Elon Musk and "X"

Let’s talk about Elon Musk and "X”.

Let’s pour one out for Twitter Bird.

The iconic branding that originated in 2006 is now dead and has now been replaced in 2023 with an X.

There are a lot of opinions swirling around the branding of Elon’s $44 Billion social media experiment. I’m here to tell you why this new pivot is brilliant.

Now, I’m not necessarily going to be arguing for or against the big “X” that took place of tweety, however to make the shift that Elon is attempting to do with “X” - a new brand really is required.

As you know, Twitter was despite the controversy a social media giant. In terms of interaction, twitter was the easiest and fastest way to interact with other people AND gain or read information. Once you followed an individual, their content was presented directly to you after they’d hit send. Users could post media content from any major platform.

Compared with Facebook, even though the two social media companies practically attempted to serve the same purpose, they went about it in very different ways. If you want to look at a company’s overall business strategy - one way to do this evaluation is to see who they’re partnering with. What business deals are they making? Deals are intended to make companies grow for stakeholders. Not all work out in the long run, but what’s essential is seeing what the intention was.

Facebook’s M&A strengths provided them a step up in the competitive space. Facebook had a lot of leverage due to broader functional capabilities, but also, they started the M&A game earlier on. On Facebooks M&A list, there are some pretty amazing deals that worked out well for them. Many acquisitions were from a technical side to improve their messaging, group chats, and building upon the programmed foundations that Facebook had laid out, but I’m going to list out some of the biggest moves Facebook made:

1. Instagram

2. WhatsApp

3. Oculus

These are MASSIVE companies that Facebook was able to Acquire and change the social media landscape. Shortly after Instagram took off, applications like Vine and Snapchat began to surge. Competitors began to fight in a new social media space, short videos instead messages. Fast-forward to today, the purchase and innovation in the Instagram space practically laid the groundwork for what we’re seeing (unfortunately) with TikTok. Regardless, that’s powerful for a business. WhatsApp has been a great supplemental chat system for Facebook’s portfolio from it’s wide appeal to users on a global stage, and it’s intuitive, user-friendly chat systems have been a great boon for Facebook.

Oculus from a technological feat standpoint is extremely innovative, and it seems to me that due to the heavy reliance of the hardware on capable software and developmental constraints due to the rather new nature of the hardware, Facebook is struggling with this piece a bit. The hardware sells, but it’s the software that makes those sales and keeps the hardware alive. Meta put all it’s chips into the Oculus spot recently with their Meta world…thing. We’ll see how it pans out. The software just may not be the correct one for the innovative hardware that Palmer had created.

This leads me now to Twitter.

Twitter simply did not innovate past their original application, which limited their ability to grow past the enhancement of their original functionalities. If you read through and compare Twitter’s M&A to Facebook’s - you really cannot see anything outside of improving the application. These are still important, but to drive value, at a certain point, a company needs to grow through innovative M&A.

Twitter’s valuation simply relied on clicks, follows, etc. It’s successful in the Youtube space, but even when brokering the purchase deal with Elon, the valuation math is kind of voodoo. Ultimately, Twitter’s attempted profitability game became the concept of marketing exclusively. Their ability to market to individuals could generate a certain amount of leads, which in turn could be determined to bring in a certain amount of revenue per view. The average spend per view or click (ideally, the Google model) was the idea. Ultimately, we all came to realize that Twitter did have influence, but it’s true value was not nearly as much as what Elon paid for it.

Social Media is going through a reconstructive phase. I think we all feel this and know it. When I left Facebook a while back, I recall most of my inbox being filled with “Farmville” requests from older friends and family. The user base moved on to Instagram, Snapchat, etc. and in the lifespan of this technology the younger user bases continue to move to the more innovative, arguably more addictive, less attention-requiring application. Not to mention, Social Media has become a target from a political standpoint as well. We’re still trying to determine where the line is drawn for a company to act as a publisher or an editor of content from users is still a hot debate today. At this point in time, Social Media has become an understood necessity, a tool for communication, but it is no longer the shiny object that it was in the early 2010s.

So with a declining or less interested population, political targets on their back, and competition truly only being between two major companies, Facebook and Twitter - how does one grow out of a $44B hole?

Elon’s done some work in this space with attempts to create a subscription for the blue check - that’s all fine and dandy, but it’ll take a LONG time for him to claw back the purchase price. Companies have pulled out too, which makes it pretty difficult for Elon to feel confident that Twitter alone can create value.

Elon needed to breakout of the position he found himself in.

This now leads me to “X”.

Ever heard of WeChat? Some of you may have.

This is Tencent’s $17.4B p/annum behemoth. On initial glance, it sounds like a simple chat application. What you realize when you start talking with the individuals that use it is that it is truly an all-encompassing application. It’s a one stop shop for nearly all of one’s application needs. WeChat had 3.5 Million programs and a total of 1.26 Billion users in 2022 - it’s a big deal.

Here are some examples of functions that WeChat serves through it’s “super app” conglomerate:

1. On the communications side of the application that can do video conferencing, text messaging, and photo and video sharing.

2. China’s Uber - DiDi - a taxi service and food delivery

3. Financial applications such as Alipay (Alibaba’s eCommerce app) that allows financial exchange, banking, etc.

4. Social Commerce Apps that allow purchasing and marketing of items.

5. Video Games- Phone games are a huge market already, but WeChat has their own that many people enjoy.

These are SUPER high-level, 30,000 foot explanations of what WeChat is able to do from a functionality standpoint. It’s a massive amalgamation of practically every app that you use today, organized on your phone in your little folders.

Elon is attempting to create THAT - and through X, the power of acquisitions is now the game.

Elon is breaking OUT of the social media bind that he was in, and realized that if he couldn’t compete and profitably win in this space, he was going to create a new space to compete.

Who is Elon going to acquire to start developing his American “Super App”? There will certainly be some legal ramifications and scrutiny behind it - but if Elon and X play their strategy cards right, this may become the new competitive landscape for social media applications.

-Sean Zottnick

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