Twitter’s artificial business growth exposed?

by | 16 Nov 2022

After months of waiting, Elon Musk acquired Twitter for $44 billion.

Upon taking ownership, Musk accused top executives and investors of misleading him on the number of accounts on the platform — which is claimed to be artificially inflated with bots, and possibly duplicate and dormant accounts.

Elon took immediate action, firing Parag Agrawal (CEO), Ned Segal (CFO) and Vijaya Gadde (Legal Affairs and Policy Chief).

I have no specific insight into Twitter, but the artificial increase of market valuation, intentional or otherwise, is more common than most people realise. This can happen through the inflation of users, assets, opportunities or revenue. Founders and executives are naturally attracted by the prospect of cashing out at a higher multiple, even though it can lead the business down a treacherous path.

Misrepresenting information to achieve a higher valuation or market share (as alleged at Twitter) is unethical, and in some cases can also be unlawful.

Short term fix vs. long-term business growth

Artificial growth itself is not necessarily unethical. It is achieving maximum market share over the shortest achievable time, without concern for medium or long-term consideration.

Whilst I do not condone all of these, here are some common methods we have seen for achieving short-term business growth:

Selling below cost price

Companies can choose to sacrifice profits for more users. The right strategy to consider is ‘penetration pricing’, beyond that (if you are buying users) your P&L will take a bath. Investors typically keep an eye on the LTV:CAC ratio (and so should you).

Penalising customers on overages (aka compliance sales)

Rather than suspending or warning customers who exceed their licensing terms, the company ‘allows’ them to run up usage, and then be presented with a bill/penalty (which is almost always delivered as a non-negotiable fine).

Stuffing the channel (aka stockpiling)

To close more business, vendors entice their resellers and distributors into buying ‘ahead’ of a customer order(s) or commitment. The reseller gets a greater discount but is left ‘carrying the baby’ if the expected orders with the end customer(s) do not materialise.


This is where businesses give away a software product as part of a bundled offering or licence deal. This artificially inflates the sale (and therefore value) of that product — irrespective of whether the customer really needs it or not. In many cases, the software would not have been purchased if sold independently, and the likelihood of a customer renewing is slim.

Most of these examples relate to software businesses because the practices are common in this space. That’s because the work required to build long-term sustainable business growth can be daunting.

For many founders, the attraction of an early, high-value exit can eclipse concerns about cost, margin or longevity. But what happens next? Typically, one of two scenarios:

Business acquired through M&A

The business is acquired and becomes part of a larger organisation. If that business is financially strong, the acquired company will now operate behind a bigger balance sheet.

The shareholders, auditors or board may still want to report on the acquired entity’s performance — which will expose its shortcomings. This is the stage that the parent business would look to optimise the acquisition.

Business receives investment

The business secures investment, but the short-term artificial growth will inevitably subside.

To survive or thrive, the board and leadership team will need to quickly work towards transforming the business, which could result in downsizing or restructuring.

Sustainable revenue growth vs. artifical growth.

Artifical business growth vs. sustainable business growth

Meanwhile at Twitter

Coming back to the Twitter acquisition, Musk has already announced plans to cut the workforce by 75%, increase working hours, and work towards transforming the business by charging for the blue check verification mark. Either way, to justify the $44bn acquisition, Musk must either find efficiencies, grow the business, or ideally both.

There’s an important distinction here.

Although short-term artificial growth is possible (and occasionally desirable) it comes at the cost of credibility for both the business AND its leadership.

At Citius Partners, our revenue strategies focus on achieving exponential, long-term and sustainable business growth. This involves aligning the strategy and leadership to build a business that can fully execute.

What next?

At Citius Partners, we provide a range of services that help CEOs, founders and investors achieve sustainable revenue growth.

To discuss this, or the specific challenges you face, contact us.


L. McKeown (2019), DO/SCALE/ A road map to growing a remarkable company.

Mitul Ruparelia

About Mitul Ruparelia

Mitul Ruparelia is a Managing Partner of Fortius Partners, a growth transformation partner for private equity and venture capital backed businesses. He has over 20 years of growing profitable, sustainable business units, defining strategy and leading sales, marketing, product, innovation, finance, raising investment and people management for established, underperforming, and scale-up businesses. He has helped companies scale to valuations of over $1 billion.

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