Elon Musk Elon Musk. Photo: Photo: Bret Hartman / TED. Twitter logo, public domain

All the sound and fury of Elon Musk’s takeover of Twitter hides a real financial crisis for the big tech companies, argues Kieran Crowe

To use a very internet slang phrase, there could barely be anything more ‘meta’ than the flurry of discussion over Elon Musk’s Twitter takeover becoming exactly the sort of incoherent bickering mess that Twitter itself so often generates. Of course, this was always the plan, ever since Musk first started whipping up interest in it back in April. He must be thrilled at the level of vacuous, over-excited reaction he’s provoked, which has mostly been inane even by the standards of a common Twitter row.

Like any Twitter row, a sensible person’s good instincts will normally be to steer well clear of the torrents of nonsense spewing forth from it. Even so, however much it pains us, it probably is worth looking at this terrible mess, not least because if you ignore irrelevant cultural aspects and focus on the context of the deal in both technological and economic terms, it probably does tell us something about what’s happening to the internet and the tech sector.

Musk’s official narrative for buying Twitter has been overtly couched in terms of the culture war, specifically that he prevents the excessively woke establishment from denying the free-speech rights of the right-wing little guy. This is obvious bait for liberal journalists and commentators, as well as catnip to libertarian commentators. They may be unrepresentative of ordinary people, but these pundits make up an utterly disproportionate constituency of the platform’s actual users, and they would have very little to do otherwise, so row about it they must.

The tone and rhythm of these arguments has become wearingly familiar, with members of each camp rushing to put out their own talking points as much as possible and in as overwhelming a way as possible. The style of debate is one that Twitter itself has done much to shape in the past decade and a half. The purpose is not to communicate with other people in any normal definition of that word, but instead to flood the space of discussion with as many talking points of your own side as is humanly possible. Quantity, not quality, is what matters. It is therefore not terribly important to those involved if their arguments are particularly strong or valid, and almost nothing said is ever informative.

Behind tedious debates about whether or not cancel culture exists, there is the much more serious business of Twitter’s finances. Musk himself has tweeted that he has somehow managed to spend forty-three billion dollars on a business that, he claims, loses a million dollars a day. Even if we take Musk’s figures with a grain of salt, which is always wise, the numbers are staggering. How is one of the internet’s – and therefore the world’s – most recognisable brands in such a financial hole? And who, in their right mind, commits dozens of billions of dollars to obtain such a doomed business?

Financial black hole

As is well publicised, Musk’s immediate response to the total absence of revenue included yet more culture war. This took the form of telling the site’s large contingent of media-land users that they would now have to pay for their beloved Blue Ticks of authentication. This is very unlikely to generate anything like the necessary additional income and is probably just another provocation. His more traditional response is to lay off around half of Twitter’s 4,000 employees. Drastic stuff, and the stories about the way blameless staff are being kicked out is horrific. However, even if it’s followed through, this only raises the question of how any business could be overstaffed to the point where it’s making such enormous losses. The probable answer to that is that there is no optimal level of staffing that would make Twitter succeed in any traditional capitalist sense: Twitter does not, and never did, make any money.

Like most of the so-called tech sector, Twitter has been living off credit for essentially its entire existence. Elon Musk’s buyout is audacious and intentionally chaotic, but it is only the latest injection of investor cash into the platform in a long chain of such injections that it has been dependent upon from day one. Twitter does, in common with other social media, take money for advertising, but nowhere near enough money. Up to this point, data analytics have shown that marketing on Twitter does not work and it is essentially pointless.

Twitter may not be an advertiser, but it is a literal hype machine, and big capitalist investors have been persuaded to shovel money into it on the grounds that it may be useful on that basis. The Twitter addictions of people like Elon Musk and Donald Trump probably are accurate reflections of their shallow, infantile personalities, but there is a certain method in the madness. Their gobby pronouncements do influence media narratives, and even the stock market, and it is this capacity to distort the public conversation – willingly aided by legions of equally addicted self-righteous journalists – in which capitalists have been willing to invest.

