Tech billionaire and Twitter CEO, Elon Musk’s rise and fall at PayPal is being re-examined as the Twitter owner is changing the name of the influential social media platform to X. File Picture: Mike Blake / Reuters
Elon Musk yearned for a technological overhaul of the company that ran PayPal, and he wanted that change to start with the letter X - even if some thought it reminded them of pornography.
In 2000, Musk had become CEO after the merger of his X.com and Confinity, the venture-backed company co-founded by Peter Thiel that owned the PayPal program that was a more popular money-transfer service than the one offered by Musk.
After Thiel resigned following a rift over Musk pushing for the PayPal system to go on a Microsoft platform instead of Unix-based software, Musk wanted to broaden the company's ambitions as more than just a money-transfer service by making the letter X more prominent in its branding and phasing out the PayPal name altogether, according to Max Chafkin, author of the 2021 book, "The Contrarian: Peter Thiel and Silicon Valley's Pursuit of Power."
But there was a problem that was too glaring for some customers: X.com sounded like it was an adult website.
"X had conducted a series of focus groups showing customers disliked the brand name, because it reminded them of porn," Chafkin wrote.
Author Walter Isaacson echoed that account in excerpts he shared this week of his upcoming biography on Musk, due out in September.
"PayPal had become a trusted brand name, like a good pal who is helping you get paid," Isaacson wrote. "Focus groups showed that the name X.com, on the contrary, conjured up visions of a seedy site you would not talk about in polite company."
Musk's vision would not last long. Thiel and PayPal co-founder Max Levchin orchestrated a coup against Musk when he was on his first vacation in years.
The board ousted Musk as CEO and replaced him with Thiel in September 2000, according to author Ashlee Vance's 2015 book, "Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future."
Thiel formally renamed the combined company PayPal in 2001.
"That's the problem with vacations," Musk told Fortune in 2007.
Musk's rise and fall at PayPal is being re-examined as the Twitter owner is changing the name of the influential social media platform to X.
As Twitter began removing its name from its corporate headquarters Monday, critics and marketing experts are noting that the move was an unnecessary gamble on a hazy future for a platform that had wide brand recognition from its blue bird logo.
Critics on Twitter have joked that the logo for the rebranded X - one that Musk promises to make into an "everything app" - is indistinguishable from the logos of several pornography sites. Chafkin noted that history is repeating itself for Musk and his love for X.com, which is now where Twitter users are redirected when they type in Twitter.com.
"Others have pointed this out, but this renaming is stepping on the exact same rake that got him ousted by PayPal," Chafkin posted.
Added Isaacson, "The infatuation of @elonmusk with the name X.com goes way back."
The merger between X.com and Confinity unfolded in 2000 to avoid competition between the two online financial services and also to "create the world's largest secure network for instant online payments," according to the Richmond Times-Dispatch. The combined company had kept the X.com name, and Musk, who had been replaced as CEO of X.com by the end of 1999, was chosen to lead the company after the merger.
Musk and Thiel appeared to initially be on the same page as part of a group of employees that referred to themselves as the "PayPal Mafia." They were seen smiling together in an Associated Press photo shoot of the two of them with a computer showing the X PayPal logo in 2000.
But the two would clash over Musk's micromanaging over technology and branding, biographers say. That uneasy feeling spilled over to the employees on both sides of the merger, culminating in Musk's desire to put everything on a Microsoft platform instead of Unix.
"He's one of those guys who can be larger than the room," Levchin said of Musk to Inc. Magazine in 2007.
Branding was also a point of emphasis for Musk to put his mark on the company, according to Vance. When Thiel left, the employees that were loyal to him thought it was "insanity" after hearing that Musk wanted to eliminate the PayPal name during a time when sellers on eBay had turned the company's name into a verb, Chafkin reported in "The Contrarian." That kind of name branding was "a landmark achievement for any start-up," Chafkin wrote, but Musk wasn't having it.
"Musk kept championing X.com, while most everyone else favoured PayPal," Vance wrote.
Added Isaacson from his upcoming book: "Musk insisted that the company's name should be X.com, with PayPal as merely one of its subsidiary brands. He even tried to rebrand the payment system X-PayPal."
Even after the focus groups results came back that had people confusing the company for a porn site, Musk did not waver in his belief that the X.com name would work.
"Musk was unmoved, possibly, employees gossiped, because of sunk costs," Chafkin wrote. "He'd paid at least $1 million to acquire the X.com domain name, legend within the company had it."
Isaacson recounted Musk's confidence in the name on Twitter this week.
"If you want to just be a niche payment system, PayPal is better," Musk said, according to Isaacson. "But if you want to take over the world's financial system, then X is the better name."
What happened next in 2000 was described by Vance as "one of the nastiest coups in Silicon Valley's long, illustrious history of nasty coups." At a bar in Palo Alto, California, a small group of employees led by Thiel, Levchin and PayPal COO David O. Sacks gathered to discuss how they could push out Musk, reported Fortune and the 2015 book.
"They decided to sell the board on the idea of Thiel returning as CEO," Vance wrote. "Instead of confronting Musk directly with this plan, the conspirators decided to take action behind Musk's back."
Musk had planned a two-week honeymoon trip with his first wife, Justine, to Australia in September 2000, months after they got married. It was going to be a fundraising trip for Musk to meet with potential investors, and the couple could also catch the Summer Olympics in Sydney.
But as Musk was boarding a flight, he was notified that X.com executives had delivered letters of no confidence to the board of directors, according to Vance. The board decided that Musk's lack of a cohesive business model and the technological issues at the company were too much to overcome. Musk was out and Thiel was returning to replace him as CEO.
"Despite having perhaps the greatest entrepreneurial streak of all the PayPal mafia, Musk was purged from PayPal like some kind of toxin," journalist Jeffrey M. O'Brien wrote in Fortune.
When asked by Inc. what he remembers of the coup that pushed him out, Musk smirked and replied, "It was like unicorns and rainbows, flower-filled meadows." He said in 2007 that he was hurt by how he got pushed out, but claimed to have "buried their hatchet."
"Life is too short for long-term grudges," Musk told Inc.
After Thiel renamed the combined company as PayPal, eBay acquired the company in 2002 for $1.5 billion in stock. And Musk benefited from the PayPal name he wanted to do away with. Since he was still the company's largest shareholder with nearly 12% of shares, Musk made roughly $176 million from the sale, according to Vance and an SEC filing.
Despite his failure to rebrand PayPal into X.com, Musk never gave up hope for his favourite letter. In 2017, he thanked PayPal for letting him buy back the domain name that some confused for adult content and was partially responsible for his ouster at the company.
"No plans right now," he said at the time, "but it has great sentimental value to me."
The Washington Post