Elon Musk just bought Twitter.
According to various reputed media outlets like the BBC, Elon Musk took control of Twitter on October 28, 2022, for a total of $44 billion. The world’s richest man (as of writing this article) and CEO of both Tesla and SpaceX had been teasing the deal for a while now. He finally got what he wanted after months of back and forth with Twitter.
Elon Musk’s takeover of Twitter has had several consequences. It also offers a lot of lessons for upcoming entrepreneurs.
Here are four things young and upcoming entrepreneurs and startups can learn from Elon Musk’s takeover of Twitter:
1. Social Media Platforms Can’t Make Money without Ads.
Social media platforms like Twitter and Facebook are free to use. As a result of that, they have to run ads to manage costs and run their business.
The idea behind social media is that users will provide their personal information to these platforms in exchange for being able to connect with others who share their interests. The problem is that this information isn’t valuable on its own. It only becomes valuable when it’s used by advertisers to target consumers with relevant ads.
Thus, if a social media platform wants to make money, it has two options. It either has to charge its users money for using the platform or make money off of ads shown on the platform.
Twitter was free to use, but it failed to generate more ad revenue due to various societal pressures. For them to run ads without incurring financial losses, they needed to retain old clients or at least find ones that could match their standards and generate the same amount of revenue.
A strategic B2B account planning process is vital in this regard. It requires the business to ensure strategic account management, which, in turn, means retaining key accounts to maximize revenue. Such an extensive account planning process also helps with various financial decision-making processes.
If only Twitter had ensured such a strategized approach, they wouldn’t have had to suffer financially because of losing ad revenue.
2. Not All Businesses Can Afford to Pay High Salaries to Their Employees.
There are many reasons why not all businesses can afford to pay high salaries to their employees.
First, the cost of living in different areas varies greatly. This means that a business located in an area where the cost of living is higher, such as New York City, will have difficulty affording salaries that are competitive with other businesses in their industry.
Second, not all businesses have the same profit margins. Some businesses may be able to afford higher salaries than others because they can charge higher prices for their goods or services.
Third, some industries require low turnover rates and, therefore, cannot afford high salaries because they would lose too many employees who could not find jobs elsewhere.
Despite being a tech giant, Elon Musk still had to lay off many of Twitter’s highly-paid employees since the business wasn’t performing well. According to Payscale, average salaries at Twitter range from $75,536 to $173,659 a year. Not having to pay some of these high salaries meant Elon could save a lot of money on employee costs.
For startups, it’s even more difficult to pay high salaries. After all, even with funding, there’s no surety that you’ll be continuously making profits. Thus, one slip-up can force you to let go of your highly-skilled and highly-paid employees.
3. You’ll Face Backlash from the Public If You Layoff Your Employees.
Layoffs are not an easy decision to make. It can be a tough choice, but it’s often necessary for the long-term health of a company. The public will react negatively to your decision if you lay off employees at all. The backlash could be even worse if you lay off employees without finding any fault with their work or work ethic.
For Elon and his new empire at Twitter, the backlash came in the form of lawsuits and threats of ad boycotts. According to an NPR news report, Free Press CEO Jessica González was quoted saying, “ Twitter was already a hellscape before Musk took over. His actions in the past week will only make it worse.”
The report further expands on how employees are preparing to file lawsuits against Elon and the overall backlash he’s receiving from the general public.
You can’t expect to mass fire your employees and not receive any backlash. Thus, before you hire or start paying your employees salaries you can’t afford, think things through.
4. It’s Difficult to Survive in the Tech Industry.
The tech industry is notoriously competitive. It’s hard to survive in this field because the competition is fierce, and many people want the same job as you. You need to be able to prove that you’re capable of doing what they ask of you while also showing them that you can grow and improve in your field.
Any sign of failure means you’re seen as vulnerable to others. That’s when many might try to take over your business, just like Elon Musk did when he realized Twitter was struggling financially.
Elon isn’t leaving Twitter any time soon. As you follow him on his new journey, you’ll discover more things you can learn from this takeover as a young and upcoming entrepreneur.