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Elon Musk took over a struggling business with Twitter and has quickly made it worse

Source image: https://www.cnbc.com/2022/11/09/elon-musk-took-over-a-struggling-twitter-and-has-quickly-made-it-worse.html

The Twitter profile page belonging to Elon Musk is seen on an Apple iPhone mobile phone.

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When Elon Musk said last week that Twitter has experienced a “massive drop in revenue” under his recent tutelage, he blamed the decline on “activist groups pressuring advertisers.”

There was some merit to his claim. A group of civil rights leaders had sent a letter to the CEOs of major companies, including Anheuser-Busch, Apple, Coca-Cola and Disney, urging them to relay their concerns about brand safety on the site to Musk. Later, the group would call for those businesses to halt ad spending on Twitter following what its leaders saw as a rise of racist posts and hate speech.

While Musk may be right to attribute some of the revenue drop to activist pressure, at least part of the responsibility falls on him. Twitter’s new owner, the world’s richest person, recently tweeted a conspiracy theory related to the attack on Paul Pelosi, husband of House Speaker Nancy Pelosi, and has made a series of crude and sophomoric jokes, some of which he’s quickly deleted.

Businesses don’t want to link their brands with that sort of behavior and content, said Rachel Tipograph, CEO of advertising technology firm MikMak.

“There’s concerns with advertisers around brand safety, and that’s really what this is all about,” Tipograph said. “Advertisers right now are not looking to be associated with the events that are currently happening at Twitter.”

Companies such as General Motors and Volkswagen have paused their spending on Twitter following Musk’s arrival, while advertising titan Interpublic Group recommended that its clients do the same. The boycott poses a significant problem for the social media service, which derives 90% of sales from advertising.

Advertisers back out of Twitter following Musk takeover as government looks into deal

Compared with larger rivals Facebook and Google, Twitter never managed to develop an online ad business that matched the scale of its influence in popular culture and society at large. Twitter has lost money in six of the eight years since its IPO. Its revenue in 2021 reached $5 billion, while Facebook generated sales of $118 billion and Google parent Alphabet recorded $257 billion in revenue.

Twitter’s revenue in the second quarter declined from a year earlier.

“In my humble opinion, to use a very technical term, their business sucks, and they need a radical transformation,” said Len Sherman, an adjunct professor of business at Columbia Business School.

It’s a business that Musk shelled out $44 billion to purchase. As part of the deal, he borrowed $13 billion, which he has to pay back.

For that investment, he got a company with “very poor targeting capabilities in an ad-based business where that’s essential,” Sherman said. “I kind of laugh because I keep getting Twitter promoted ads in my stream for companies that would be better directed to 13-year-old girls.”

On Wednesday, Musk is holding an audio meeting with advertisers on “Twitter Spaces.”

Twitter didn’t respond to requests for comment.

The YouTube approach

Musk did himself no favors after the acquisition, which closed in late October. In addition to his own questionable tweets and retweets, he’s been inconsistent in laying out what he means by free speech and acceptable content on the platform, and he abruptly fired roughly 50% of Twitter’s staff almost immediately, raising further questions about content moderation.

Companies typically halt their advertising campaigns if they feel they may suffer reputational damage. For example, businesses boycotted Alphabet’s YouTube in 2017 over concerns their ads would be played alongside extremists’ videos.

YouTube executives responded quickly at the time, allowing third-party verification of content, and hired more people to remove the offensive videos. Advertisers came back, and the business rebounded promptly.

Musk would rather take a combative approach to advertisers. In response to a tweet recommending that he name the brands that are boycotting Twitter so that his followers can boycott those brands, Musk said “a thermonuclear name & shame is exactly what will happen if this continues.”

Meanwhile, Musk is taking a convoluted approach to banning users. Twitter booted comedian Kathy Griffin for impersonating Musk on the site, while it temporarily locked comedian Sarah Silverman’s account for a similar offense.

Jeff Seibert, Twitter’s former head of consumer product and now co-founder of Digits, called it “a mistake for Elon to be the face of content moderation.” In the past, Twitter has taken a team approach to policy violations.

