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Musk Secures Funding as More Hints of his Twitter Plans Slowly Filter Through

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What to Make of Elon Musk's Buy-Up of Twitter Shares

So what’s the latest on Elon Musk’s great Twitter takeover?

It’s been reasonably quiet on the Elon front this week, but in the background, Musk has been busy shoring up investment, in order to fund his $44 billion takeover bid for the social media platform.

Today, in a new filing with the SEC, it was revealed that Musk has raised over $7 billion in funding commitments from a range of partners, including Sequoia Capital, Binance, Oracle chief Larry Ellison and Saudi Prince Alwaleed.

As you can see from this listing, Ellison is the biggest individual contributor. Ellison is also a director on the board of Tesla, while Oracle was also, at one stage, close to becoming the US owner of TikTok amid the Trump Administration’s push to force the platform into American ownership.

Ellison also has a good relationship with former US President Donald Trump – which is either entirely coincidental or hugely relevant here, depending on your perspective.

The additional funding commitments will ensure that Musk can go ahead with the Twitter deal, with these contributors to act as equity partners, meaning they will also benefit from any profits that Musk is able to glean from the social app.

Which will be difficult. Twitter has long struggled to significantly boost its revenue, and has been working to reform its business elements to meet tough new performance thresholds set by shareholder groups. Most market analysts don’t see how Twitter will be able to reverse course and become a bigger money-making machine, while Musk has also flagged cutting ads entirely, which contribute 98% of Twitter’s income, as part of his broader free speech push.

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But there have been some inklings of Musk’s plans here.

In brief notes and missives, it seems that Musk may be planning to stop ads, and take Twitter entirely private for a time, before launching a second IPO, and reimplementing ads at a later stage.

That plan has received tacit endorsement from former CEO Jack Dorsey, who also agrees that the company’s reliance on ads has impeded its potential.

That’s an interesting proposal, and clearly, given the investments Musk has secured, he must have some plan for further monetization. These investors aren’t just putting money into Elon’s Twitter project because they want to support his hobbies.

Which is really where the Musk takeover is interesting – because from the outside, it does seem like a hobby horse for Musk. Elon is clearly passionate about Twitter, and his push for supporting free speech, but given his stances on moderation and ad reliance, there doesn’t appear to be a business focus here, it does seem like it’s just a rich guy throwing his cash around to make the platform what he wants.

But that’s definitely not the case. While I would expect Musk to make the moves that he’s publicly stated, in terms of reducing ad reliance and reforming the platform’s moderation policies, there must also be a longer term strategy there, whether that’s through increased subscriptions, selling tweet embeds or any other vague strategy that Musk has outlined thus far.

On the subscriptions front, my original view here was that Musk would likely look to push to make all users pay for Twitter access, while also verifying their details to ensure that they’re not bot accounts, another of his focus aspects.

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Then earlier this week, Musk shared this:

So it seems that while Musk is considering a new subscription model, it won’t be applied to regular users.

There’s still not a heap to go on, and there’s still a way to go in securing the final approvals that will see Musk’s Twitter deal go through. But the funding is now ready, the process is in motion, and reports suggest that Musk will act as Twitter CEO for some time as the details are finalized, taking over from Parag Agrawal.

Expect job cuts and program changes, while you can also expect Twitter’s focus to shift dramatically within this initial period.

How that changes your day-to-day tweet experience, we’ll have to wait and see.

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TikTok Scales Back Live-Stream Commerce Ambitions, Which Could Be a Big Blow for the App

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TikTok Expands Test of Downvotes for Video Replies, Adds New Prompts to Highlight its Safety Tools

TikTok’s facing a significant reassessment in its business expansion plans, with the company forced to scale back its live eCommerce initiative in Europe and the US due to operational challenges and lack of consumer interest.

TikTok has been working to integrate live-stream shopping after seeing major success with the option in the Chinese version of the app. But its initial efforts in the UK have been hampered by various problems.

