Can Elon Musk turn Twitter into an ‘everything app?’

Okay, so we discussed last week the decline in ad revenue from Twitter. Then, right after I published, AnotherA major advertising agency has halted spending on Twitter. But I wrote last week’s column to tee up the thing I actually want to talk about: the long-term plan to make Twitter less dependent on advertising.

Musk pals are scheduled for October 29th. Jason Calacanis stated on his podcast All-In, “There’s no doubt that, I think, Elon can turn this around pretty quickly and make it massively profitable.” Even when he said it, it wasn’t quite true. Elon Musk was already a media entrepreneur: Notable failure ThudThe company apparently didn’t have a plan for being profitable. After the events of the last couple weeks, I feel like I’m dunking on Calacanis just by quoting him. But whatever, we’re less than a month in, and it’s possible that in the long term Calacanis is right, so I am going to do my best to take this all seriously.

Here’s another thing Calacanis said, which I am trying to take seriously. 

It would be wonderful if everything could be verified and there was a path to verification. Elon has mentioned this publicly many times. And payments, which Elon has also discussed publicly many times. This could be a quick turnaround if everyone could verify their accounts.

Well, I think we all know how the Twitter Blue experiment went — canceled after two days! — but in fairness to Calacanis, that is not quite the same thing as verification. Musk is going back to try it again later. I hope it will be better because I truly do love Twitter, unfortunately, and I would prefer not to see some arrogant, out-of-touch Gen Xers drive it into the ground because they aren’t ready to deal with two generations of internet zooborns. You know what? It is Twitter is a karmically right way to sabotage itself.

So, let’s discuss verification! Musk has a history in verifying users. He failed at it.

The entities that purchased Twitter, X Holdings were a reference X.com, a company Musk founded in 1999. That was when Musk “began to hone his trademark style of entering an ultracomplex business and not letting the fact that he knew very little about the industry’s nuances bother him in the slightest,” writes Ashlee Vance in his Musk biography. “He had an inkling that the bankers were doing finance all wrong and that he could run the business better than everyone else.” 

X.com seems like an early version super app with electronic payments and checking accounts. You can also trade stocks, make stock trades and invest in mutual funds. A lot of X.com’s ideas seem ahead of its time, like being able to use an email address to send payments. Customers got a $20 bonus on a cash card when they signed up and $10 for everyone they referred — and there were no overdraft fees, Vance writes. You might be thinking: hmm, that sounds like a business that’s hemorrhaging moneyYou are correct!

At X, Musk dodged “know your customer” rules, which require banks to make sure you are who you say you are. “Of course, there was nothing stopping X’s customers from lying about who they were and where they lived when they signed up for an account, which they did all the time,” writes Max Chafkin in his biography of Peter Thiel, the Other PayPal mogul. “Every day, the mail carrier would stop at 394 University and deliver a giant bag of letters that X had sent to its customers that, having arrived at fake addresses, had been returned to sender.”

X shared office space with Thiel’s company, Confinity, which developed PayPal. The two money-losing companies eventually merged, but that didn’t help what Thiel called “a runaway fraud problem” In a speech delivered at the 2015 Center on Capitalism and Society conference:

A long time ago, I thought of writing a book about PayPal. The working title that I had was Risky BusinessThe whole thing was about how we moved from one terrifying, crazy risk to another. The chapter title on Elon — at the time, Elon Musk was working with us very closely, we sort of combined two companies — was going to be entitled “The Man Who Knew Nothing About Risk” … We had decided to give credit cards to absolutely anybody who wanted them. You can get up to $10,000 in credit. Elon had stated to the woman rolling out the service that he wanted one million people to use the credit card by the end the year. It was two levels below the main page so not many people could find it. Some people did; they wrote us back and said, “This is fantastic, I haven’t had credit in years. I can’t believe you’re offering me credit. I haven’t even had a checking account in 10 years.” These were people who wrote so many bad checks that banks wouldn’t allow them to have checking accounts. We ended up paying a chargeback rate of 50 percent. The lowest subprime companies had rates of 4 to 6 percent. We were able to quickly roll that product back, which was a great thing.

Thiel was able to remove Musk from the job of CEO in 2000. PayPal, the successful product that renamed the company, was chosen to rename it.

Okay, but that was more than 20 years ago, and we’ve all learned things since then. For instance, in 1999, I had a learner’s permit, and now I have a driver’s license! Let’s see what Musk has learned about payment companies.

At Musk’s first meeting with Twitter employees,He did talk about his ambitions to make Twitter payment-friendly. It’s a “high priority!” More to the point:

I think there’s this transformative opportunity in payments. Payments are essentially information exchange. There is no difference in sending a message or sending a payment. They are practically the same thing. You can use a direct message stack to make payments in principle. And so that’s definitely a direction we’re going to go in, enabling people on Twitter to be able to send money anywhere in the world instantly and in real time. We want it to be as useful as possible. 

In that speech, Musk indicates that he’s aware of the possibilities of people buying credit card information and scamming, so that’s good! But he also says he’s going to recycle his old plans for user acquisition, saying that in order to acquire users, he’s going to “give them some amount of money, like 10 bucks or something, that they can send anywhere in the system.”

Twitter needs money transfer licenses for that, which Musk says he’s applied for. But his ambitions sound bigger than just payments — he wants high-yield money market accounts “so that having a Twitter balance is the highest-yield thing that you can do,” he says. Also, check, debit cards and, eventually, loans. Musk believes that payments will make Twitter more friendly for e-commerce.

