The value of X

Making sense of a re-branding, from a lawyer's perspective

Much - most - of the commentary about what Elon Musk is doing with the social media platform previously known as Twitter focuses on his personal role and decision-making.

But, as an intellectual exercise, let us de-personalise the matter and see what, if any, sense we can make of the re-branding of that particular platform.

And, for the sake of this post, let us assume the individual heading the platform to have the generic quality Y.

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From the perspective of an information technology (IT) and intellectual property (IP) lawyer, a platform like Twitter is comprised of one or more things of value.

Sometimes the platform is rich in IT - there are processes and hardware and software which are distinct and significant and difficult to copy. Sometimes that IT can be protected by patents, or by another form of IP, or it can be a mysterious trade secret. Sometimes that IT is simply on a scale, or is configured in a certain way, that makes hard to impossible to duplicate.

With Twitter, this does not seem to be the case.

The IT for social media platform is not, shall we say, rocket science.

Message boards and micro-blogging are quite common and although Twitter may have many more users than other platforms, the value of Twitter is not really in its IT.

And in their different ways, the Threads platform (which is the property of Meta) and the Mastodon phenomenon (which is largely non-proprietary) show that rivals can produce a Twitter-like experience without the Twitter proprietary IT.

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So if it is not the IT then perhaps the value is in the branding, which would be protected by trade marks and other forms of IP.

Even if the technology is commonplace, there would be value in the brand.

Twitter - and its associated words tweet (as a noun) and tweet (as a verb) - is part of the vernacular and popular culture.

The branding is well-known internationally.

A purchaser of or investor in Twitter could disregard and replace the IT completely and still have something of huge value in the brand.

And as long as the user experience was not affected, few would care or indeed notice.

Here Twitter has an advantage: it may not be rich in IT, but it is in IP - at least in respect of branding.

Regardless of the quality of the owner Y, it would be a very strange thing for an acquirer of or investor in Twitter to renounce or abandon the brand.

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A third thing of value in a business is what can be called generally “goodwill”.

Here the word means the collection of non-tangible (and tangible) things that keeps a business in, well, business.

So a platform which had commonplace IT and, say, unimpressive branding can still be worth buying because of the quality of, for example, its workforce or leadership team, or because of the size and loyalty of its customer or user base, or because of its relationship with advertisers.

Sometimes a company will be acquired just for such assets - regardless of its IT and IP.

Twitter, however, has lost most of its workforce and its leadership team, and many users and advertisers have been alienated.

Users and advertisers are going elsewhere, creating goodwill somewhere else.

To the extent that Twitter users and advertisers have been the focus of attention, it has been as things to exploit for short-term revenue rather than for long-term development.

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The above list - IT/IP, branding/IP, and goodwill - is not exhaustive: technology and media companies are bought and sold, or invested in, for all sorts of reasons everyday.

Sometimes such companies, like football clubs, are bought for reasons that make no commercial sense whatsoever.

But when someone purchases or invests in technology and media companies one (or more) of those three things is usually the real target of the transaction.

And so what happens when a platform is purchased for an extraordinarily high amount of money which is (a) IT poor, (b) stripped of its valuable branding, and (c) alienates its users and advertisers?

What actually has been bought?

What is the value of such a company?

Well, now we know.

It is the value of X.