Another year, another wealthy executive trying to take over Twitter.
This time is different, of course, because the rich suitor is Elon Musk, the erratic tech superstar who has the world's largest fortune and legions of fans and foes.
But Musk's effort to buy Twitter and "unlock" its potential makes him the latest in a long line of people who have kicked the company's tires since its 2006 launch, stirring up fresh excitement and speculation, only to walk away empty-handed.
"It feels like Twitter has been up for sale for a while. It's just nobody wanted to go forward because of the challenges," says Bloomberg Intelligence technology analyst Mandeep Singh.
Facebook founder Mark Zuckerberg reportedly tried to buy Twitter twice in its early years. Google, Apple, Disney and Salesforce reportedly considered bids back in 2016 but walked away. (Disney's then-CEO, Bob Iger, later said in reference to the platform, "The nastiness is extraordinary").
In early 2020, the hedge fund Elliott Management took a stake in Twitter and pushed to replace then-CEO Jack Dorsey, blaming his lack of focus for the company's sluggish growth and low share price.
Now, it's Musk's turn. The Tesla CEO last week launched a hostile takeover bid that has sent the company's board and management into crisis mode. With Musk's advance getting more serious by the day, Twitter will be forced to confront its long-standing problems like never before.
Used by politicians and journalists, but failing to break through more widely
Since Twitter went public in 2013, it has reported an annual profit only twice, in 2018 and 2019.
Analysts say this reflects Twitter's fundamental business struggle: getting people to use its service and getting advertisers to spend their money there.
Facebook and Google have grabbed the lion's share of online ad dollars by letting brands target people based on their interests and what they're searching for. Twitter, on the other hand, hasn't been able to convince many advertisers that it's worth inserting themselves into the site's fast-moving and often acidic reaction to events of the day.
Twitter dominates the political discourse and shapes the news, thanks to its hold among politicians, world leaders, celebrities and journalists. But its popularity is limited. Around 80% of U.S. adults don't use Twitter. Globally, it does not rank among the top 10 social networks by monthly users. (Facebook and YouTube are the most popular platforms.)
Twitter has 217 million monthly active users — a fraction of the nearly 3 billion who use Facebook monthly and smaller even than Pinterest, at 431 million.
It also has failed to grab users' attention and keep it for long periods of time. Whereas the average TikTok user spends 48 minutes on the short-video app and Facebook users spend 33 minutes on the site, Twitter users spend about 10 minutes a day on the platform, according to recent estimates by Angelo Zino, an analyst at CFRA Research.
"The engagement levels aren't there," Zino says. "If they're not in the eyes and the ears of the user out there, clearly advertisers aren't going to put as much money into that platform as they potentially could."
Last year, Twitter brought in $4.5 billion in advertising revenue, compared with $115 billion at Meta, the parent organization of Facebook and Instagram, and $28.8 billion at YouTube.
While Twitter has succeeded in attracting big brands around major news moments, it hasn't lured the smaller advertisers that make up the backbone of Facebook's ad business, says Singh of Bloomberg Intelligence.
"[Facebook has] the breadth of advertisers, whereas Twitter is very concentrated among large brands. And so that's why Twitter does well when you have got large events like the Olympics or an election" but struggles at other times, he says.
And while other social networks share similar problems, Twitter's long-running battle to curb harassment, abuse and spam — what Disney's Iger called the "nastiness" — may also be weighing on its growth prospects, some critics say.
"I know a lot of people who say, 'I use Twitter because I need to for my job or to promote the work that I do, but I get on and I get off as soon as I can,' " says Ellen Pao, the former CEO of Reddit and a tech investor.
Can audio chats and subscriptions help Twitter break out of its niche?
There is fresh urgency to address these issues. After Elliott Management started agitating for change two years ago, Twitter reached an agreement with the hedge fund that included aggressive growth targets. By the end of 2023, it's aiming to reach 315 million daily active users — up from 192 million in 2020 — and to at least double 2020's revenue to $7.5 billion.
To reach those goals, Twitter is rolling out product updates, from live audio chats to subscription services for power users to the long-requested edit button.
This accelerated pace is a big change for the company, which famously spent years before deciding to double the length of a tweet.
But despite all this work, Twitter is lagging. It has added users but not at a pace to reach its 315 million target by next year. And like other businesses that depend on digital ads, its revenue has been crimped by Apple's recent privacy changes, which make it harder to target smartphone owners with ads.
That has left some observers questioning whether Twitter can ever be successful as an advertising-dependent company.
"There's a lot more to this than just improving the product," says Zino, the CFRA analyst. Twitter "is just a niche offering" that may never reach the scale of other social media companies, he says.
While Musk says his interest in Twitter is not about making money, he has floated the idea of leaning more heavily into subscriptions, including getting rid of ads for paying users.
A new buzzword: "decentralized"
Others say more sweeping changes are necessary. Dorsey, Twitter's former CEO, has advocated for a "decentralized" Twitter. The idea is, essentially, to make Twitter more like email: a communications service that other developers and companies can build products to access. Think Google's Gmail and Microsoft Outlook.
When Dorsey stepped down in November, he handed the reins to then-Chief Technology Officer Parag Agrawal, who is also in favor of decentralizing Twitter. The company is backing a project called Bluesky that's working toward that goal.
This week, analyst Ben Thompson argued that Twitter should be split in two. One company would run its core service. A separate one would build apps and advertising. The core service provider could also let other companies build their own Twitter apps, as was common in the company's early days. Thompson says this could take pressure off Twitter over the rules it sets about what people can post and could shift its business model away from depending on advertising.
All eyes are now on Twitter's board
But Musk's entry into the picture has thrown everything about Twitter's future into doubt.
"It's a distraction from the work," Pao, the former Reddit CEO, says. "A distraction from doing the work of running the company and building a product and trying to deal with all of the hate and harassment that people experience using the product."
In his first months as Twitter CEO, Agrawal, who is relatively unknown outside the company, has been juggling pressure to meet the goals set by Elliott Management and a newborn at home.
Now, he and the rest of Twitter's leadership must come up with a plan to respond to the company's newest threat — someone who also happens to be one of the platform's most influential users.
The board's decision to adopt a so-called poison pill, which would make it more difficult and expensive for Musk to try to buy more of the company, suggests it is unlikely to accept the billionaire's offer of $54.20 a share, at least in its current form.
But the board will have to explain why, given that Twitter's shares closed on Friday at $48.93.
"As a board member, you can't deny that there is an offer that is much higher than where the stock is currently trading," says Bloomberg's Singh.
If Twitter rejects Musk's offer, he says, it will have to give "a very good reason and really show the shareholders your plan in terms of how you think the company will be better off on a stand-alone basis, which none of the prior CEOs have been able to do."
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