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Is Twitter's Rebrand to X a Category Design Play?

What everyone is missing about the strategy and opportunity.
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Dear Friend, Subscriber, and Category Pirate,

Unless you’re stranded on a remote island, you’ve likely heard that Twitter rebranded to X.

Elon Musk explained the move in a tweet “x.”

After the announcement, most media outlets, journalists, marketers, and brand experts said the switch will destroy Twitter’s “brand value.”

As we wrote in The Big Brand Lie—the only time you should ever rebrand is when you are launching a new category design. 

Why?

Because branding in the absence of category design is asinine.

In this week’s Pirates Perspective, you’ll see why we think the “brand value” argument is asinine. (Categories make brands, not the other way around.) You’ll also hear what new category we believe X is trying to create—and the new and different future that might come out of it. And you’ll understand the mistakes Musk made when Languaging the category vision for X.

Remember: Branding should be used in conjunction with the new and different category you are creating.

So, let’s wait and see if the rebrand will help create the future Musk has in mind.


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Arrrrrrr,

Category Pirates

Eddie Yoon

Christopher Lochhead

Katrina Kirsch


Video Transcript

Katrina Kirsch  00:03

It's interesting—I've actually been reading a couple of articles about the whole Twitter moving to X. Everyone's talking about the brand change, and how it's ruining the brand value. I was reading a CNBC article about it this morning.

But your argument is that it's more about a category change and moving to financial services, e-commerce, all that stuff. And why I think one of the facts you stated was that X could potentially account for half of the entire financial system.

So I'd love to hear your perspective on that, especially because when you think about, is it better to create something new, and just create a new company to do that? Why rebrand Twitter and try to turn Twitter into that and go through that entire category creation?

Eddie Yoon  00:44

It's interesting, the whole debate, right is what is the cost of the rebrand. And that's some level heart of what most of the articles and pundits that I've seen talked about is what you know, in classic economic theory, you'd call sunk cost, right, which is cost incurred in the past about stuff that was built in the past that you're now moving away from, and that what economics teaches you is that you should ignore sunk costs, because they're in the past, and you should be looking forward, which is exactly what category design teaches us to do.

I just find it interesting that people have said, you know, the primary argument is that Twitter has built legacy brand value.

So why would you walk away from that?

Eddie Yoon  01:30

And that the reality of it is, is one of the big arguments again, Tesla was like, well, some of these other companies have great brand value, what's the value of the Toyota brand? What's the value of the Ford brand? What's the value of the BMW brand? I think what people can make the mistake of is that the only people who really care about legacy historical past brand value, or the brand stewards, there's not there are there are some consumers that love certain brands and Rfo, deep affection for them. I had a neighbor who loved the Cadillac brand, and he had all Cadillacs, and were just very, very loyal to that.

And but I actually find that in my, you know, 25 years of looking at consumers, that's pretty rare.

Most people, consumers are what have you done for me lately? And they care about what the brand will do for them in the future?

Which is what the I think the X rebrand is talking about. There's one kind of fallacy of where does the brand derive its value? Is it from what you've done in the past? Or what the category will do for you in the future? I think that's kind of point number one. And then point number two is that, you know, you can make the argument, I could understand if the company that is now x, and formerly Twitter was just going to remain a social media company, based on advertising, you know, which is a lot of the arguments is like, how is Elon and everyone else going to attract advertising dollars to x, if they all know Twitter and his brand value to that?

Eddie Yoon  02:58

Well, what I think we're seeing is the plane for a new category is being built while it's being flown. And that you don't necessarily want to change your brand, if it has legacy value, if you're going to stay in the same category. However, if you're going to change categories, and open up new ones, it makes all the sense in the world to have a different brand going forward. Because you know what, you know, Christopher, you've talked about this a lot is like, you know, having a brand does not mean you can extend it to new category, or Go Red Bull Cola and everything else.

Eddie Yoon  03:29

So when you fixate on the past, that's kind of mistake number one.

When you forget what's the opportunity in the future, that's mistake number two.

And what he is actually talking about is a world where it is truly about not just messaging but about money, and that transactions are where all the opportunity is. And Trent, you know, financial services is one of the largest categories in the world. That has been a legacy artifact of the past.

