Sample Undergraduate 2:1 Business Case Study

Elon Musk and the Controversial Acquisition of X (Formerly Known as Twitter)

Introduction

The controversial acquisition of Twitter was an extremely complex and disorderly process that offered multiple hurdles for Musk to overcome during several months in 2022. In January of that year, Musk behind the scenes, had been quietly investing money into Twitter’s stock (Siddiqui, 2024). By April, Musk has been able to acquire a 9.2% stake in the company, making him the largest shareholder of the platform. Rather than becoming a fully-fledged member of the board, he then decided to strike a deal to buy the company outright, stating back in 2022, that Twitter is “the platform for free speech around the world” but cannot achieve this “societal imperative” in its current form and “needs to be transformed as a private company” (Milmo, 2022, n.p). This short business case example delves into the takeover of Twitter by Elon Musk, and the controversy surrounding shareholders and stakeholders involved.

Reaction to the Musk Twitter Acquisition and the Rebranding of Twitter to X

Elon Musk in July 2023 decided to totally rebrand Twitter into the brand it now operates under, X. In a bold move, he made wholesale changes, moving away from Twitter, retiring the established logo and company colours, as well as changing ‘Tweets’ to ‘posts’. It is now unrecognisable from the old established company, and this has resulted in a significant loss of loyal Twitter users, with reports of losing more than a fifth of users in the US (Hern, 2024), and Mueller (2024) noting many people did not understand why Twitter was rebranded. Twitter’s product experience was so distinctive that its brand name came to be identified with a behaviour, highlighting the strong emotional attachment to the brand. Daley and Moloney (2004) argue that a well-planned communication and reassurance to stakeholders is essential to mitigating resentment and confusion when changing a brand name, something which Musk failed to do.

Many of the employees and former employees of Twitter raised concerns about the new corporate culture installed by Elon Musk, as well as being critics of his leadership style, which can be portrayed as unpredictable and impulsive. There were many resignments and resignations that followed this in key areas of the business, which would have inevitably impacted negatively on morale within the workforce. Joseph et al. (2021) identified that a rebranding that involves changing the company’s vision needs internal buy-in from the employees for them to get a sense of belonging. Therefore, failure by Musk to address the concerns raised by staff had adverse consequences, in this regard.

Users of Twitter also became very divided in their overall reaction. On one hand, users have praised Musk for promoting a ‘free speech’ environment, which was less censored than other platforms. On the other hand, users feared that this was an easy way to promote hate speech, harassment and the spread of misinformation, as can be seen with Suciu (2023) mentioning X being the social media platform that is the biggest source of fake news and urging Elon Musk to make greater efforts to tackle this issue. Failure to do so could lead to catastrophic consequences for wider audiences. An example in the UK relates to the violent unrest in August 2024, where Elon Musk added fuel to the fire stating, ‘a civil war is inevitable,’ in which the UK Prime Minister, Keir Starmer, quickly objected this viewpoint and gave a heated exchange of words in return. Collange and Bonache (2015) explain that rebranding is resisted by consumers when they fear a change to the formula coinciding with the brand change. This helps to explain why those who feared the propagation of hate speech and harassment on X fled the site after Elon’s acquisition and rebranding of Twitter.

Financial impact of the Acquistion and Change to X

Investors and advertisers reacted extremely cautiously to the acquisition, as many big brands such as Disney, Apple and Sony pulled their advertising and association with Twitter (now X), in response to Musk’s comments and conspiracy theories he has promoted. This potential advertising revenue was the primary source of their income before the acquisition. Kantar’s findings have revealed that 26% of marketers have reported plans to reduce ad spending on X in 2025, which is the biggest recorded pullback from any major global ad platform. The trust from marketers have reached a low under Musk’s leadership, from 22% in 2022 to 12% in 2024 (Kantar, 2024). These figures are indicating a huge financial loss that is still being felt under the new acquisition, and this changeover impact could prove even more turbulent in further projected years for X. The concept of brand safety helps to explain why these brands have pulled their advertisement as the negative spillover effects of brand safety violations on social media, such as X, impact users’ emotions and perceptions towards the brands. Lee et al. (2021, p.354) found that “even a brand’s inadvertent association with offensive content can induce consumers to believe that the brand implicitly approved or overlooked its ad placement”.

However, X has attempted to diversify revenue streams with X premium, for example, which is a paid subscription. X premium itself expanded on, and was a rebrand of Twitter Blue. Subscriptions are one way that businesses, especially online ones, diversify their revenue strategies via user payment to reduce business risk (Vara-Miguel, et al. 2023). Musk has used this strategy to try and offset revenue loss from advertisers pulling their advertisement from X. Nevertheless, Koetsier (2022) suggested that the company would need 64 million subscribers to recoup losses, which is a difficult feat to achieve.

Most recently, the platform has been banned in Brazil after failing to meet a deadline set by a Supreme Court Judge in order to name a legal representative in the country (Santos, 2024). This has resulted in an immediate suspension of the platform within Brazil until it complies with all outstanding court orders and paying off existing fines. Again, this case will cause significant damage to the reputation of the company and may lead to affiliates wanting to distance themselves from being caught up in the controversy and invest into safer social media platforms.

Conclusion

Overall, it appears that the takeover has produced poor results, both financially and in terms of damaging X’s brand reputation. The long-term impacts of Musk’s ownership of the platform are still yet to be seen in some respects, however it has certainly altered the overall social media landscape. This sparks further debates on whether a controversial leader should have control over such a powerful platform. Whilst there have been attempts to offset financial losses, these have not produced the desired results. As discussed in the work, buy-in from all key stakeholders is recommended if acquisitions and re-brandings are to be successful.

References

Collange, V., and Bonache, A. (2015) Overcoming resistance to product rebranding, Journal of Product & Brand Management, 24(6), pp: 621-632

Daly, A., and Moloney, D. (2004) Managing Corporate Rebranding. Irish Marketing Review, 17(1/2), pp: 30-36.

Hern, A. (2024) Twitter usage in US ‘fallen by a fifth’ since Elon Musk’s takeover, The Guardian. Available at: https://www.theguardian.com/technology/2024/mar/26/twitter-usage-in-us-fallen-by-a-fifth-since-elon-musks-takeover#:~:text=Use%20of%20Twitter%20in%20the,after%20Musk%20completed%20his%20takeover. (Accessed: 10 September 2024).

Joseph, A., Gupta, S., and Wang, Y. (2021) Corporate rebranding : an internal perspective. Journal of Business Research, 130, pp: 709-723

Kantar (2024) More marketers to pull back on x (Twitter) AD spend than ever before (no date) Kantar. Shape your brand future. Available at: https://www.kantar.com/company-news/more-marketers-to-pull-back-on-x-ad-spend-than-ever-before#:~:text=Kantar’s%20findings%20reveal%20that%20a,2022%20to%2012%25%20in%202024. (Accessed: 10 September 2024).

Koetsier, J. (2022) Twitter Would Need 64 Million Subscribers To Replace Existing Revenue And Cover Losses, Forbes. Available at: https://www.forbes.com/sites/johnkoetsier/2022/11/14/twitter-would-need-64-million-subscribers-to-replace-existing-revenue-and-cover-existing-losses/ (Accessed: 11 September 2024).

Lee, C., Kim, J., and Lim, J. S. (2021). Spillover Effects of Brand Safety Violations in Social Media. Journal of Current Issues & Research in Advertising, 42(4), pp: 354–371.

Milmo, D. (2022) How ‘free speech absolutist’ elon musk would transform Twitter, The Guardian. Available at: https://www.theguardian.com/technology/2022/apr/14/how-free-speech-absolutist-elon-musk-would-transform-twitter (Accessed: 10 September 2024).

Mueller, S. (2024) Why is X still called Twitter? Available at: https://edition.cnn.com/2024/02/23/tech/twitter-x-rebrand-cec/index.html(Accessed: 11 September 2024).

Santos, S.F. (2024) Musk’s X suspended in Brazil after disinformation row, BBC News. Available at: https://www.bbc.co.uk/news/articles/c5y3rnl5qv3o (Accessed: 09 September 2024).

Siddiqui, F. (2024) Musk’s twitter investors have lost billions in value,. Available at: https://www.washingtonpost.com/technology/2024/09/01/musk-twitter-investors-underwater/ (Accessed: 08 September 2024).

Suciu, P. (2023) X is the biggest source of fake news and disinformation, Eu warns, Forbes. Available at: https://www.forbes.com/sites/petersuciu/2023/09/26/x-is-the-biggest-source-of-fake-news-and-disinformation-eu-warns/ (Accessed: 10 September 2024).

Vara-Miguel, A., Sádaba, C., Negredo, S., and Sánchez-Blanco, C. (2023). Revenue diversification strategies of online news organisations: subscriptions and memberships. Profesional de la información, v. 32, n. 2, e320205