Thought it would be worth looking at the proposed "freemium" model from Musk and co.

Originally wrote this in my newsletter here.

Source: Twitter

Tool: Microsoft Excel

Thanks to taking it private, he doesn't have to worry too much about profits. So he is probably going to reduce the profit margin by a bit. Also, it seems he is interested in cutting some fat from operating costs, so maybe that will help out too. So long as we see fewer ads, I'm all for it.

He wants to increase ads though, you only get half the ads if you pay $8. He also said he wants to make ads feel like content. Oy

I haven't heard about him wanting to increase ads. And I don't think I like the idea of ads feeling like content, unless that means the ads will be taking a less predatory form, and therefore feel more genuine, but that's certainly not going to be the case.

He made a twitter post a few days ago saying he wants to increase ads, but he wants them to feel fun or relevant like content. Whatever that means.

Must have missed that Tweet. I'm not following this religiously.

I want to eat cake and cheesesteaks all day and also lose weight and have good cholesterol numbers.

Me neither, but I use Twitter and follow him, was kinda hard to miss.

>Thanks to taking it private, he doesn't have to worry too much about profits

His investors probably feel otherwise

I don't follow him and rarely use Twitter.

I thought he took it private, so he owns it in his own name. So he would not have a fiduciary duty to extract maximum profits like he would have if it were public.

Well there you have it

Damn. Crazy to look at the numbers laid out like this. Charging for a check mark for verified users is just a drop in the bucket looking at the big picture. A subscription-based system may not be the best way to profitability... but what other options are there?

He took it private, but he did so with the help of others. It's not just his money on the table.

and twitter ads were already the ugly children of fb/insta- and sem-ads. advertisers are already fleeing twitter and theyll probably not be coming back. unless they are breitbart or smth :)

Freedom of speech as a service

He is not the sole investor, I'm not so sure if they won't be anxious about not turning profit. Actually, I'm sure. They will be anxious, even more than before.

My understanding is there just arn't profits, twitter is operating at a loss. A problem he maybe making worse. I'm not sure how long he'd be willing to foot that sort of bill.

It looks like you are not considering ad revenue from un-paid non "verified" active users which would still presumably be the main income stream.

Wait until he hears about board members and that they can shitcan his ass if he does not outright own 51% of the company. I love business.

I'm assuming you are talking about darthshadow25 not Elon 😅

I think they need to recognize that the platform itself is not the value of the offering, it's all the people who participate/provide content. Because of this, there should be a minimal expectation of massive returns. Why should the people providing the value do the paying to support high returns for billionaires?

The platform only fails against the weight of unreasonable expectations for high margin returns from minimal value added. Private ownership should able to filter out these unreasonable expectations that primarily come from the rent-seeking investor class aka Wall St.

Operating cost cuts are fair game to increase this margin, but not at the expense of reducing the quality of participant submissions, which erodes the value of the platform if not protected.

Yeah 8 seems like kinda an arbitrary number, so I feel like they put thought into it. But then again, it’s Elon, so I wouldn’t doubt he didn’t have the foresight to even do a mental multiplication to see if the magnitudes line up (couple hundred thousand verified users * not even 10 dollars = a few tens of million dollars = like 0.0002% of what he spent on Twitter overall)

Your best bet is to lower your own expenses and rely on AD revenue. You start making people pay for the service and they’ll just leave to another competitor who makes they money off of data mining. All it will take is for Elon doing something super fucked up and enough celebrities to leave twitter to a new competitor that appeals to the younger generation and it’s done. He’s not making his 44 billion back anytime soon and definitely not be the time a competitor starts up that lures in user base.

I thought:

$8 was to be a 'verified'/blue check user; he had dropped from $20

Verified users were 'blue check' users, essentially content creators paying to be on the platform (as an authentic user, verified);

Why is the "Hypothetical new revenue" the same color as the AD revenue?

Was the point to show that even at Max subscriptions the main revenue is still ads?