“If you put one person in charge of it, I think you start seeing random decisions like this that then [cause people to] lose trust,” Seibert said.

Kathy Griffin attends the premiere of ‘A Hell of a Story’ during the 2019 SXSW Conference and Festival at the Zach Theatre on March 11, 2019 in Austin, Texas.

Tim Mosenfelder | Getty Images Entertainment | Getty Images

Twitter’s advertising business has already started deteriorating under Musk.

Data from MikMak, whose clients include Colgate, Unilever and General Mills, show a broad pullback in ad spending on Twitter. From Oct. 1 through Nov. 7, Twitter suffered a 68% drop in media traffic, which refers to the number of times people click on an ad, according to MikMak.

Before that, the numbers had been going up. Twitter’s media traffic increased 56.3% from July 1 to Sept. 30, and 326% from April 1 through June 30.

“We were actually seeing an uptick in Twitter traffic,” Tipograph said. “As soon as Elon Musk’s potential ownership was becoming more imminent, we significantly saw a change in traffic.”

Whatever tech and business improvements were taking place will be difficult to sustain, as the mass layoffs ate into Twitter’s global marketing team, whose responsibilities include reporting and metrics around ad performance, CNBC reported.

‘Now pay $8’

Musk has turned his focus to subscriptions as the key to reviving Twitter’s financials. He’s pitched an $8-a-month offering that allows people to be “verified” and gain premium features. The critics have been so vociferous that Musk on Monday tweeted an image of a t-shirt, reading “Your feedback is appreciated. Now pay $8.”

Musk has previously hinted that he wants to convert Twitter into a so-called super app, similar to China’s WeChat, that people can use to talk to friends, watch movies and buy goods.

Still, he’ll need partners that want to work with him. And his aggressive stance towards companies that have paused ads on the site isn’t a good look as he pursues other partnerships, said Jeanine Turner, a professor in Georgetown University’s Communication, Culture and Technology program.

The “big issue for him I would think would be trust,” Turner said. “I don’t see people trusting him with all of that information.”

As for advertisers, many brands don’t consider Twitter an essential avenue for distribution considering its less sophisticated ad-tracking technology and targeting capabilities. Other opportunities are emerging, such as connected TVs and streaming services as well as Amazon’s growing online ad business for retail-oriented companies, Tipograph said.

Jessica González, the co-CEO of nonprofit group Free Press, has been unimpressed with Musk’s antics. González was one of the civil rights leaders who spoke to Musk last week, expressing concern about the rise of hate speech against Black and Jewish groups on Twitter. It’s the same group that was urging advertisers to halt their campaigns.

González said she was willing to give Musk “the benefit of the doubt” when he told the group that Twitter was aligned with them. But between his rhetoric that followed and his slashing of half the staff, she has serious doubts about whether it’s worth trying to work with him.

When asked whether she would take another meeting with Musk to discuss Twitter’s approach to offensive content, she said, “I don’t know.”

“Only because he made some promises in that meeting, and then went back on them like two days later,” González said.

Correction: This article has been updated to correct the spelling of House Speaker Nancy Pelosi’s name.

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Source: https://www.cnbc.com/2022/11/09/elon-musk-took-over-a-struggling-twitter-and-has-quickly-made-it-worse.html

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Two children and two adults survive after Tesla plunges 250 feet off California cliff

View from the helicopter during a rescue operation after a vehicle carrying two adults and two children went over a cliff in Devil’s Slide, San Mateo county, California, U.S., January 2, 2023, plunging hundreds of feet, according to the Department of Forestry and Fire Protection, in this still image obtained from social media video.

CHP – Golden Gate Division | Reuters

Two adults and two children were rescued from a Tesla that plunged 250 feet off a cliff Monday morning in San Mateo County, California, officials said. 

The car was traveling southbound on the Pacific Coast Highway when it went over the cliff at Devil’s Slide, south of the Tom Lantos tunnel, and landed near the water’s edge below, the Cal Fire San Mateo-Santa Cruz Unit said. 