As reported by The Financial Times:

“TikTok had planned to launch the feature in Germany, France, Italy and Spain in the first half of this year, before expanding into the US later in 2022, according to several people briefed on the matter. But the expansion plans have been dropped after the UK project failed to meet targets and influencers dropped out of the scheme, three people said.”

TikTok has since refuted some of FT’s claims, saying that the reported timeline for its commerce push is incorrect, and that it’s focused on fixing problems with its UK operation before expanding, which is still in its roadmap. But the basis – that its program is not going as smoothly as planned – is correct. 

TikTok’s UK shopping push has also faced internal problems due to conflicts over working culture and management.

Last month, reports surfaced that TikTok’s parent company ByteDance had been imposing tough conditions on its UK commerce staff, including regular 12-hour days, improbable sales targets, and questions over entitlements.

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Now, it seems like the combination of challenges has led to a new growth dilemma for the app – which once again underlines the variance between Asian and western app usage trends.

Social media and messaging apps have become a central element of day-to-day life in several Asian countries, with apps like China’s WeChat and QQ now used for everything from purchasing train tickets to paying bills, to buying groceries, banking, and everything in between.

That spells opportunity for western social media providers, with Meta, in particular, looking to use the Chinese model as a template to help it translate the popularity of WhatsApp and Messenger into even more ubiquitous, more valuable functionality, which could then make them critical connective tools in various markets, solidifying Meta’s market presence.

But for various reasons, Chinese messaging trends have never translated to other markets.

Meta’s Messenger Bots push in 2016 failed to gain traction, and after its Messenger app became ‘too cluttered’ with an ever-expanding range of functionalities, including games, shopping, Stories, and more, Meta eventually scaled back its messaging expansion plans, in favor of keeping the app aligned with its core use case.

Meta then turned to WhatsApp, and making messaging a more critical process in developing markets like India and Indonesia. That expansion is still ongoing, but the signs, at present, don’t suggest that WhatsApp will ever reach the same level of ubiquity that Chinese messaging apps have.

Which then leads to TikTok, the world-beating short-form video app, which has seen massive growth in China, leading to whole new business opportunities, and even market sectors, based on how Chinese users have adapted to in-app commerce.

The Chinese version of TikTok, called ‘Douyin’, generated $119 billion worth of product sales via live broadcasts in 2021, an 7x increase year-over-year, while the number of users engaging with eCommerce live-streams exceeded 384 million, close to half of the platform’s user base.

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Overall, the Chinese live-stream commerce sector brought in over $300 billion in 2021. For comparison, the entire US retail eCommerce market reached $767 billion last year.

Given this, you can see why TikTok would view this as a key opportunity in other markets as well – but as noted, Chinese market trends are not always a great proxy for other regions.

The decision to scale back its eCommerce ambitions is a significant blow to TikTok’s expansion plans, not only from a broader revenue perspective (and worth noting, TikTok’s parent company ByteDance recently cut staff due to ongoing revenue pressures), but also in regards to revenue share, and providing a pathway for creators to make money from their efforts in the app.

Unlike YouTube, TikTok clips are too short to add mid and pre-roll ads, which means that creators can’t simply switch on ads to make money from their content. That means that they need to organize brand partnerships to generate income, and on Douyin, in-stream commerce has become the key pathway to exactly that.

Without in-stream product integrations as an option, that will significantly limit creator earnings capacity in the app, which could eventually see them switch focus to other platforms, where they can more effectively monetize their output.

Which may not seem like a major risk, but that’s exact what killed Vine, when Vine creators called for a bigger share of the app’s revenue, then switched to Instagram and YouTube instead when Vine’s parent company Twitter refused to provide such.

Could TikTok eventually face a similar fate?

TikTok, of course, is much bigger than Vine ever was, and is still growing. But limited monetization opportunities could end up being a big challenge for the app – while it also continues to face scrutiny over its impact on youngsters, and the potential for it to be used as a surveillance tool by the Chinese Government.

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In isolation, it may not seem like a major move, scaling back its eCommerce ambitions just slightly as it reassesses the best approach. But it’s a significant shift, which will slow down TikTok’s broader expansion. And it could end up hurting the app more than you, initially, would think.

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