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Free bird

Free bird

After seven months of dithering and legal jousting, Musk bought Twitter for $44 billion last Friday.

State-by-state:

  • Google’s YouTube revenue came up $400 million short of estimates.
  • Meta’s leadership refused to cave to investor demands on the metaverse. 
  • Apple faced criticism from Spotify over anti-competitive behaviour.
  • Microsoft insisted that it would not monopolise Call of Duty.
  • Amazon faced a sales slowdown despite the holiday season. 
  • Tencent shares rose after rumours – quickly denied – of a Naspers stake sale.

Affairs of state: Free bird

Elon Musk once said he wanted to unlock Twitter’s “extraordinary potential”. Whatever that means he wants to customise it first.

After seven months of dithering and legal jousting, Musk bought Twitter for $44 billion last Friday. Since then he has:

  • fired most of its top managers;
  • dissolved its board;
  • told software engineers from Tesla to review its products;
  • asked employees to work 12-hour shifts to change its
  • subscription and user verification systems;
  • hinted at plans to cut as many as 75 per cent of its staff;
  • announced plans to charge verified users $8 a month to keep their blue tick.

Twitter is not a Tech State. It’s not as big or influential or valuable as Meta, Microsoft, Apple or Amazon. But it has 238 million users and, as Musk says, can claim to function as a digital town square. He will now play the central role in deciding its future.

Here’s what he plans to do:

Go private. Musk’s decision to take Twitter private means it’s no longer beholden to a board and doesn’t have to make the same comprehensive financial disclosures as public companies. That arguably makes Musk more powerful than Meta’s Mark Zuckerberg, who’s under pressure from shareholders to downsize his workforce as his stock price slides.

Change the guard. Musk has fired most of the people who might challenge or resist him, chief among them the now ex-CEO Parag Agrawal. Shortly before Donald Trump’s 2021 suspension from Twitter, Agrawal told the MIT Technology Review his focus was less on free speech than on “how times have changed”. Two years on, Musk is trying to avoid paying severance to some Twitter execs by firing them “for cause”. Senior staff say they haven’t been told what to expect and fear for their jobs.

Make money. Despite saying he’s buying Twitter to “help humanity” rather than make more money, Musk has shown a clear interest in the financial health of the company. His plan to charge users $8 to remain verified with Twitter’s blue tick – down from an initial $20 – seems to have been finalised after a Twitter exchange with the author Stephen King. But the plan would earn a fraction of the $18.5 billion the platform owes, even assuming every blue-ticked account holder paid up.

Other items on Musk’s agenda include:

Defeating the “army of bots” Musk and his lawyers said could comprise up to 20 per cent of Twitter’s users. This looked at first like a pretext to wriggle out of the deal but is now another sign Musk is worried about financial performance. He’s previously asked how advertisers can know what they’re getting for their money if the platform is riddled with fake accounts.
Open-sourcing the content recommendation algorithm to prevent what Musk calls “behind-the-scenes manipulation” that privileges particular political views. Internal research has found Twitter amplifies right-wing content more than left.

Hellscape? Musk promised advertisers the platform wouldn’t become a “free-for-all hellscape, where anything can be said with no consequences”. Then he tweeted and deleted a baseless theory about the attack on Paul Pelosi, the husband of House Speaker Nancy.

Like Zuckerberg, Musk now has to grapple with balancing free and harmful speech, over-moderation and hateful content, revenue and erosion of democracy. He hasn’t proven he’s equipped to do so. He seems more interested in experimenting with Twitter as a business and a sandpit for libertarianism. As the newly styled “Chief Twit”, Musk’s influence is unprecedented in the history of the internet.


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Google: YouTube struggles

Alphabet stocks – down 36 per cent this year – continued falling after a disappointing Q3 earnings report. Most notably, YouTube’s revenue fell for the first time since its numbers have been separately reported, coming up $400 million short of estimates. Overall revenue came in at $57.27 billion. This drop is in line with the other tech states and the digital advertising market, which has been struck by low spending, rising rates, rising inflation and a looming recession. Still, Richard Bowman at Simply Wall Street says not to take the downturn too seriously. “Alphabet is primarily an advertising business, and ad spending is cyclical,” he said. His bigger question is whether revenues can continue growing at the same pace seen over the past decade. The answer: probably not. 


Meta: Despot Zuck

Meta’s shares tumbled a further 25 per cent last week after the company revealed that losses from Reality Labs, the division that is building the metaverse, would grow “significantly” in 2023. Zuckerberg’s metaverse commitment has wiped 74 per cent from Meta’s stock price in just over a year, but investors told the FT there is little outsiders can do to prevent him from using his control of Meta to plough ahead with the metaverse bet. “When people had callbacks with the company they got more disgusted, not less disgusted,” said Jim Tierney, chief investment officer for US growth at AllianceBernstein, a Meta shareholder. “Zuckerberg was tone-deaf to the investment community, doubling down on everything,” said David Older, head of equities at Carmignac. When asked what impact the shareholder unhappiness would have on its plans, Meta said: “We value the opinions of our investors and regularly engage with them to ensure we’re aware of their respective perspectives.” Translation: Zuckerberg will do as he likes. 


Apple: Spotify spat

Spotify has complained to the UK’s competition watchdog, saying Apple should be investigated for anti-competitive practices. Last week, Spotify chief executive Daniel Ek accused Apple of “choking competition” and making Spotify’s audiobook product worse. Spotify added audiobooks to its streaming service last month, but was forced to make multiple changes to the service to avoid paying Apple a 30 per cent fee. Ek said: “Apple has once again proven just how brazen it is willing to be with its App Store rules, constantly shifting the goalposts to disadvantage their competitors.” The Competition and Markets Authority (CMA) said: “Complaints that Apple is using its market position to set terms which are unfair or may restrict competition and choice – potentially causing customers to lose out when buying and using apps – warrant careful scrutiny.” Its investigation continues.


Microsoft: What monopoly?

“As long as there’s a PlayStation out there to ship to, our intent is that we continue to ship Call of Duty on PlayStation,” said Microsoft Gaming CEO Phil Spencer. This is important because of Microsoft’s controversial $68 billion acquisition of Activision Blizzard. It follows Sony’s claim in September that Microsoft was misleading regulators over its plan to keep Call of Duty on Playstation consoles. The CMA is investigating the acquisition – and Microsoft goes on trying to allay fears that it will create a harmful monopoly.


Amazon: Slowdown

Asian Tech Press, an “information outlet” with fewer than 5,000 Twitter followers, reported that Naspers, a South African holding company, was in talks with a CITIC-led consortium to sell its $70.5 billion stake in Tencent. CITIC is a state-owned investment company of the People’s Republic of China. Naspers quickly dismissed the claim, saying it was “speculative and untrue”, but that didn’t stop its shares rising by almost 11 per cent. This comes at a time of turbulence in Chinese markets, which collapsed on 24 October after Xi Jinping’s power grab. Chinese markets have since rebounded with the largest daily gains since May 2009, after speculation on social media that a “reopening committee” was being formed. This was denied by the Chinese foreign ministry.


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Luke Gbedemah
@LukeGbedemah

Additional reporting by Sebastian Hervas-Jones

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