Have we reached peak Musk, peak Twitter and peak social media?

It looks as though Twitter will be a smaller business in the future, writes Hamish McRae

If he has destroyed value in the business, or simply paid too much for it, that would make a big dent in his finances (AFP/Getty)

Peak Musk? Peak Twitter? Peak social media? Or maybe we’ve reached all three?

The takeover of Twitter by Elon Musk has many moving parts. There are too many stories already embedded in it to be able to sort out what really will seem important in a few years’ time and what is just the noise of the moment. But let’s try, if only to give people a template into which to fit their own interpretations of what’s going on.

Start with the man himself. I have only met him once, when I was seated one place away from him at a dinner in London just before the pandemic. He was extremely courteous, even to some annoying chap who came over and tried to pitch some business idea to him while he was eating his dessert.

We have all read the stories about a rather different side to his character, and the Twitter people who have just been sacked will find it hard to cut him any slack. But whatever happens over Twitter, the fact remains that he has made a huge contribution to decarbonising the world’s car fleet a decade or more sooner than would have otherwise have happened. Tesla changed everything.

So peak Musk? Well, according to the Bloomberg Billionaires Index he is currently worth $190bn, and still the richest person in the world. But he is down $80bn on the year to date, largely because of the fall in the price of Tesla shares, which have nearly halved since January. The Twitter purchase cost $44bn, and is worth nearly a quarter of his total wealth.

If he has destroyed value in the business, or simply paid too much for it, that would make a big dent in his finances. But there would still be a lot left, and ultimately what will really determine whether this will turn out to be the start of his financial decline will be what happens to Tesla. That is his biggest asset, accounting for $82bn of his total wealth. If it does not recover, we may indeed have seen peak Musk.

Peak Twitter? That is difficult. There is a temptation for Twitter users to see this in personal or indeed political terms. No one likes paying for things they previously got for free. There is the $8 blue tick stuff. There are the concerns of the United Nations about the company’s attitude to human rights. In terms of employment, we may well have seen peak Twitter, and co-founder Jack Dorsey has already acknowledged how the people laid off will feel.

The only chink of light there is that the skills of those former employees make them very attractive to other corporations. One person I know who was in a senior job there has already high-tailed it to Goldman Sachs.

But leave aside emotion, and let’s ask what will really determine Twitter’s fate. That will be whether it can make money. Can it keep advertisers on board? Evidently not. Some 90 per cent of the company’s revenues comes from advertising and Elon Musk has acknowledged that this has plunged. Maybe it will recover a bit, but it looks very much as though he will press on with the switch to a subscription model.

That is not a novel idea. Newspapers, including this one, have been heading down that path for several years. But it is a hard road and you have to tread along it with caution and care. It looks as though Twitter will be a smaller business in the future, even if the combination of cost-cutting and revenue-raising will make it a profitable one.

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And peak social media? Well, that is the biggest question of all. Facebook is in some trouble too, with declining revenues this year. Could the downturn in the fortunes of Twitter be an early warning of a wider social and economic shift away from social media more generally? The data, as so often, gives contradictory pictures. A Pew study showed that most people are spending more time on social media, with only 18- to 25-year-olds cutting their time on it since 2018. But this Generation Z is enormously important.

Anecdotally, you hear of many people switching away but for many professionals, social media is a vital selling tool. Until something else comes along, they have to keep at it. Maybe this means a plateau for social media, rather than a peak.

So the short answers to those questions above regarding a peak for Elon Musk, Twitter and social media?  Mine are: probably yes; almost certainly yes; and, I am afraid, a rather wishy-washy maybe.