Billionaire businessman Elon Musk has bet $44 billion — equal to about a quarter of his net worth — that he can make Twitter pay as a payments player.

Musk has told investors he can quintuple the social media platform’s revenue to $26.4 billion in six years, and a key part of that strategy is building a payments business that contributes $1.3 billion by then, according to a report from The New York Times

Musk, who pursued the purchase for months before acquiring it on Oct. 27, also underscored the payments tack when he spoke with Twitter employees in June, saying he wanted to revamp Twitter to look more like WeChat, according to a report by The Verge. WeChat is the Chinese social media outlet that has a super app side, letting its users make payments and use other financial tools.

Musk is no stranger to the payments business. He was co-founder of a firm called in 1999 that merged with another business to become PayPal. He has also taken a keen interest in 21st-century payments in the form of cryptocurrencies, doggedly backing a joke crypto called Dogecoin.

And of course, his other entrepreneurial moon-shots, namely car-maker Tesla and the aerospace company SpaceX, have made him the richest man in the world. They’ve also given him plenty of capital to invest in other enterprises.

Still, former top PayPal executives, who are also entrepreneurs and venture capitalists, said they doubt he can turn Twitter into a payments business. Others have tried to transform social media platforms into money-making payments businesses and failed, they argue, doubting Musk has the magic touch to make it happen. 

“Twitter is Twitter, and Twitter is going to stay Twitter, and never be anything else,” said Jed Rice, CEO of digital bill payment company Aliaswire and a former PayPal senior director. Rice said he gives Musk 100-to-1 odds of successfully creating a Twitter payments business, even with three years to prove him wrong.

Social media habits die hard

The big barrier is that social media users who become accustomed to using a social media site for one particular purpose aren’t apt to adopt new payment features, Rice said. What’s more, companies that have created successful payments tools took many years to get them right and still have difficulty adding to them.

When Facebook tried to couple its messenger service with a peer-to-peer payment (P2P) tool, “it flopped spectacularly,” Rice said. “People said ‘This is dumb. Why would I do this? I’ll just Venmo you.” The disappearing-photo company Snapchat was similarly unsuccessful when it created Snapcash, he noted. That company ended the experiment in 2018.

Twitter already has “hundreds of millions of users with a cadence and culture and flow to it,” and changing their habits will be near impossible, Rice concluded.

Even P2P businesses like Venmo, which was acquired by PayPal in 2013 via Braintree, are still having a hard time expanding beyond their original mission. PayPal has struggled to segue Venmo to merchant uses.

PayPal itself has tried to add P2P and other payment functions, but they fell flat, said Rice, who was at PayPal from 2015 to 2019. “All the broader commerce possibilities just fall off,” he said.

Dickson Chu, a former executive at PayPal from 2004 to 2010 who helped build the business when it was part of the EBay online marketplace, has a similar perspective. Social media companies are hard-pressed to turn users who are simply social on a platform into people who are transacting on that platform, he explained. 

“I’ve never seen anyone else do it, and I’ve failed at it twice,” said Chu, now CEO of the payments industry company Copper. In addition to failed efforts at PayPal, Chu took a stab at it when he was at Yahoo in the early aughts. Tech giant Microsoft couldn’t pull it off either after purchasing Skype, he noted.

Competition abounds

And today the competitive landscape has changed, with incumbents having spent years developing specialized payments tools from scratch instead of trying to bolt them onto a social media company. Rivals to any new business would include PayPal as well as Block’s consumer payments business Cash App, and the P2P business Zelle, backed by the biggest banks in the country.

“There are other people vying for that same audience,” Chu said, listing off competitors already offering a payments function. “They’ve got the most important thing — they’ve got consumers who feel safe about it.” 

Source link

Share This