Dear Readers,
In this Update for Product | Strategy | Innovation I will share significant developments regarding X. The tech industry in particular is monitoring how Twitter as a corporation and brand are phased out. Twitter as a public company was acquired in October 2022 for US$44 billion and taken private as an “accelerant for creating X, an everything app.”
The website X.com now redirects to twitter.com as of July 23, 2023.
A giant X was installed on top of the Twitter building in San Francisco and illuminated at night only to be taken down a few days later on Monday July 31, 2023 due to potential safety concerns expressed by city officials for pedestrians on the streets below.
The transition of the Twitter brand to X over the last 10 months has also accelerated. Even though Twitter became an icon and the go-to channel for real-time information around the world, the company also struggled monetizing its brand and faced many operational challenges. Twitter’s future was uncertain as a financially sustainable business for its devoted users.
X aims to rebuild this business to thrive, but there is a hard fork to only preserve some core assets from Twitter like key information network protocols, core engineering resources, user accounts and message history. And then a transition to a better user experience that evolves and continues to improve over time.
To better understand this evolving story, I captured the timeline below dating back to the origin of X.com and more recent developments around xAI, X Corp and X Holdings Corp.
1998 - Max Levchin, Peter Thiel and Luke Nosek co-found Confinity and later that year launch an online payment service called PayPal for the Palm Pilot and web browser.
1999 - Elon Musk creates X.com when he launches a financial services company and expands into online payments.
2000 - Musk and Thiel merge their efforts for financial services and online payments into one company and initially operate as X.com. The combined company eventually shuts down X.com online banking and expanded financial services and moves away from the X.com brand to focus exclusively on online payments as PayPal.
2002 - PayPal IPOs and is acquired later in the year by EBay for US$1.5 billion.
2002 - Musk and an aerospace engineer co-found what is now known as SpaceX.
2017 - Musk acquires the X.com domain from PayPal, but X.com only returns a small “x”.
2022 January through April - Musk is one of the leading users of Twitter with 80 million followers at the time. Musk starts purchasing shares and accumulates 9% of Twitter, Inc. and becomes its largest shareholder.
2022 April - Musk is asked to join Twitter’s Board of Directors and he considers the offer, but later decides to make an unsolicited and unbinding offer to acquire Twitter for US$43 billion, and take it private.
2022 October - Musk with other investors acquires and takes Twitter private for US$44 billion. Musk becomes the CEO for the Twitter.
2023 March - Musk registers the private company X Corp and artificial intelligence (AI) company X.ai in Nevada.
2023 April - Twitter, Inc. is merged into X Corp and operates under parent company X Holdings Corp.
2023 May/June - Musk hires advertising executive Linda Yaccarino to serve as CEO for the Twitter business and X.com to focus on business operations and to rebuild advertising partnerships with corporate brands. Musk serves as the Chair and CTO.
2023 July - xAI is formed as a separate company from X Corp and operates online as X.ai. Musk leads the founding team of engineers and scientists.
2023 July - Musk accelerates the transformation of Twitter; X.com redirects to twitter.com and the Twitter logo changes to X across it website, mobile app and various icons.
So, with all the demands at Tesla, SpaceX, The Boring Company and Neuralink competing for his time, why did Elon Musk acquire Twitter? And what are the aims and product strategy for X? Tesla and SpaceX are big companies taking on significant challenges designing, building and scaling the manufacturing of physical products and connected software. But there are many other challenges outside of transportation, energy and space exploration that could add significant value if their solutions are well-designed and well-received.
X can sweep these other challenges under one larger effort. This could operate just as a brand or like an accelerator and incubator for new ideas. Just like Amazon has 3 Pillars, X might span 3 core Pillars, too.
Information Network - Virtual “Town Square” to share, promote and debate ideas under a menu of open protocols to select a preferred protocol to engage this Town Square based on how a user wants to use such a platform. Twitter was just the beginning. Individuals, groups and brands engage others in this Town Square. Brands position where they stand relative to the open protocols. These open protocols determine how and what information is amplified. Each user can control the open protocol they adopt. These open protocols were planned under prior leadership at Twitter, but never materialized. Twitter co-founder and its original CEO Jack Dorsey claims Twitter was intended to just be a protocol for an information network, but evolved into a company to fund its rapid growth.