In many ways, Twitter fits into Musk’s business portfolio perfectly, and not just because he is such a model of a vacuous Twitter-based celebrity. Musk’s businesses are all over-hyped, over-sold and unprofitable. His flagship brand, Tesla Motors, has yet to sell one of its cars for a profit: the company keeps its head above water almost exclusively by selling government eco-credits on to manufacturers of petrol cars. As an engineer, Musk is a farce. He frequently lies in interviews about having founded Tesla and Space X when he bought them in high-finance deals very similar to Twitter. Most of his big ideas are pure spectacle: from self-driving cars that will never be road legal in any country, through a phantom Hyperloop transport system that was announced purely to prevent California from investing in public transport, to an ‘android’ that was literally a man dancing around in an unconvincing robot suit. None of these things are solutions to any actual problem, they are all just informational noise. This is something else that is in common with the average daily content of Twitter.

Social-media crash

All that being said, while there is more continuity than change in the turmoil at Twitter, there is probably also the beginnings of a very genuine decline. As noted above, Musk won’t be able to sack his way to profitability. His ideas for new revenue streams are hare-brained, and what little revenue comes from advertising is not only inadequate, but certain to reduce. Web advertising is dropping in value precipitously, and this is having a catastrophic impact on the prevailing powers of the internet.

Although it’s garnered less news than Twitter, their longstanding rivals at Facebook are also getting hit hard, and are close to announcing a shock wave of big redundancies. Facebook, unlike Twitter, was making serious cash from ads, but the global recession has severely limited the amount vendors are willing or able to pay for advertising (which was very over valued in any case). Less drastic, but still significant cutbacks have also been announced at Google. The revelation that these giants of cyberspace have feet of clay might have been predictable to some, but not the giants themselves: Facebook has been spending the past two years ploughing fifteen billion dollars into its widely mocked ‘metaverse’ – a rehash of the hackneyed old premise of virtual reality – that attracts pathetically few users. This is a folly no less wasteful and ridiculous than Musk buying Twitter.

What we are likely seeing is the effective end of the era that was known as Web 2.0, the era of social media. Web 2.0 was not something that anyone planned: a small number of computer programmers accidentally came up with ways to utilise internet-era communications more effectively, albeit with only the haziest notions about how to make money out of them, and their tiny start-ups became the tech giants pretty much overnight. Believing the hype about their own supposed genius, these people convinced themselves that they would get to write the next chapter of this story, too. They began to speak of a Web 3.0, which would finally solve the problems of making stable capitalist profits online by integrating finance-orientated concepts such as cryptocurrency and non-fungible tokens into their platforms, securing their future forever.

But that’s not what’s happening. Instead, a reality that the sector thought it had transcended – and could even be an alternative to – has returned, and it is not minded to be kind to the tech bros. One of the things none of that set – Musk, Dorsey, Zuckerberg and so on – appreciate is that their businesses grew when there were a lot of venture capitalists willing to make big investments, very cheap electronics because of globalisation, very cheap credit as a result of the post-2008 quantitative-easing measurers and very cheap energy as a result of Bush invading Iraq and denying climate change. Now, credit is expensive, electronics are expensive, energy is expensive and the public simply have less spending money. And none of the tech bros are used to running businesses in any level of an economic headwind.

The end of Web 2.0 is almost certainly going to be a long overdue period of contraction, after a period of uncontrolled growth. To put it another way, not only is the internet not infinite, but it is also going to start shrinking. The increasingly silly lurches of the people at the top of the system are basically acts of desperation: putting money into frivolous nonsense worked for them before, and they fail to comprehend why it shouldn’t keep working now. This is how we should see the Twitter takeover: a Quixotic bid to keep the party going by members of an elite class whose dominance has likely peaked.

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