The car flipped and landed on its wheels in the fall, CAL FIRE/Coastside Fire Incident Commander Brian Pottenger said. Witnesses saw the accident and called 911. 

As crews were lowered down, they were able to see movement in the front seat, through their binoculars, meaning someone was alive.

“We were actually very shocked when we found survivable victims in the vehicle. So, that actually was a really hopeful moment for us,” Pottenger said. 

Fire officials called for helicopters to help hoist the survivors to safety. As they waited, firefighters rappelled to the scene and rescued the two children.

Rescue teams are seen at the scene as a Tesla with four occupants plunged over a cliff on Pacific Coast Highway 1 at Devils Slide on January 2, 2022 in San Mateo County, California, United States.

Tayfun Coskun | Anadolu Agency | Getty Images

The California Highway Patrol shared video on social media showing helicopters lower first responders to the scene to extricate and rescue two adults inside. 

All four were hospitalized. The San Mateo Sheriff’s Office said the two adults suffered non-life-threatening injuries and the two children were unharmed.

It’s not clear what caused the car to go over the cliff. CHP is handling the investigation. 

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Tesla shares tumble more than 10% following deliveries report

Tesla vehicles are shown at a sales and service center in Vista, California, June 3, 2022.

Mike Blake | Reuters

Shares of Tesla dropped 13% on Tuesday morning, a day after the electric auto maker reported fourth-quarter vehicle production and delivery numbers for 2022.

Deliveries are the closest approximation of sales disclosed by Tesla. The company reported 405,278 total deliveries for the quarter and 1.31 million total deliveries for the year. These numbers represented a record for the Elon Musk-led automaker and growth of 40% in deliveries year over year, but they fell shy of analysts’ expectations.

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According to a consensus of analysts’ estimates compiled by FactSet, as of Dec. 31, 2022, Wall Street was expecting Tesla to report around 427,000 deliveries for the final quarter of the year. Estimates updated in December, and included in the FactSet consensus, ranged from 409,000 to 433,000.

Those more recent estimates were in line with a company-compiled consensus distributed by Tesla investor relations Vice President Martin Viecha. 

Some Wall Street analysts think Tesla’s deliveries miss spells trouble for the electric vehicle maker, but others see a buying opportunity for the company in 2023.

Baird analyst Ben Kallo, who recently named Tesla a top pick for 2023, maintained an outperform rating and said he would remain a buyer of the stock ahead of the company’s earnings report, which is scheduled for Jan. 25.

“Q4 deliveries missed consensus but beat our estimates,” he said in a Tuesday note. “Importantly, production increased ~20% q/q which we expect to continue into 2023 as gigafactories in Berlin and Austin continue to ramp.”

Analysts at Goldman Sachs said they consider the delivery report to be an “incremental negative,” and view Tesla as a company that is “well positioned for long-term growth.” Goldman reiterated its buy rating on the stock in a Monday note and said that making vehicles more affordable in a challenging macroeconomic environment will be a “key driver of growth.”

“We believe key debates from here will be on whether vehicle deliveries can reaccelerate, margins and Tesla’s brand,” the analysts said.

Shares of Tesla suffered an extreme yearlong sell-off in 2022, prompting CEO Musk to tell employees in late December not to be “too bothered by stock market craziness.”

Musk has blamed Tesla’s declining share price in part on rising interest rates. But critics point to his rocky $44 billion Twitter takeover as a bigger culprit for the slide.

Morgan Stanley analysts said they think the company’s share price weakness is a “window of opportunity to buy.”

“Between a worsening macro backdrop, record high unaffordability, and increasing competition, there are hurdles for all auto companies to overcome in the year ahead,” they said in a note Tuesday. “However, within this backdrop we believe TSLA has the potential to widen its lead in the EV race, as it leverages its cost and scale advantages to further itself from the competition.”

CNBC’s Lora Kolodny and Michael Bloom contributed to this report.

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Tesla makes China boss Tom Zhu its highest-profile executive after Elon Musk

Tom Zhu Xiaotong, Tesla’s current executive in charge of China, speaks as a new Tesla experience store opens on Aug. 18, 2015 in Hangzhou, China.