Everything App - User verification and authentication to stop the proliferation of bots is a key feature using a credit card and government-issued ID. Simplify transactions and reduce fees for payments and all financial needs across an entire ecosystem. Banking. Loans. Investments. Buy. Sell. Send. Receive. Order and Pay for food or merchandise. Order and Pay for a taxi or service. Send an invoice for a transaction. Services for individuals, groups and brands to communicate. Services for Creators to develop and distribute content using text, audio, photos, and video to their Subscribers.
AI Models - Keep large language models and other AI assets secure but under the control of a separate private company. Public companies and non-profit organizations can license AI assets from this private company to operate services. Advancing AI policies, safety and security are a priority of the private company in collaboration with other organizations and governments. The stated aims are to seek truth and the true nature of the universe to limit bias.
Through these 3 core Pillars, X could realize something similar to combining the products and services of Twitter, WeChat and OpenAI (or Google DeepMind).
Other companies like Meta and Microsoft do not have the X.com domain Musk acquired from PayPal in 2017, but they have trademarked use of X in social media and other areas like gaming. This will likely lead to more narrow exclusivity and limit some freedom to operate for X in specific areas of interest unless the respective parties eventually just cross-licensed their IP to block others and move on.
X serves multiple roles, but one key role could emulate the direct-to-consumer model Amazon Prime provides for consumers and businesses seeking value.
Musk understands the opportunities provided when a product-focused business like Tesla can access consumers directly for sales, product feedback and monitoring use without any intermediaries. One of Tesla’s core founding principles was a direct-to-consumer business model versus the conventional model of selling cars to dealers. Tesla gets real-time feedback on demand based on the order backlog and price for each model. This allows Tesla to adjust price as needed to balance supply and demand.
X currently brings just over 350 million consumers to businesses on a digital platform they use in many cases daily. This allows these businesses to directly engage consumers. Businesses will not advertise with conventional models on X. Business is transformed with X. Business leaders build their brands, promote their products and transact sales with target consumers all through X. Elon Musk serves as somewhat of a proxy for communicating directly with 150 million of his followers on X as he builds and scales Tesla, SpaceX and his other companies.
Creators who post long-form content through text, audio and video can play a key role engaging their subscribers on topics of interest that can overlap with the priorities of a business. Tesla is a great example where a number of Creators advance conversations around sustainable energy, battery technology, electric vehicles, robotics and other topics. Many of these individuals are also Tesla enthusiasts and in some cases early adopters of Tesla vehicles.
X has released a revenue sharing model for advertising with Creators who have significant followings and views of their content. X will likely pilot this program with a target cohort of these Creators before opening it up with easier criteria to qualify. I anticipate entrepreneurs, athletes, and musicians will eventually play a key role in building out this revenue sharing model that works for Creators and businesses for more targeted advertising.
Musk’s verified X profile for a period in July 2023 was telling with almost 150 million followers. The X logo overlaps the banner depicting planets in space. A link to X.com is provided. And Musk’s location is shown as XD. The D with a stroke is sometimes used to represent dogecoin. This could indicate the destination is X as a payment system.
SpaceX and its logo suggest another long-term role X could play.
The Space Exploration Technologies Corporation (more commonly known as SpaceX) was founded in 2002 by Elon Musk and aerospace engineer Tom Mueller. SpaceX designs and builds rocket technologies for space exploration. Since 2010, SpaceX has launched over 240 missions with the Falcon 9 family of rockets into space including crewed missions to the International Space Station.
What separates Earth from Mars? Space. The SpaceX logo (far right in the image below with 6 logos) depicts space travel to and from a far away place, but the current location is depicted by an X. This can translate into X develops over time while SpaceX leads space exploration to Mars. The mission for SpaceX has always been about “Making Humanity Multiplanetary”, but the creation of X.com by Musk preceded his founding SpaceX and likely influenced the abbreviated name and logo. Half of the 6 logos include an X.
X deploys the core infrastructure for a distant civilization that cannot be easily served by existing infrastructure on Earth due to communication delays. A distant civilization should be self-sufficient anyway to sustain life with its own decentralized infrastructure. But X will need to deploy mature technology for a distant civilization. The innovation starts now on Earth.
If the above roles are true, why was a legacy advertising executive Linda Yaccarino hired as the CEO for the Twitter business and X Corp? The scenarios highlighted above will take time to gain significant traction with over 1 billion users. So advertising revenue is still important in the short-term. Or maybe an advertising executive from the legacy model is needed to build the strategy to transition the advertising model towards a new model more aligned with an X vision. She can work with Musk’s other companies like Tesla as proxies for how brands can leverage X to execute their consumer strategies. Musk has even committed to Tesla shareholders to start some advertising tests. These will likely start with educating consumers about electric vehicles.
