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Twitter’s New Business Model Is Hostage-Taking
July 27, 2023

Twitter’s New Business Model Is Hostage-Taking

Reading Time: 5 minutes

On Elon Musk’s X, you pay up or you get a worse product., Twitter is making companies advertise to keep check marks and users pay for Twitter to be less crappy. The business model is hostage-taking.

The first good indicator of how Elon Musk would manage adversity at Twitter came last November, about a week into his ownership of the platform. In the lead-up to the deal’s closing, Musk had signaled an opposition to content moderation in favor of ‘free speech,’ and then he either fired or lost half of Twitter’s staff. That staff included people who worked directly with Twitter’s advertisers, many of whom were already worried that Musk would put their ads next to the kind of tweets advertisers like to avoid—slurs, harassment, hate speech, and worse. Many of those ad buyers fled the platform, costing Twitter a big chunk of a business line that had made up about 90 percent of its revenue. Musk’s response could’ve cut two ways. In one scenario, he would be chastened and make an immediate commitment to assuaging worried advertisers with effective moderation and management. In the other, he’d threaten them over their departures. He picked that one. ‘A thermonuclear name & shame is exactly what will happen if this continues,’ Musk tweeted. Advertisers could resume paying Musk, or he’d unleash his not very nice fans on them.

In the months since, Musk has not remade Twitter—now X, I guess—into a welcoming destination for advertisers. The ad experience on the platform has been a shambles for months, as most people who use it regularly can attest. Where Instagram is a land of highly relevant ads that make a ton of money for Meta and compel us to buy all kinds of things we don’t need, Twitter’s ads are clunky, uninteresting, and often at least a little fraudulent-looking. (Twitter is the only platform that serves me sponsored content written in German, and it is also the only one that urges me to invest in crypto projects that look like money-laundering operations.) Twitter’s advertisers have not come back. They’re down 50 percent, Musk says, and sometimes more.

A visionary businessman might try to remove that rake from his face. He might determine that threats are a less effective means of customer acquisition than making a product better. But Musk has doubled—tripled!—down on his sticks-over-carrots strategy, and not just with Twitter’s skeptical advertisers. Twitter has not gotten better, but it has become more annoying in myriad ways. The loudest voices on the platform are the paid ones, not the best ones. Porn spam fills the replies underneath countless tweets. The website and app break a lot, with videos failing to play and buttons not working right. Sometimes the whole platform is literally unusable. Musk could have responded to these self-induced shortfalls by fixing them. Instead he has made a different bet: that with X in such rough shape, he can position his business in such a way that the only way for people to improve their experience is to give Musk more money. Most tech companies want to turn users into addicts; Musk is trying to take hostages.

The core competency of Twitter was that it allowed people to post and look at posts easily. That simple thing was Twitter’s whole genius. Type letters into a machine, and maybe add a picture or video. Press a button, and voilà, a post exists. Others can now look at it, and will only see it if they want to see it or someone they trust presses a different button that shows it to them. The posting part of Twitter has not broken yet, but the looking at posts part is on very thin ice, and that’s the thing that most people spend by far the most time doing on Twitter. People go to Twitter to look at posts.

It’s so basic that it feels like a waste of a paragraph. A Twitter where people cannot freely look at as many posts as they want is not Twitter at all, and can’t possibly offer anything else. But there was Musk over the Fourth of July weekend, instituting a rate limit that made it impossible for many people to load tweets at all. Musk said it was part of an anti-bot measure, which was suspicious given that he says a lot of untrue things about Twitter and bots. That limit has since gone away, but Musk said that ‘soon,’ users who don’t pay for Twitter would be able to see a maximum of just 800 posts per day. Users who do pay, he said, would be able to see 8,000 posts (which, it’s worth pointing out, would still impede very online users). I have no idea if Musk will actually institute that policy. Maybe he hoped the threat would generate enough subscriptions on its own that Twitter wouldn’t need to stop showing people tweets in order to make money. Plus, people seeing fewer tweets does not seem like a great way to serve them more ads.

Musk has carried the same approach to the platform’s direct messages. The messaging function has been a valuable Twitter communication tool for years. It’s been an easy way to make friends with people you meet online, and a DM exchange reads to a lot of people like a natural intermediate step before exchanging phone numbers. Would-be networkers from all corners of the platform have used their DMs to build bridges. Sharing sensitive information of any kind in Twitter DMs is not a good idea, but the medium has remained a quick, fast way to talk about nonconsequential things with online pals. (It’s an especially good way to share tweets with friends, and the swapping of funny posts among friend groups has been one of Twitter’s greatest traits.)

Details are sparse, but the company now says it will limit how many direct messages nonpaying users can send in a day. It’s incredibly silly, of course. There are roughly 1 million messaging platforms that do not cost users money and do not limit how many times a user can use them. Charging to send messages is not an example of Musk embracing cold, hard market realities. And if he truly wants Twitter to be ‘an everything app,’ making it harder for most people to send messages on the app is a curious course to chart. But Musk’s ad business is not doing well, and he wants more subscribers. Maybe a lot of people will pay him in the hope of alleviating an annoying barrier to communicating with their friends on his platform. Or maybe they’ll just communicate elsewhere, because it’s not like anything about Twitter’s direct messages will get better for people who pay for them. They’re just messages, same as ever.

Advertisers, the entities in this equation who do tend to pay Twitter directly, are also getting a taste of his harsh medicine. The Wall Street Journal reports that the newly named X has warned companies that if they don’t meet benchmarks for advertising spending, they will lose their gold verification check marks on official accounts. The gold checks are one of the last viable symbols of authenticity on Twitter, now that the standard blue check has ceased to verify anything other than an $8 monthly payment and possession of a phone number. X’s threat to companies is that they should spend money on ads, or X will make it easier for someone to imitate them on the platform. It has echoes of an episode from earlier this year, when Musk slapped a ‘state-affiliated media’ label on the official account of NPR. When the organization stopped using Twitter altogether, Musk threatened that he’d make the @NPR handle available for another company, which might then appear to someone who hadn’t followed the saga closely to be the real NPR.

What Musk has done—or threatened to do, more accurately—is invert the freemium model that underpins a lot of tech and media businesses: Companies offer a product for free. They try to make it really good. And if they convince enough people that the product is really good, they might get some of them to pay money and get more of that product, whether that means more newspaper articles, powerful features, or customer support. Musk’s tack has been different. He has set a series of fires that have made his social media site worse, not better. Pay up, he reasons, and he will at least hand you a hose.


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