Business textbooks of the future will describe Musk as a genius for the way he created the Tesla brand. They’ll also describe him as an idiot for destroying the Twitter brand. He’s wiped out billions in brand equity.
Brands matter, it’s a company’s primary unfair advantage. One of these days, I’m going to write a “Business Deprogrammer” to teach hackers how business really works. One of the sections will be on branding. This isn’t a thing that just happens, but is something that a company creates.
Tesla’s brand
For example, Nissan dominated the early electric vehicle market with their Leaf. They tried to make it cheap for the mass-market, probably to soak up government subsidies that often made it nearly free. Given the state and federal incentives, the lease would’ve cost me $100/month — extremely cheap for a car. Lots of people took advantage of this.
But Tesla was building a brand, not a car. They started at the high-end with the Roadster, then the $100k Model S. They added other cool wizzbang technology, like insane acceleration, self-driving features, and a big touchscreen as the control panel.
There are reason for this from a branding perspective. There are two basic types of brands in the world:
high-end luxury goods sold in small numbers for high margin
low-end mass market-goods sold in high numbers for meager margins
What you want to do is combine them, sell for high-margins like luxury goods, but sell large numbers like mass-market goods.
This is almost impossible to achieve, but Apple has done this, which is why they have a $3 trillion market cap.
Tesla has also achieved. The best selling single model of car is the Tesla Model Y, selling 0.5 million over the last year. They sell it at fairly high margins, frustrating their competitors who are still selling at a loss trying to compete with Tesla.
They achieved this by starting from the high-end moving down, rather than from the low-end moving upward. It’s hard to move up-market. A Nissan Leaf would never become a high-margin good. It’s easier to move down-market, to sell a luxury car, and then a cheaper (yet still high-margin) car for the masses.
Telsa really has no technology lead. Their competitors all have the same quality of tech. They do have a supply chain lead, because of their high-volume, they can build cars much cheaper than their competitors. They’ve got some lock-in effects, such as their NACS charger becoming the North American standard. But their biggest, sustainable, unfair advantage is their brand.
People are trying to copy the Tesla business model, like Lucid, Rivian, and Polestar, but they really can’t fight the brand.
There are two issues here. The first is that the quality of a brand. And the second is the destruction of band equity.
Twitter was a master-class in branding. First, the name is so evocative to what it is. Second, it’s terminology like “tweets” and “re-tweets” have become fundamental to the English lexicon, making it difficult for competitors to describe the same thing without using those words.
It’s incredibly rare that this can happen. Its destruction is making branding experts everywhere weep everywhere.
Second, there is just general brand equity. The chief measure of a brand is how many people have heard of you. The second is whether they know what the brand stands for. Twitter has excelled on these metrics. Even though they had only 500 million subscribers (vs. Facebook’s billions), they had roughly the same brand equity. It’s icon is one of the most recognizable in tech.
They lucked into things, such as many official spokespeople announced the latest PR release on Twitter, so that news stories would report “as announced on Twitter”.
Again, it’s nearly impossible to build this level of brand awareness. It usually takes decades an $billions.
To be fair, Musk has already been trashing the brand, even before he officially destroyed it. It’s not just whether you’ve heard of the brand, it’s also what the brand stands for.
Musk has changed Twitter so that it now stands for unhappiness and hate. Nobody is flocking to Twitter to find the latest news announcements. They’ve now gone full 4chan mode spewing toxic hate on the platform.
Musk is likewise hurting his personal brand and Tesla’s brand with this toxicity.
It’s so damaged that it’d be hard to come back from it, even if tomorrow Musk sold off Twitter to a better organization. It’s still worth billions. Branding people would probably rather try to fix the Twitter brand than create a new one. But it’s clear how many billions of dollars of damage Musk has done to the brand even before he got rid of it.
You can measure how much it would cost to reproduce the fame and respect for a brand. This is roughly how much it would cost to replace it. For example, such estimates say it would cost $66 billion to replicate the Tesla brand if Musk wanted to rebrand it as AutoX instead.
