Good morning, team! We’re working toward the end (?) of the Musk-Twitter saga now that the deal is loosely settled and the social media company’s earnings are out. But the latest round of numerical disclosures from Twitter revealed just how dependent the company is on advertising revenues, which highlights a potential weak spot in the plan by the technology mogul to buy and reform its service.
For the sake of clarity, I am a Twitter user and free-speech advocate. By that, I mean that I think that governments should not control the speech of private citizens. This means that I am in favor of Twitter finding a platform posture that allows the maximum of user speech while maintaining a market position that allows it to also run a business.
The Exchange explores startups, markets and money.
Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.
On the ability to run a business, there are two sides to the matter. First, Twitter must create a platform on which users want to spend lots of time. Why? Because time spent using Twitter translates to advertising opportunities, and therefore revenue. Second, Twitter must operate a platform that advertisers are willing to spend money on; it can’t have so much toxic content that advertisers don’t want their brand associated with the muck.
YouTube has faced similar issues, for example.
I share all of that because Musk appears to take the view that Twitter has done too much to control its platform — though it can be a little hard to parse precisely whether the multi-CEO is joking or being serious in his public missives. He seems to believe that users should have more white space in which to scribble. Whether I agree with Musk is immaterial; what does matter is how advertisers view the possible impending changes. Because if they don’t like them, Twitter’s business has few ways to recoup the loss of those incomes.
The company’s earnings results this morning make that plain. And with Twitter already looking to placate advertisers ahead of its sale, it’s not hard to see where Musk’s plans for the social media giant could run into a financial reality that is anything but salubrious.
What’s the risk?
Simply put, if Twitter relaxes its content moderation policies and there is a surge of toxic bullshit, advertisers could walk. Sarah Perez explored this for TechCrunch rather recently:
If Twitter were to turn back the dials on content moderation, it could allow more bullying, violent speech, hate speech, misinformation and other abusive content to gain ground. This may make Twitter less palatable to newcomers who were already wary about posting in a “public square” — an area that impacts Twitter’s ongoing concerns with flat user growth. But it could also disincentivize advertisers from investing their budgets with the platform.
This is not an idle concern ginned up by your friendly TechCrunch crew as we spitball business dynamics on Slack all day. Not one bit. Twitter is working ahead of the sale to assuage advertisers.
Today’s earnings report showcases why Twitter is so hellbent on preserving its advertising incomes: It has little else to lean on. From the company’s Q1 report, detailing how it generated around $1.2 billion in total top-line revenue: