Will Elon Musk alter Twitter's course?
Will Elon Musk alter Twitter's course?

Elon Musk, the CEO of Tesla, said over the weekend that he will not be joining Twitter's board of directors. That's a huge point. Musk said that he had purchased a 9.2% stake in the company, making him the company's largest stakeholder.

In return, the business offered Musk a seat on the Board of Directors, although this would prevent him from owning more than 14.9 percent of the company legally. Musk could probably keep expanding his share if he does not take his place on the board.

Even after the stock price soared as a result of Musk's investment, the company's market valuation remains at $37 billion. Musk's net worth is estimated to be $274.3 billion dollars. That means he's worth enough money to acquire a controlling share in Twitter 14 times. Musk has recently shown a keen interest in social media.

So, how does this affect the markets?

The Twitter conundrum

Since its peak in early 2021, the stock price of Twitter has been declining. Even after Musk's announcement, the stock's price began to fall following an early surge.

Part of this could be attributable to Twitter's two years of losing money in a row. Despite the growing demand for technology, this is due to individuals staying at home because to covid. During the same time period, the company's revenue grew.

Musk has been active on his own Twitter account since acquiring a stake in the company. In addition, polls have been conducted among his followers to gauge their opinions on changes to the microblogging platform. However, the majority of those questions are just cosmetic (e.g., adding an edit button) or comedic (e.g., deleting the "w" from the name). While those may garner a lot of attention, they aren't the kinds of things that will cause the platform's recent trend to change.

The numbers are king.

One of Twitter's key financial issues is that its CPM (the amount marketers pay to place adverts on the network) is the lowest among major social media platforms.

This is due to a number of factors. One of the reasons for this is that only 0.2 percent of the platform's users are unique to it. Advertisers can still target the same population through different channels.

Furthermore, Twitter is dominated by men. Women are responsible for 70-80% of buying decisions, which means that, despite the fact that Twitter users tend to be wealthier, the platform's greatest consumer base remains underrepresented.

Furthermore, the majority of the content is created by a small percentage of individuals. As Musk himself has stated, the most popular users provide minimal stuff. And only ten percent of users are responsible for 80 percent of the content on the platform.

The chasm

In other words, there is a misalignment between what is available on Twitter and what users desire to see.

Twitter's "traffic acquisition expenditures," which include advertising charges, have climbed by 32% in the last year. This is in addition to the 39 percent increase in "marketing" costs during the same time period. Last quarter, Twitter spent an additional $176.6 million on user acquisition. And that was greater than the period's overall operating income.

Twitter attracts to a surprisingly small group of users (affluent, politically left-leaning, highly educated guys) who aren't a big target for advertising. And it appears to be striving to break free from the confines of that box.