The creator economy is an obvious way to make Twitter payments work. Right now, it’s hard to monetize on Twitter, though Tips and Super Follows exist and may be one way to do it. 

So I called up Hank Green, YouTuber and CEO of Complexly — in other words, An OG of the creator economy who knows a lot about the business end. I asked him what he thought about Twitter as it stands right now, and he told me, “Thinking about Twitter in a rational economics way would lead you not to make content on Twitter. There’s more downside than upside, and a lot of people with reputations to protect left over the last 10 years.” 

Green says that Twitter can be used to market your products if you have an adequate audience. But, it isn’t very effective for converting people. But that’s also true of regular marketing. Still, “the customer acquisition costs on Twitter are higher, and that’s why you don’t see the same kind of ads on Twitter as you do on Instagram,” he says.

Musk spoke out about rebuilding Vine (an early video platform Twitter created), to compete with TikTok. To attract content creators away TikTok (or YouTube, Instagram), one way is to make it easier to make a living. But Vine as it was isn’t great for that because the videos aren’t long enough. YouTube is still the king of creator revenue. You can make 10-minute videos running preroll and middleroll advertising. 

Twitter is mostly a text product and videos are not what users use it for.  “I’ll watch a hockey highlight or Chris Hayes say something, but if it’s more than a minute, you’ve gotta give me a good reason to watch that,” Green says. 

Musk can be seen creating, say, a Vine Tab that lives inside the app. But that has its own problems — specifically, copyright. It is necessary to have a content identification system that stops people from using unauthorised Britney Spears songs. Or else, it could lead to trouble with the record companies. It is possible to ban Britney songs on the platform. But users will hate it. And also, users are going to set videos to Britney no matter what — so, enjoy the record labels’ lawyers, I guess. It’s better to have a deal like TikTok to allow users to create videos with small pieces of music. Will the labels be interested? “I don’t think they’re going to take a meeting with Twitter unless and until they build something big,” Green says. 

And to compete with YouTube, he’s going to need to figure out how to beat that 55 percent revenue split while also making money to pay off the $1 billion in annual interest payments that Musk’s acquisition saddled the company with.

The creator economy has been hit by the slowdown in advertising, which has never seen a recession. Green states that the current creator economy began to emerge in 2009, or around. “That’s when the upswing began, and it’s been on cocaine ever since, the cocaine of zero percent interest rates.” Those days are over! So it’s not clear what a recession would do to people who build businesses on social media.

There It is a place where Twitter has an advantage, though — and it’s over Discord. Right now, there’s a plug-and-play setup with Patreon, where you can pay to get access to your favorite creator’s Discord. Discord has a problem. It requires extensive moderation. Twitter is however a one-to many communication service. That might be more attractive for people who don’t want to spend a lot of time on community moderation, Green says.

Musk could find a way into the creator economy if he can. Could be bring people to the platform in a way that’s cheaper than the $10 sign-up bonus he’s proposed. Most creators’ fans want them to continue to be able to make stuff and are willing to pay to support that. If there’s a way to keep the most fun, prolific Twitter users on the platform — either by paying them directly or by letting their fans pay them — I can imagine a world in which that creates a revenue stream that makes Twitter less dependent on advertising.

Twitter has to be stable enough that people can build businesses there. And the chaos of these last few weeks is frightening for any business owner. Creators often complainMore YouTube algorithm changesOder Instagram is a threat to their business! The Kardashians have complained loudly and recently, but not so famously. They reversed an Instagram product change They did it because it was bad news for their business. Musk can substitute creators for advertisers to have a new set of happy constituents.

My sketch for this story was a bit sloppy, but I thought it might be nice if I ended on a positive note. So, I decided to write about crypto Twitter. Is actually growing. Und in Musk’s texts to his brother Kimbal, he says, “I think a new social media company is needed that is based on a blockchain and includes payments.”

In this vision, users pay a “tiny amount” to register their messages on a blockchain. (Musk thinks this will cut out “the vast majority of spam and bots”; I disagree, and I think the recent hijinks around Twitter Blue prove my point, but whatever.) I can sort of imagine this like a blockchain Venmo — where part of the fun is watching other people transact. Make a UI that’s friendly and onboard the normies, sure, why not! 

Musk was, after all, one of the Twitter investors Musk attracted. Changpeng “CZ” Zhao — a crypto world heavy hitter. “Twitter is a platform I use heavily,” Zhao posted in a thread explaning the investment.. “As the saying goes, invest in the products you use. (Not financial advice).” He also didn’t seem too concerned about a roadmap, saying “Don’t ask me about a plan. Binance has never had a plan. Entrepreneurs don’t plan.” 

I had intended to take this seriously. FTX melted downI think, and you think This alone has made the risk/reward profile more attractiveMusk’s network proposal. Part of that is my suspicion that regulators will be coming hot and heavy for anything that is even a little bit cryptocurrency-related. More importantly,Zhao is now an obvious target for US regulatorsBecause of his involvement in the debacle. That makes it riskier to lean on his expertise to develop the kind of blockchain-based network Musk was proposing — I imagine that any regulators looking to put Zhao’s head on a spike will start by investigating any US-based entity close to him.

Still, there’s some hope for Twitter. FTX’s Sam Bankman-Fried was in Musk’s texts, trying to become a Twitter investor. Musk seemed doubtful — well before just about everyone else — that Bankman-Fried was good for the money. Smart decision! But given how Musk handled verification on Twitter and fraud at PayPal, it seems like Musk’s judgment falters at scale.