contract with “an unnamed large AI company”, which will see that company integrate Reddit insights into its models.

Which is a high price tag, considering that the top tier of X’s API access (200 million posts per month) costs around $2.5 million per year.

So could Reddit’s data be worth significantly more than that, and if it is, does it then make sense for Reddit to provide such on an exclusive basis?

The value of Reddit data is that it provides actual, human usage insight, which can often be of more value than online reviews that can be gamed and skewed by paid responses. That’s getting even worse in the age of generative AI, with some companies now employing AI tools to create human-sounding reviews online, in order to boost their product ratings.

As a result, more and more people have been turning to Reddit to get honest product reviews and performance insight. They’re still using Google, but more people are using the “site:reddit.com” qualifier to glean more specific insights from Reddit communities.

For example, if you were looking for a new hair dryer, you can look up “best hair dryer” on Google to get this:

Or you can add “best hair dryer site:reddit.com” for this:

Google example

The Reddit forum links connect through to actual people’s experiences, and include solid, functional insight from those who’ve used each device. The Reddit responses are also up and downvoted, making it easier to find the best response to guide your search process.

The more specific, personal insight can add significant value to the answers provided, and many people have found that this is now a better, more valuable discovery process than trusting Google results within themselves.

And now, one AI company will get all of this insight exclusively to itself.

That could be a big boost to its business ambitions, with a view to making AI chatbots more of a rival for traditional search behavior. Already, more people are turning to conversational chatbots for online discovery, and with this, whichever LLM can access Reddit data will have an exclusive trove of valuable consumer insights, which it can repackage within its responses.

For example, using the same hair dryer prompt in ChatGPT, the system currently gives me a listing of technical considerations and recommendations based on top sellers. But with added Reddit commentary, it could also provide a more personalized addendum:

“According to users, the best hair dryer for curly hair is the Ella Bella Ionic hair dryer, while those with straight hair tend to prefer the Dyson Supersonic.”

The system could then provide more specific answers based on your requirements, by sourcing that info from subreddit communities.

It’s a significant value-add, which will make whichever company gets this info a far more viable option as a search consideration, though the $60 million per year ongoing price tag is high, and is also at least somewhat reliant on Reddit continuing to grow, in order to maximize its value and utility.

And Reddit is growing. Reddit’s added 20 million more users over the past three years, and it continues to see strong engagement in over 100,000 active communities. The company’s been working to highlight its business value, ahead of a planned IPO, which could come next month, and this deal will now be factored into the valuation of the platform moving forward.

In some ways, it’s possible that Reddit could be limiting its opportunities by signing an exclusive data contract. But that’s why the price tag is so high, and it’ll be interesting to see which chatbot comes out with “Reddit exclusive insights” as a value add sometime soon.

I mean, it seems likely that it’ll be OpenAI, with the backing of Microsoft, as it looks to take on Google’s Search dominance. With the rise of conversational searches, that does seem like a logical investment, and with another data source taken out of the mix, that could also lead to more differentiation in the market.

It could also point to similar exclusivity deals in future, as each company tries to differentiate and dominate with their chatbot tools. Current AI chatbots have been able to scrape vast amounts of data from across the web, which means that their initial models will all be relatively similar as a result, but in future, as information evolves, and new data is required to match search intent, fresh sources will also be required to maintain relevance, and audience interest.

Meta claims to have an advantage in this respect, because it has all of the insights published to Facebook and Instagram to work with, while Elon Musk will view xAI as holding a lead, due to his platform being the leading real-time news discussion app.

But maybe, considering broader trends, Reddit insight is actually the real leader in terms of refining search queries.

And maybe, that will prove to be more important than most think.  



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EU launches probe into TikTok over child protection

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The European Commission said it launched formal infringement proceedings against TikTok over the protection of minors online

The European Commission said it launched formal infringement proceedings against TikTok over the protection of minors online – Copyright AFP KARIM JAAFAR

Raziye Akkoc

The EU on Monday announced a formal investigation into TikTok over alleged breaches of its obligations to protect minors online, under a landmark new law on policing digital content.

It is the second probe into a major online platform since Brussels introduced the Digital Services Act (DSA), after targeting tech billionaire Elon Musk’s X in December.

Brussels is particularly concerned that the video-sharing app owned by China’s ByteDance may not be doing enough to address negative impacts on young people.

A key worry is the so-called “rabbit hole” effect — which occurs when users are fed related content based on an algorithm, in some cases leading to more dangerous content.

The European Commission’s concerns also include TikTok’s age verification tools, which it said “may not be reasonable, proportionate and effective”.

The commission opened “formal proceedings to assess whether TikTok may have breached” the DSA in other areas including “advertising transparency” and “data access for researchers”.

The action comes after analysing a risk assessment report by TikTok and its replies to Brussels’ requests for more information about what measures the video-sharing platform has taken against illegal content, the protection of minors and access to data.

– ‘Spare no effort’ –

Regulators will continue to gather evidence, the commission said, adding that the move empowered it to take further enforcement steps if necessary.

“As a platform that reaches millions of children and teenagers, TikTok must fully comply with the DSA and has a particular role to play in the protection of minors online,” said the EU’s internal market commissioner, Thierry Breton.

“We are launching this formal infringement proceeding today to ensure that proportionate action is taken to protect the physical and emotional well-being of young Europeans. We must spare no effort to protect our children,” Breton added.

TikTok has over 142 million monthly users across the EU, up from 125 million last year.

“TikTok needs to take a close look at the services they offer and carefully consider the risks that they pose to their users — young as well as old,” commission executive vice president Margrethe Vestager said.

The formal probe will focus on four areas: how TikTok assesses and mitigates systemic risks; how the company is complying with protecting minors’ privacy and safety; TikTok’s measures on providing a “reliable” advertisement repository and the steps taken to increase transparency.

TikTok said it was working to protect minors online.

“TikTok has pioneered features and settings to protect teens and keep under 13s off the platform, issues the whole industry is grappling with,” a TikTok spokesperson said.

“We’ll continue to work with experts and industry to keep young people on TikTok safe, and look forward to now having the opportunity to explain this work in detail to the Commission.”

– Risk of fines –

There is no deadline for the completion of the proceedings.

The DSA gives Brussels the power to levy heavy fines, with penalties for violations that can include fines going up to six percent of a digital firm’s global revenues.

The commission can even block platforms in the 27-nation bloc for serious and repeated violations.

The EU law came into effect last year for the world’s biggest online platforms including TikTok and X as well as Facebook and Instagram.

The new rules demand companies do more to police content online, but also expect digital retailers to act swiftly and effectively to protect shoppers online.

The DSA law has applied to all platforms since February 17.

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