Good morning team! We’re working towards the end(?) of the Musk-Twitter saga now that the deal is loosely settled and the social media company’s earnings are known. But Twitter’s latest round of numerical disclosures revealed how reliant the company is on ad revenue, pointing to a potential flaw in the tech mogul’s plan to buy and reform its service.
Just to be clear, I’m a Twitter user and advocate of free speech. By that I mean that I believe that governments should not control the expression of citizens. This means that I am in favor of Twitter finding a platform attitude that allows the most out of the user’s speech, while maintaining a market position that allows it to run a business as well.
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When it comes to the ability to run a business, there are two sides to the matter. First, Twitter needs to create a platform that users want to spend a lot of time on. Why? Because the time spent using Twitter translates into advertising opportunities and thus revenue. Second, Twitter needs to operate a platform that advertisers want to spend money on; it can’t have so much toxic content that advertisers don’t want their brand associated with the mud.
YouTube, for example, has faced similar issues.
I share all of that because Musk seems to believe that Twitter has done too much to control his platform — although it can be a little difficult to analyze exactly whether the multi-CEO is joking or serious in his public posts. He seems to believe that users should have more white space to scribble. Whether or not I agree with Musk doesn’t matter; what is doing it’s about how advertisers see the possible impending changes. Because if they don’t like them, Twitter has few ways to recoup the loss of that revenue.
This morning’s company results make that clear. And since Twitter is already looking for advertisers before it’s sold, it’s not hard to see where Musk’s plans for the social media giant could collide with a financial reality that is anything but salutary.
What is the risk?
Simply put, if Twitter relaxes its content moderation policy and a wave of toxic nonsense comes, advertisers could walk. Sarah Perez researched this quite recently for Marketingwithanoy:
If Twitter were to turn back the clocks on content moderation, it could lead to more bullying, violent statements, hate speech, misinformation, and other offensive content. This could make Twitter less attractive to newbies who were already wary of posting in a “public square” — an area that impacts Twitter’s continued concerns of flat user growth. But it can also discourage advertisers from investing their budget with the platform.
This isn’t an idle concern invented by your friendly Marketingwithanoy crew as we spit business dynamism on Slack all day long. Not even a little. Twitter is working ahead of sales to calm advertisers.
Today’s earnings report shows why Twitter is so determined to keep its ad revenue: It has little else to lean on. From the company’s Q1 report, detailing how it generated approximately $1.2 billion in total revenue: