On Monday 25 April 2022 Elon Musk agreed to pay $44 billion for the social media company, Twitter.  The takeover will take Twitter from a Public Limited Company which is listed on the New York Stock Exchange to become a private company solely owned by Musk. This adds Twitter to the car manufacturer, Tesla, and the space exploration company, SpaceX to Musk’s business portfolio.

So why did Elon Musk buy Twitter?

Economic theory suggests he did it to increase profits or ‘profit maximize’ as the accepted aim of an entrepreneur in neo-classical theory. Twitter’s main source of revenue is through advertising on its social media site, but it has always struggled to be profitable. Since it was founded in 2006 (by Jack Dorsey, Noah Glass, Biz Stone, and Evan Williams) it has made many years of losses although the business did report a profit in March 2022 of $513m. There is the potential for Musk to develop advertising revenues further or even turn Twitter into a subscription service where users pay a fee to access the content. This has the potential to increase Twitter’s profitability.

But perhaps Elon Musk has bought Twitter to make a philosophical statement about free speech. When he announced his takeover bid on Monday he said, ‘Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated.’ He may feel that the exclusion of certain people and views from this social media site goes against the principle of free speech.

The other theory regarding Elon Musk’s acquisition of Twitter is for power and influence. The social media platform has a huge political influence. Some people wonder whether Donald Trump would have been elected in 2016 without his daily use of his Twitter account which had 89 million followers. Musk himself has 90 million followers and his tweets have created significant publicity with one example being when he asked his followers whether he should ‘sell 10 per cent of his shares in Tesla’. One of the key publicity benefits of Twitter is the way its tweets get amplified by the media which will give significant news coverage to a tweet made by a famous user. Elon Musk’s tweets certainly give Tesla and SpaceX plenty of publicity which can be viewed as free advertising.

There is a view that Elon Musk’s purchase of Twitter is an illustration of one of the problems of income inequality and inequity. Should the world’s richest man have the right to control the social media debate in such a powerful way? It can be argued that the effective use of Twitter has a strong influence over the democratic process it can decide the election of US presidents. What if Elon Musk decided to run for president of the United States?

Points for discussion with a class

1. In the context of different business objectives, where does Elon Musk’s decision to take over Twitter fit?
2. How might Elon Musk increase Twitter’s profits?
3. Do you think it is right for the world’s richest man to control a social media site that has so much political influence?
4. Are there any risks to Elon Musk of taking over Twitter?