Thread by @alex_valaitis

Rebranding from Twitter to X was a brilliant business move by @elonmusk

A lot of people think this is a mistake, but they couldn't be more wrong.

By the end of this thread, you will understand why 🧵 https://t.co/FDIMmNUoKKtwitter.com/i/web/status/1…

Let's begin by understanding Twitter's business model as a Social Media platform:

-Twitter drives new USERS to its site

-It convinces these users to have more SESSIONS by serving engaging content

-It then makes REVENUE by selling those eye balls to advertisers

Social media companies like Meta have grown to nearly a $1 trillion valuation with this same model.

Yet, Twitter was only acquired for $44 billion by Elon.

Why has Twitter not been able to drive as much revenue as Meta?

I believe this happened for 2 main reasons...

1) Twitter had a fundamental cap on the number of people it appealed to:

Aside from all the degenerate activity on this site, the reality is that Twitter is THE most highbrow social platform in the world.

It's where the world's elite go to engage in written & spoken debate.

2) Twitter also never did a good job of monetizing the ~300M users it did have.

That is because they never built out a proper ads platform.

(I've spent $100K+ on ads, and can confirm that Meta is miles ahead)

This is problematic when ads is 90% of your revenue...

So for the better part of a decade, Twitter's growth stagnated on: Users & Ad revenue.

This was reflected in their share price, which was actually HIGHER in 2013 than it was in 2023.

(During this same timeframe, other companies like Meta saw their stock 10x in value)

Once Elon completed the purchase of Twitter, he had 2 options to recoup his investment:

1) Stay a Social Media company & fix the user growth + ad platform problems

OR

2) Use the Twitter data + social graph to build a NEW company that could be even more valuable.

IMO, choosing path 1 was always going to be a losing battle.

Some of the best & brightest minds in Silicon Valley have failed to fix these problems over the past decade.

The reality is that NOTHING was working.

I believe Elon realized this and chose path 2...

Let's put ourselves in Elon's shoes for a minute.

IF you had to transform Twitter into a new company, what type of company could one day be worth $50M?

How about an AI research company?

How would you do this with Twitter?

-Create a new AI company with the best AI/ML researchers in the world (maybe call it @xai)

-Train an AI model on 17 years worth of text (Tweets)

-Cut off all 3rd parties from that training data

-Launch a ChatGPT competitor to 300M users

But a generative AI company is still thinking too small.

What else could the company become that would justify a $100 billion+ valuation...

How about a payments company?

How would you do this with Twitter?

-Get users to attach their Credit Card by aggressively pushing a paid subscription service (Blue)

-Leverage the social graph to automatically connect people

-BONUS: Have history of building one of the biggest payment companies of all time

But of course to pull this all off you would need A LOT of capital.

Sure, being the richest man in the world helps. But it's still not enough.

No...you need to raise $ from the public markets.

But how do you do this with a social media app who's stock stagnated for years?

Well the answer is simple:

You make people forget that the company was EVER a social media app called Twitter.

You strip the name/brand/color from everywhere as quickly as possible.

You need to memory hole that previous brand.

In its place, you begin to paint a new vision:

The Everything App.

Now THIS is a narrative you can sell to the public markets.

Especially when you are one of the greatest business men/visionaries of all time.

(Like the type that builds a trillion $ EV company)

Here's the kicker:

Because of your track record, you don't even need to drive tens of billions of $ in revenue.

You just need to show enough traction across AI/Payments/Social, to sell a narrative.

(This will be easier when interest rates inevitably fall)

And that my friends is why Elon is rebranding from Twitter to X in such a hurry.

Of course the armchair quarterbacks & media are going to hate on it (like they do with all his other companies).

They'll try to convince you he's an idiot & that he's making huge mistakes...

And who knows, maybe this time they'll finally be right.

But the reality is that there hasn't been a worse person to bet against in the history of business.

So I know who I've got my money on.

If you enjoyed this thread, please consider:

1. Following me @alex_valaitis

2. Subscribing to my newsletter

(Will do more deep dives like this one) 👇

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Btw, my goal is not to have an echo chamber here.

Like/Comment/RT in order to drive the convo.

I want their to be a record of where everyone stood, when X Corp IPO's in a few years: