Elon Musk’s Twitter Crusade Could be Good for the Competition

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When news broke yesterday of Elon Musk’s takeover of Twitter, the Tesla CEO and world’s richest man tweeted out a mini-manifesto of his ideas and intentions for the blue-bird platform. His competitors likely had a hard time holding back from smashing the Like button.

As Musk champions free speech and hints at shifting Twitter toward a subscription model, fellow social networks may have spotted an opportunity to poach the site’s advertisers.

Twitter-Down Economics

Musk’s insistence on unfettered free speech — probably in the form of relaxing content moderation rules — could hurt the bottom line. Just ask Parler, Gettr, Gab, Truth, or the former CEO of Reddit. Even Facebook and Youtube have seen periods of major advertiser boycotts from brands such as Starbucks, Unilever, and Coca-Cola, who prefer to keep their ads far from hate speech and extremist content. In a now-deleted Tweet, Musk pushed for a $3 per month subscription model that would adorn paying users’ profiles with a coveted blue checkmark and offer an ad-free timeline.

All taken together, competitors are ready for a Twitter trickle-down effect:

  • “With ~85% of Twitter’s revenue generated through brand advertising, and as free speech is a priority for Mr. Musk, advertisers may shift budgets to other channels given brand safety concerns,” JMP analysts wrote in a note on Tuesday.
  • Of the $1.57 billion of revenue Twitter reported in its first-quarter earnings in February, the company says $1.41 billion came from ad revenue.

The Bot Hot Spot: Declining ad revenue will not be Twitter’s sole problem. Musk wants to defeat spam bots, but experts say his insistence on making Twitter’s algorithms open-source will simply provide bad actors with a road map for creating more spam bots. It’s all par for the course for the man who tends to speak first and answer (or not answer) questions later.