Visual China Group | Getty Images

Tesla’s China chief Tom Zhu has been promoted to take direct oversight of the electric carmaker’s U.S. assembly plants as well as sales operations in North America and Europe, according to an internal posting of reporting lines reviewed by Reuters.

The Tesla posting showed that Zhu’s title of vice president for Greater China had not changed and that he also retained his responsibilities as Tesla’s most senior executive for sales in the rest of Asia as of Tuesday.

The move makes Zhu the highest-profile executive at Tesla after Chief Executive Elon Musk, with direct oversight for deliveries in all of its major markets and operations of its key production hubs.

The reporting lines for Zhu would keep Tesla’s vehicle design and development — both areas where Musk has been heavily involved — separate while creating an apparent deputy to Musk on the more near-term challenges of managing global sales and output.

Tesla did not immediately respond to a Reuters request for comment.

Reuters reviewed the organizational chart that had been posted internally by Tesla and confirmed the change with two people who had seen it. They asked not to be named because they were not authorized to discuss the matter.

Elon Musk needs to go back to Tesla and have others run Twitter, says Jim Cramer

Zhu and a team of his reports were brought in by Tesla late last year to troubleshoot production issues in the United States, driving an expectation among his colleagues then that he was being groomed for a bigger role.

Zhu’s appointment to a global role comes at a time when Musk has been distracted by his acquisition of Twitter and Tesla analysts and investors have urged action that would deepen the senior executive bench and allow him to focus on Tesla.

Under Zhu, Tesla’s Shanghai plant rebounded strongly from Covid lockdowns in China.

Tesla said on Monday that it had delivered 405,278 vehicles in the fourth quarter, short of Wall Street estimates, according to data compiled by Refinitiv.

The company had delivered 308,600 vehicles in the same period a year earlier.

The Tesla managers reporting to Zhu include: Jason Shawhan, director of manufacturing at the Gigafactory in Texas; Hrushikesh Sagar, senior director of manufacturing at Tesla’s Fremont factory; Joe Ward, vice president in charge of Europe, the Middle East and Africa; and Troy Jones, vice president of North America sales and service, according to the Tesla notice on reporting lines reviewed by Reuters.

Tesla country managers in China, Japan, Australia and New Zealand continued to report to Zhu, the notice showed.

Zhu does not have a direct report at Tesla’s still-ramping Berlin plant, but a person with knowledge of the matter said responsibility for that operation would come with the reporting line for Amsterdam-based Ward. Ward could not be immediately reached for comment.

Zhu, who was born in China but now holds a New Zealand passport, joined Tesla in 2014. Before that he was a project manager at a company established by his MBA classmates at Duke University, advising Chinese contractors working on infrastructure projects in Africa.

During Shanghai’s two-month Covid lockdown, Zhu was among the first batch of employees sleeping in the factory as they sought to keep it running, people who work with him have said.

Zhu, a no-fuss manager who sports a buzz cut, favors Tesla-branded fleece jackets and has lived in a government-subsidized apartment that is a 10-minute drive from the Shanghai Gigafactory. It was not immediately clear whether he would move after his promotion.

He takes charge of Tesla’s main production hubs at a time when the company is readying the launch of Cybertruck and a revamped version of its Model 3 sedan. Tesla has also said it is developing a cheaper electric vehicle but has not provided details on that plan.

When Tesla posted a picture on Twitter last month to celebrate its Austin, Texas, plant hitting a production milestone for its Model Y, Zhu was among hundreds of workers smiling on the factory floor.

Why China is beating the U.S. in electric vehicles

Allan Wang, who was promoted to vice president in charge of sales in China in July, was listed as the legal representative for the operation in registration papers filed with Chinese regulators in a change by the company last month.

Tesla board member James Murdoch said in November the company had recently identified a potential successor to Musk without naming the person. Murdoch did not respond to a request for comment.

Electrek previously reported that Zhu would take responsibility for U.S. sales, delivery and service.

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