Eddie Yoon  03:57

You know, my insurance policy for our big island house is from State Farm. They've told me that my policy is over past due payment. Why is that the case? Am I being delinquent with my payment?

No, it's because they owe me a new quote.

Five weeks ago that I've asked for a new quote, and they were like, we can't get you a new quote because the systems need to work through the process. And in this day and age, like I have done work for State Farm in the past way long ago, and you could not believe the amount of innovation they could not do is predicated on their technology stack and their systems. And so if there was ever a category disrupt, it would be financial services via technology. And if you're going to go do that, then you know, does anyone would anyone sign up for a New York Times mortgage? Probably not. Right? Why wouldn't you go forward with a new brand for a new category, I think is the real argument that people are missing.

Christopher Lochhead  04:57

I 100% agree with every word that just came out of Eddie Yoon's mouth, no surprise. The other thing I would add is the whole discussion is hysterical. Literally people are hysterical over this. And the emphasis is on the wrong syllable, which is the category makes the brand.

Christopher Lochhead  05:19

So Twitter is the category king of microblogging to Eddie's point, Elon wants microblogging to be some meaningful sub-component of a much broader set of offerings.

Translation, he is going to create a new category of service.

Now, the mistake I think he made was, he didn't unveil the vision for that new category with the rebrand. So he did the rebrand independent of that. And that's a big mistake. Because a rebrand for the sake of a rebrand really doesn't do anything, where it where it does do something where a rebrand makes sense, is when you're launching, but it's part of a lightning strike to launch a new category design. So I think he blew that piece of it. But the whole discussion about the value of the brand, is a completely stupid discussion. Because the brand only has any value the degree to which the world perceives that it's the leader in a category that matters.

And the reality is the microblogging category has either stagnated or is, you know, maybe even shrinking. So what he's doing makes sense. He just didn't do it in classic, what we call a category design multiplier effect, where you do brand, you do POV, you do category design, maybe new ecosystem, and you kind of lay down a big vision for a new category.

Now, all that said, when he wants to go do that, the whole world will listen. And that's what's different about Elon than most entrepreneurs, right? Most entrepreneurs, the world's not going to listen to you, if you want to talk all the time. So he may have a reason for decoupling them.

Eddie Yoon  07:07

You know, there may be reasons exactly as you said. The global financial services industry was about 22 and a half trillion dollars. The global GDP was about $96 trillion. So if you if all he had said was, hey, we're gonna go from microblogging (and by the way, Twitter has never made money in its history so you could argue they're the Category King of not a very profitable category), to a new set of categories that could account from anywhere from a fifth to a quarter of the world's GDP.

Maybe you would want a new brand with that. And maybe that's the vision that you've been tasked with like, hey, a quarter of the world's GDP is incredibly important in financial services. It is poorly run and services the consumer by squeezing them on fees, and you know, screwing them over. And there's a different way forward with this. And there's going to be a new brand that's required. Just to illustrate and emphasize your point, Christopher—he may have a reason for doing it. He may do it shortly.

But you know, his classic masterplans that he does would have worked great. I wish he would have dropped that in conjunction with the new brand. But maybe that's to come.

Christopher Lochhead  08:25

The other thing I think is that there are two other pieces of this one. There's all this discussion on Twitter about Meta owns the trademark for X. And Microsoft owns a trademark for X and for games. And so there's going to be these giant lawsuits. Well, we'll see—that may be the case. I bet you a lot of people have a lot of trademarks and copyrights on X.

Christopher Lochhead  08:50

That said, let's do a little category storytime.

When Jobs was ready to launch the smartphone category with the iPhone. All of the Apple products were had “i” in front of the iMac i this i that iPod. So in Jobs's mind, it had to be iPhone. Well, they did a trademark search, and guess what they found? Cisco, one of the largest technology companies on the planet was the category king of IP phones. And they call that product, the iPhone.

Christopher Lochhead  09:29

Well, if the folklore is right (I'm not 100% sure, but this is the folklore around Silicon Valley) Jobs said, launch the iPhone—and we'll figure out the shit with Cisco later.