The 𝕏 brand
You can’t make an X into a brand. It’s not distinctive enough.
You can make it part of a brand, such as Microsoft’s Xbox, or Comcast’s Xfinity. Companies do this all the time. But it’s the combination that works, not the X standing alone.
Early dot-com entrepreneurs tried a land-grab of common things that people had already heard of. Everyone has heard of “Pets” so a company “Pets.com” thought they go do an end-run around the recognition problem. But it doesn’t work, because it’s really not distinctive enough. Now when you go to pets.com, it directs you to something more distinctive, petsmart.com.
There’s never going to be things like “xeets”. People are still goin to “tweet”. The frustrating things with brands is that you can’t make the public comply. You are still ultimately at the whim. Branding experts like to believe they are in control. But in reality, it’s a chaotic mess, the public is in control, and the most you can hope for is to take advantage of occasional opportunities.
It’s unlikely Musk can ever make 𝕏 into a brand. But to do it, he’d need to spend billions of dollars. He’d need to buy multiple dot-com style SuperBowl commercials every year, and that’s merely the tip fo the iceberg.
In the end, he’s still not going to be more successful than the dot-coms, where the public forgot about them as soon as they stopped trying to push their brand.
The unfair advantage
The most important thing here is that Musk has thrown away his unfair advantage over competitors (Mastodon, Bluesky, Threads) and now much compete on equal footing.
In order to survive, a business must have an unfair advantage over the competition. It’s a bit offensive expressing it this way, because we think everything should be fair. But fairness doesn’t work. If things were fair, the only way to compete would be price, and we’d both have to lower prices until we both went out of business.
Small companies have inherent unfair advantages. They usually have better technical talent and better technology than their bigger competitors. Revolutionary change in the industry usually comes from such startups because of this.
But they aren’t durable. Over time, competitors catch up, often by simply hiring away your best talent.
Intel led the industry for 20 years on technology, a large company leading as if it were a startup. But this came at a cost of spending vast sums of money in RND, delivering meager profits to shareholders. In the end, after a few missteps, they fell off the technology curve, becoming no better than their competitors, like AMD or TMSC.
In the long run, your unfair advantage cannot be either technology or having the best employees.
One well-known unfair advantage is the lock-in effect, such as what IBM enjoys with mainframes (a $40 billion/year business with no competitors) or Microsoft with it’s desktops. This makes techies angry and resentful, because they want to see Linux succeed on the desktop alongside Windows, but it’s never going to happen. But it’s not really important. The Windows desktop market stopped growing 20 years ago, with all the growth in the industry going to mobile, cloud, gaming, etc. Microsoft’s revenues for “Windows” is scarcely larger than for “Gaming” or “LinkedIn”.
In the long run, a lock-in isn’t going to benefit you, as everyone will just innovate in other areas.
Another well-know unfair advantage is the supply chain. Apple is so big that it can demand concessions from suppliers. This allows it to make phones cheaper than any competitor. Tesla is now experiencing the same advantages. They sold 1.3 million electric vehicles world wide while their competitors struggle to sell 20,000. This allows them to control their supply chain in ways competitors can’t. Thus, competitors suffer selling cars at a loss while Tesla makes a good profit on each car sold.
But the biggest unfair advantage is branding. It’s the one thing in your business that competitors can’t replicate. They can hire away all your engineers, build the same technology, make the same agreements with your suppliers, and so on. But they can’t replicate your brand.
The reason this is important is Musk has thrown away his unfair advantage. While Bluesky and Threads are struggling to build their brands, Musk must also struggle to build up a new brand.
Conclusion
Musk has a track record of proving experts wrong, so I’d give him some credit that maybe he’ll prove us all wrong this time.
But mostly, I think he’s a failure. I think Tesla’s brilliant branding was either an accident or due to the decisions by others. He’s trashing his personal brand. And this discarding of $billions of brand equity is just too far to accept.
I’m pretty sure he’s just not going to make 𝕏 happen.