The danger of a purely ad-based platform is that the entire incentive structure is based on volume of impressions/engagement which conflicts with aiming for credible content. If charging celebrities $8/m means they can afford to govern the platform better, maybe it’ll work.

You can say this about any social platform though.

Same thing for Facebook and it was able to print money for a decade

Who will pay 8$ per month for that shitshow? 😂 I dont even use it for free 😅

Facebook lets you connect to your family/friend group. Twitter is random people either quipping or yelling at each other. There's just less value there.

Dude, goddamn.

You're a visionary.

This is how you do it everyone!!

> he doesn't have to worry too much about profits

The interest on that $44B he borrowed would like a word with you.

I didn't realize he borrowed it. I thought it was his money.

The graph is kind of hard to read, it shows current revenue on the left and new revenue on the right, aka total new revenue would be current+new. Since new is <2bil and current is 5bil you are right, it would still be a significant uplift however.

Yup. And I saw another chart earlier that may show what's behind his thought process. For other large social media companies, the revenue-per-employee ratio is big, something like $1MM per employee, while for Twitter it's about half that, $500k per FTE.

Which is likely what's driving his desire to fire so many. If he can keep it limping along with a lower headcount, the revenue-per-employee goes up, and he can say he's just as smart as the people running other large social media platforms.

Yes. So much so that they tripped over the moral hazard of spending the windfall on the VR boondoggle.

And it's a lot of work filtering out the garbage, because algorithms foist whatever there business model wants upon you inspitenofnyour best efforts. Facebook has this problem too, however.

Oh you're probably right. Its incremental potential revenue

His co-investors will be the other board members, and presumably they agree with him or else they would not have joined the venture.

He has other investors who went along with him, but since they joined him, they presumably agree with what he's doing

I wouldn't use that shithole even if Twitter paid me $8/month to use it.

This is very well designed!

Paid creator content. Essentially the Onlyfans model just without the porn. Okay, less porn.

Step one is not profitability. It's cleaning up the platform.

I don't understand why people ignore the reasons Elon literally gives. (just kidding, I do understand - don't agree- people just want to hate anything he does...) There is, or Elon believes there is a massive bot problem. Verified accounts will be more prominent. No scammer is going to pay 8$ a month for each of his thousand bots so they get pushed down.

Now, am I a fan of pushing down actual people who don't want to pay? No. But can we please stop ignoring the legitimate parts of his reasoning?

I wouldn’t use it if they paid me $8/hr

THIS is a fantastic chart.

What’s the analysis of their ad revenue if three quarters of the users stop using the app?

Because the service is as valuable for the high profile users as it is for the business.

Cutting jobs and increasing prices while overpaying for Twitter and getting in debt... Is totally about profitability.

4% paying $8/mo doesn't even cover the interest payments on the leveraged buyout.

It's not 8$ to use Twitter - only for services which include verification. A scammer doesn't use or need those services.

How many celebrities do you think there are? A significant portion of the user base has to opt in for this to work. Granted there are businesses that have been successful in getting significant portions of its audience to opt in to payment for features over ads, but Twitter needs a really compelling value prop for people to do that

One thing this chat isn’t looking at?

Would Twitter still be collecting 90% of the advertising revenue, if 10% of the people were paying for their subscription. Or even better, would they still be collecting 100% of the revenue, with non-subscribing users just seeing 10% more advertising.

All the people participating would argue the platform is the value. So in business, Twitter provides utility value, in that the technology is capable of providing services to the customer, as well as network value, in that the number of customers participating in those services provide a unique value to the customers.

The customers provide neither of these values to the service.

Maybe his model is “more porn”

Need a bunch of ideas and see what sticks! New features and revenue ideas. Must find profitability and maintain it. Must increase & diversify revenue streams. 4% users, $8/m= $1B! Subscription tiers is confirming 'value in the "Blue Check" - via journalists, big business, celebs, politico's, etc.

Looking forward to seeing how they get all the bots and fake accounts to pony up.

There is absolutely no way in hell over 2% of users will pay any amount of money to be verified. Not a chance. The graph should have been in smaller increments.