And that's exactly what happened.

It would be interesting to go look if it ever became public how they resolved that but they got it resolved. And so all these idiots talking about these trademarks, they're going to be some shit. Legally, maybe, but it's going to be irrelevant. Elon will make it go away. That's a nose-picking conversation.

The other thing, all the criticism of him about this, here's something that all of the donkeys on Twitter are criticizing this are missing.

Elon Musk has created more value than any human currently alive on planet Earth.

More economic value by a meaningful amount. And so, before you throw him under the bus (and look, I don't agree with everything he does, of course not), but before people throw him under the bus, you gotta realize, hey, wait a minute, this guy has done things that are totally impossible. Like bring rockets back to Earth and reuse them. Okay, people thought the electric car was dead. There was a there's a documentary called “What happened to the electric car?”Nobody could make that shit work. So

So I just think all these idiots who are armchair quarterbacking Musk—you got to realize, hey, wait a minute. This guy is not a guy to bet against even if you don't like him. And even if you think it's stupid, just wait. Let's just see.

Eddie Yoon  11:20

You know, and it's funny that they haven't even seen what's already happening. The money is already flowing on Twitter, in the sense that, you know, the way Twitter the money flow at Twitter used to work was a one way from advertisers to Twitter. And then, you know, obviously, they did it where you could, you know, he's charging people eight bucks for Twitter, blue.

And so the money was flowing from the user back to Twitter. And people were complaining about that.

But now people are reporting that they're getting thousands and tens of thousands, and even hundreds of thousands of dollars from Twitter, because he is now sharing ad revenue that is tied to the impressions that you generate. So now, money is flowing multiple ways already as it is right. And so Christopher to your point, not only has he done it in other ways, it's hiding in plain sight that whatever financial services, it's the movement of money from one party to another, the flow of money has already changed in a meaningful way.

Christopher Lochhead  12:20

Well, and to underscore your point, all these idiots criticizing him seem to forget that much of the crypto world or some meaningful percent of people in crypto are on Twitter. There's a ton of conversation about crypto on Twitter. And so to your point, Eddie, if he mobilizes at stuff, he's going to change a lot. And if he, if he makes it easy to go between, you know, US currency or government, government currencies, and a bunch of different cryptocurrencies, who knows what, what you can almost be certain of, is he's got an evil plan on that stuff.

Katrina Kirsch  13:11

Well, that was kind of YouTube's model. They were incentivizing creators, they're getting paid because of their views. We already know that that model works. It's now just trying to spin it out into all these other things, right ideas, goods, services, all these other opportunities for people.

Christopher Lochhead  13:27

Well, and think about this—maybe he wants X to be a currency. And maybe what he's gonna do is, let's say you're that creator, and you have a Twitter, let's just call it bank account, where you could have money and crypto. And let's just say, He gives you X dollars, aka Twitter dollars. And he says, Great, you earned $100,000 As a creator this month, you can have $100,000 US currency, or you can have 110,000 X tokens. And so all those sorts of things. There's a lot of lift, he could create around different ways of imagining transactions that upend the financial system.

Eddie Yoon  14:22

Why and just to, you know, make that super concrete and practical, you know, this is no different than what American Airlines has done by creating the first ever frequent flyer program.

They made a currency.

You know, crypto is not that far off of what that is. And if you can redeem American miles for a whole variety of things in addition to flights. Remember that the American Airlines loyalty program, their frequent flyer program—the category that they created—is worth $30 billion more than the actual airline itself. And that should Elon create an X token as Christopher you're laying out and Kat as you're saying, like, follow the YouTube model and you're paying creators to create, you know, an ad share. Now we have this whole virtuous cycle where it is very obvious that an X token business funded by creators that are incentivized like mad, will be worth more than the original core business, in which case, why would you keep the legacy brand?

Christopher Lochhead  15:26

Exactly. Look, that may not be what he's doing. I have no inside information. But you can see that if he wants her now X to be a completely new thing that is essential to everybody's lives. People seem to forget, hey, the guy is the co-creator and co-founder of PayPal. Right? Like, since this is a domain he understands, and so we'll just have to see but this could go in a lot of very, very interesting directions.

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