I assume leading the transition to new business models is what persuaded Linda Yaccarino away from a senior executive position at NBCUniversal Media. She is rebranding and rebuilding herself and X under the leadership and vision of Musk. It might work or maybe it will not. I’m sure Linda talked to SpaceX President Gwynne Shotwell who has led SpaceX operations for a number of years under the leadership of Musk to transform space exploration.
What is xAI?
The formation of xAI was announced on July 12, 2023 with a founding team led by Musk and experienced engineers and researchers who previously worked at DeepMind, OpenAI, Google Research, Microsoft Research, Tesla and the University of Toronto. Members of this team have worked on and led the development of some of the largest breakthroughs in the field of artificial intelligence including GPT-3.5 and GPT-4.
Musk aspires to create more balance in artificial intelligence technology when large tech companies like Google through DeepMind, Microsoft with OpenAI and Meta Platforms with Meta AI dominate the field with access to leading talent, computing resources and large sources of data. The aspiration is to create open source protocols and models for entrepreneurs to compete with the likes of Google, Microsoft and Meta. Musk was an original investor, co-founder and Board member of OpenAI as a non-profit company, but eventually left its Board. To fund its growth, OpenAI pivoted to a more complex hybrid structure with a Board of Directors, several non-profit companies and a capped-profit company with Microsoft as a minority owner.
xAI is a separate company from X Corp and will operate separately from the other companies founded by Elon Musk. A primary driver for creating xAI was to revisit the founding goal of OpenAI to limit domination by a few tech companies in artificial intelligence. It is unclear how xAI, X and Tesla in particular will operate at arms length to maintain separation when there are so many synergies between these companies. Tesla is investing significant resources as a public company to design, build, test and scale silicon, hardware, and software for machine learning models focused on computer vision, energy distribution and manufacturing vehicles at scale. Tesla investors and employees will not want Tesla intellectual property (IP) to just walk out of Tesla and into xAI.
xAI will likely focus more on the research, development and application of artificial intelligence technologies outside and/or beyond the immediate focus of Tesla but more immediate for X. I mention this because Tesla is such a heavyweight in advancing and operating AI technologies. Data are the key advantage for Tesla with over 300 million miles of driving data with Full-Self Driving and growing exponentially. Tesla may be the best positioned company to crack artificial general intelligence based on the data and computing resources it is developing.
Some Final Thoughts
X is an iconic symbol that can mark a location on a map. X represents the number 10 in the Roman numeral system. X is one of only 4 letters (H, I, O, X) out of 26 letters in the modern English alphabet with both vertical and horizontal line symmetry. X can also represent transformation with coexisting descending (legacy, incumbent, established, etc.) and ascending (new, disruptor, growth, etc.) trajectories overlapping during a specific period of time. The descending trajectory is depicted by the outline of a thicker line, or “more is better” as the incumbent. The ascending trajectory is scaling upward represented by a thin line, or “less is more” as the disruptor.
As we transition to sustainable energy, the initial adoption of electric vehicles seems limited, linear and incremental until an inflection point highlights accelerated adoption and exponential growth. This adoption can accelerate even faster if the internal combustion engine supply chain collapses with waning demand and forces electric vehicle adoption as the most viable option. This would further accelerate the transition to sustainable energy represented by an X. This scenario can also play out between humans and machines, money transitioning from centralized to decentralized systems, humanity transitioning from a single planet to multiple planets, and so forth.
Transformation can also be really hard. Twitter and the realization of X could only co-exist for about 10 months. Twitter the corporation, at least 50% of its enterprise value, many advertisers and users, most of its remote staff, culture, and brand were eliminated towards a vision with X. Will this achieve a successful outcome? The outcome will either be a significant failure or an epic success with many comments from observers along the way. But a $44 billion bet was made to test possibilities on the other side.
Best,
Stephen
And just in from TwitterX…. I’ll be back!
I’m long TSLA mentioned in this Update. Nothing in this Update is intended to serve as financial advice. Do your own research. The opinions and views expressed in this newsletter are those of the author. They do not purport to reflect the opinions, views or policies of any other organization, company or employer.