These are important days for Elon Musk, with several pieces of news affecting both Twitter and Tesla.
However, while there is some good, or at least interesting, news coming from Tesla, there is some bad news coming from Twitter.
Elon Musk addresses Twitter’s problems, while Tesla celebrates
Elon Musk completed the purchase of Twitter a little less than four months ago, but management problems, and especially financial ones, seem far from resolved.
It is worth noting, however, that Tesla was also acquired by Musk, when it was still a small company, and it took years to make it profitable. Twitter has been in existence since 2006, but it has been loss-making for some time now. So although this time Musk bought a large company that was already established, it could still take time for it to become profitable again.
As The Verge reports, Musk continues to be forced to lay off employees, even after declaring some time ago that the job cuts were now done.
In fact, on 21 November last year, after reducing Twitter’s workforce by about two-thirds in a matter of weeks, he gathered the remaining Twitter employees at its San Francisco headquarters to tell them that the layoffs were over. Instead, he is continuing the layoffs.
The Verge claims Musk has made at least three more rounds of layoffs after promising to stop making them. But there is an important difference that The Verge seems to miss.
In fact, the layoff campaign prior to 21 November had been massive, with cuts of several thousand employees having a major impact on the company’s workforce.
In contrast, subsequent shifts have affected far fewer people, with minimal impact on the total workforce.
For example, the last of these additional rounds of layoffs affected only a few dozen employees in the sales and engineering departments last week, which is far fewer than the number of employees laid off in the first weeks of November.
So while it is true that Elon Musk lied when he promised a stop to layoffs, it is also true that the great workforce reduction campaign ended in November itself.
Not least because it is possible that the employees laid off after 21 November were replaced with new hires, with probably very little impact on the company’s overall workforce.
Ads on Twitter
The sale of ad space is the largest source of revenue for the company. At this time, it appears that Musk wants to focus the efforts of Twitter’s development team on trying to improve the system of collecting and publishing ads from advertisers, because he believes there is a problem of relevance.
In fact, the less an ad meets the interest of the user viewing it, the less market value it has.
If the ads that are shown on Twitter to different users have low relevance to their individual and specific interests, the market value of those ads is low, thus limiting the interest of advertisers and their willingness to pay a lot for them.
This also reduces revenue for the company, creating a problem.
Twitter before the Musk era had come to have two problems: too much spending and too little revenue.
The expense problem now seems to be under control, thanks largely to mass layoffs, but the revenue problem is still there.
Elon Musk’s idea is to change ad targeting so that it works like Google ads, based on the keywords that are searched.
Sorry for showing you so many irrelevant & annoying ads on Twitter!
We’re taking the (obvious) corrective action of tying ads to keywords & topics in tweets, like Google does with search.
This will improve contextual relevance dramatically.
— Elon Musk (@elonmusk) February 17, 2023
It is not clear how he wants to make it work technically, but it is important to remember that Musk started out as a software developer, so he is experienced enough in these matters to have a clear idea of how to go about it.
The problem is that he has only given the engineers a week to solve the problem.
The other problems
There are also other problems, although fewer than the serious ones caused by the revenue shortfall.
For example, it appears that the Supreme Court wants to hold Google and Twitter accountable regarding the 2017 Isis attack in Istanbul, that is, years before the Musk era. Google would be implicated because it owns YouTube.
The speculation circulating is that Twitter should bear some responsibility for indirectly supporting Isis in general, although the company may not have specific responsibility regarding the 2017 attack.
Other problems involve lies posted by users with a blue checkmark, or “verified” profiles.
The fact that one only needs to subscribe to Twitter Blue to receive it, if eligible, is causing a controversy to arise regarding the usefulness of this blue checkmark if it can be assigned simply to those who purchase it.
It is worth mentioning that profile verification does not, and cannot, cover the verification of even all content posted by verified profiles.
Elon Musk and Tesla’s good news, Twitter in the background
Tesla was born 20 years ago, and the following year Elon Musk bought a majority stake.
It took the company many years to grow enough to become profitable, and many today ignore how difficult it was.
In recent days, the first images of the Model 2 prototype, which is the new car the company is working on, have been released.
By now Tesla is producing and delivering thousands of cars every quarter, with production having become for all intents and purposes mass production.
It is also working on the new version of the self-driving software, which aims to further increase safety and optimize in particular the performance on long-distance stretches, such as highways.
What’s more, it is also returning to California, where it is expected to set up a new engineering center in the middle of Silicon Valley.
There is actually quite a lot of news concerning Tesla that has been released in recent days, revealing a remarkable vibrancy in the development of its business.
Tesla on the stock market
It is no coincidence that the share price on the stock market stopped falling more than a month ago, and is now back to the price levels of early November.
After hitting an all-time high in November 2021, above $410, Tesla’s stock price in the following twelve months had come to lose 75% of its value, only to rise again and settle momentarily around $200.
While the current value is still less than half of the all-time high, taking instead the pre-bubble value of around $60 that it had after recovering from the March 2020 financial market crash due to the onset of the pandemic, it can be argued that precisely because of the bubble it has more than doubled in value, even net of its bursting.
In other words, if we look at the performance over the long term, we find that the company does indeed appear to be healthy now, although in the short term there are still difficult times ahead.
Moreover, even during the darkest moment in 2022, when the price fell to just over $100, it still remained much higher than pre-bubble.
When compared then with the 2019 price of about $20, it is perfectly clear how well it is performing in the long run.