Why Elon Musk’s Twitter buyout is ‘a net positive’: Analyst

Lou Basenese, founder of Disruptive Tech Research, weighs in on Elon Musk's acquisition of Twitter and why it will be a good thing for the company going forward.

Video transcript

DAVE BRIGGS: Welcome back to Yahoo Finance Live. The world's richest man now owns one of the world's biggest megaphones. What will Elon Musk do with it? And what voices will he amplify? Let's get some answers now from Lou Basenese, who is the founder of Disruptive Tech Research. Good to see you, sir.

You refer to Elon as the agitator-in-chief. We had that for four agitating years. Why is that good for Twitter's business model that he has now purchased it and will take it private?

LOU BASENESE: Look, I would tell you if you boil down social media's success, it comes down to the network size and engagement. And if you don't have engagement, if you don't have voices from all sides, from left, and right, and in between, on the same platform, you're not going to have growth. You've seen Twitter has stalled out in their growth.

You saw it with Snapchat hitting kind of a critical mass at 300 million users. To get to that 400, 500 million and potentially a billion users on a social media platform like you have in Instagram and TikTok, you need engagement. So I think Elon Musk being the head and now in charge of this and opening up, bringing at least the hope, right-- we've got to give him a chance.

I've been a huge Elon critic for years, and it's kind of shocking. And it's probably why I'm having tech problems right now, right? I'll float my own conspiracy theory, like Jeff Bezos did, that Elon's Starlink is interfering because he thinks I'm going to be critical. Actually, I think it's a net positive. The status quo wasn't working. Twitter was trying to re-energize growth. It wasn't happening.

You were getting other offshoots that I think are dead on arrival in Truth Social, but nevertheless, it was drawing an audience and engagement to other platforms. And I think this now, at least for the time being, until he's got an opportunity that he can re-engage users on the platform-- and I think you're seeing that, right? We're seeing at least now a whole cohort of people that are saying they're going to get off the platform. Well, just get off. You don't have to tell us. The truth is they're not going to get off the platform. So I think this is a positive indication of what's ahead right now.

RACHELLE AKUFFO: And it's interesting, because when you look at Hootsuite's 2022 ranking of the most used social media platforms by global users, Twitter is actually ranked at 15th. And that's far behind Facebook, YouTube, Instagram, TikTok, and others. But there does seem to be this sort of amplified disconnect in terms of the role of Twitter that it plays versus the usage. Why do you think that is?

LOU BASENESE: Yeah, look, I think what we've seen is just consumers consume information in different ways. And I would tell you that Twitter and us, maybe, in the financial media and the media space, are the best use case, right? We know it's the best place for live reactions, breaking news. It's not something that we necessarily go to mindlessly scroll, where you have teenagers, right-- that's the big population of audience that all these social media platforms target.

And I have two teenagers that literally mindlessly scroll through TikTok because the content there lends itself to it. I think Twitter is more about actually being engaged and having an opinion about news and things that are-- real-time news. We've seen that with the war in Ukraine. Twitter has become a great place to get breaking news. So I think you point out the right thing-- if we look at just the top list of engagement, or usage, and time spent on a social media platform, Twitter is probably never going to rank at the top because the content is not made in a way that actually engages you to, like, a short form video or a longer form video that you see on other platforms.

BRAD SMITH: How comfortable are existing financial backers going to be with any type of disruption to the user experience in order to just try and tinker with making Twitter more profitable, especially at a time where they know that they're going to be trying to get their capital back that they've poured into this-- this now solidified take over, assuming all the regulatory I's and T's are crossed and dotted?

LOU BASENESE: Right. No, I think you're bringing up a wonderfully nuanced point here that a lot of the-- $25 billion, roughly, of this deal is being financed with margin loans by Elon himself. Look, that makes Tesla vulnerable. That makes too many changes too fast, could cause the financial backers to really worry, and for good reason.

So, look, I think it's-- in tech, normally, you move fast and break things to rebuild them too. I don't think that's going to work here. I think there's a lot of changes, two immediate changes, that Elon can really do to re-energize growth. And one is an Edit button, which we know has been in the works.

The other, which I think the olive branch has been extended, is to let former President Trump back on the platform, even though he says he's not going to come back on. When Truth Social implodes, he's going to be rushing to come back on. I will go-- you know, I've been a big just critic of Truth Social and CEO Devin Nunes, because I just think that they've stumbled out of the gates and they don't have what it takes to launch a competing platform.

And I think you're going to see the former president eat his own words saying he's not coming back on Twitter if Elon lets him. And I think that that'll spur-- again, probably to the chagrin of many, many people that don't like President Trump having him back on the platform-- but again, it's about engagement. And having both sides, Yankees fans and Red Sox fans, in the same place so that they can argue with each other ad nauseum and have that engagement there.

DAVE BRIGGS: Quite a visual there. The price was at $23 when Trump was inaugurated. It was at $51 when they kicked him off a Twitter. I'm not saying that's direct cause and effect, but it is interesting to observe. Yahoo Finance did a poll this morning asking people if they would pay for Twitter.

The results were pretty surprising. 86% said no. More than 2,400 people voted. Is charging for the service of Twitter in the future, and do you believe this poll is representative of the country?

LOU BASENESE: I totally believe that poll is representative. We've been just spoon-fed freemium models, right? Everything is free at first and then there's some price. So I think it's a mix. I think you can always monetize-- I mean, your poll, right-- the 80-20 rule, it's showing that roughly 80% won't pay, 20% would. You can charge.

As long as you can offer content that is of value at a couple dollars a month-- I think right now, Twitter premium is $3 a month-- somewhere in that low price point for your super users, they're going to pay for that content. I've long advocated when Jack Dorsey was splitting his time between Square and Twitter, that they should have really come out with a premium feature for the media, because we use it the most. So I think there is an audience.

You need to be cautious about leaning too hard into subscription. I think really to be the de facto public square, like Elon Musk envisions, it's got to be free. Everyone's got to be able to come on and voice their opinions, their truths, to put it more accurately. No misinformation, which I think raises another issue.

Elon Musk probably thinks he can come up with a simple and elegant solution to moderation. I don't think it's that easy. We've seen difficulty doing that already at Twitter, at Facebook, and all other social media platforms. There needs to be some level of moderation, but it's not as easy as people think.

RACHELLE AKUFFO: And certainly Twitter, if it's taught us anything, is that you literally cannot make everybody happy. Thank you so much to our guest Lou Basenese, Disruptive Tech Research Founder, thank you for your time.