By Vlad Gozman, a serial entrepreneur and the founder & CEO of involve.me. Follow @vladgozman on Twitter.
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Mergers and acquisitions can be incredibly lucrative for businesses. But they can also be a minefield, as many past examples have shown. In 1998, Daimler-Benz AG and Chrysler Corporation merged in a $36 billion deal that was widely hailed as a masterstroke of automotive engineering. However, the cultural differences between the two companies proved to be insurmountable, and the merger was ultimately undone at a loss of $20 billion.
This is not an isolated incident. In 2001, AOL and Time Warner merged in a $65 billion deal, only to see a $99 billion write-down just a year later. Elon Musk’s recent acquisition of Twitter has yet to play out, but his actions since taking over the platform have been widely criticized.
A successful turnaround of Twitter would be a major coup for Musk. However, it is by no means guaranteed, and the platform faces an uphill battle to regain the trust of advertisers and users alike. Several missteps serve as a cautionary tale for other leaders who seek to acquire established brands.
1. Don’t take your users for granted.
In swift succession, Twitter’s new leadership made a series of decisions that alienated many of the platform’s users. This included rolling back work-from-home policies, creating the now infamous $8/month blue check mark and other moves that were seen as out of touch.
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This is a cautionary tale for all businesses: Don’t take your users for granted. They’re the ones who give you your power, and they can just as easily take it away. If you mistreat your users, or if you make decisions that they don’t agree with, they will leave. And once they’re gone, it will be very hard to get them back.
2. Don’t put all your eggs in one basket.
After Elon Musk’s takeover, many advertisers pulled their budgets from Twitter. Due to the risks associated with the platform, it’s important for businesses to diversify their advertising budgets. Twitter is not the only game in town, and businesses need to be careful about the platforms they use to advertise.
Advertising on a third-party platform comes with a certain amount of risk. There’s always the possibility that your ads will appear next to offensive content. As a business, you need to decide whether that risk is worth it. Sometimes it is, but sometimes it’s not.
If the platform you advertise on suddenly changes direction, becomes embroiled in scandal or loses consumer engagement, you could be left without a way to reach your target audience. This is why it’s important to diversify your advertising budget across multiple platforms.
This also highlights the value of zero-party data. This is data that you collect yourself, through quizzes, surveys and sign-ups. This data is incredibly valuable, as it allows you to get to know your customers on a much deeper level. Unlike third-party platforms like Twitter, which, as we’ve seen, can be volatile, zero-party data is something you control. Full disclosure: My firm offers services to help facilitate the collection of zero-party data.
3. Don’t underestimate the importance of regulation.
In 2010, Twitter entered a consent decree with the FTC in which it agreed to take a number of steps to protect user privacy. In the wake of Musk’s takeover, Twitter has been accused of violating this agreement by making engineers “self-certify” that their work complied with the agreement.
I would caution you to act differently and keep up to date on the regulations around your industry—for a few reasons. Staying informed about the latest regulations can help ensure that your business is in compliance with the law, as well as help you anticipate and prepare for changes in the industry and make better decisions about who to do business with. This can prevent your business from facing fines or other penalties for violating regulations, allow you to make necessary changes to your operations or business model to stay competitive and help you choose suppliers who can meet your needs.
Overall, staying up to date on the regulations around your industry can help protect your business’s bottom line, maintain a good reputation and stay competitive in the marketplace.
4. Don’t forget your core values.
When Twitter was founded, it had a powerful mission: To give everyone the power to create and share ideas and information instantly, without barriers. This was an incredibly powerful and motivating message, and it led to rapid growth for the company. But recently—even before Musk’s buyout—there has been concern about whether the company is sticking to that.
Maintaining a strong sense of mission is essential for any business. It’s what gives your team a sense of purpose, and it’s what drives growth. If you lose sight of your mission, you risk losing the support of your user base.
5. Don’t forget the importance of communications.
In the mass exodus of Twitter employees following the acquisition, the communications department was among the hardest hit. This is a critical mistake, as effective communications are essential to the success of any business. A New York Times article dryly remarked that “Twitter, whose communication department has been laid off, did not respond to a request for comment.”
Laying off your communications team is a surefire way to lose control of the narrative. If you’re not careful, the media will shape the story for you. And if you don’t have a team in place to manage your reputation, you could find yourself in serious trouble.
Ultimately, it takes years to build a successful business but only a few missteps to destroy it. Any entrepreneur can learn from historical mistakes—such as Twitter, AOL and Chrysler—and use them to build a better business.
