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In its new filing at the Securities and Exchange Commission, Twitter admits to the risk of losing advertisers. This is in relation to the pending acquisition of the company by affiliates of Elon Musk. The company recognized that there may be adverse effects on their business results due to the announcement and pendency of the agreement.
It could be recalled how Musk’s announcement of his vision to make Twitter a free-speech platform stirred reactions from users, advertisers, and experts. He clarified that “free speech” for him pertains to expressions that match the law. He, therefore, stands against censorship that goes beyond the limitations of the laws. This vision is bound to change a lot of things in how things are done on Twitter. As of the moment, the platform moderates content beyond what is legal.
This vision, however, could scare away advertisers who would naturally prefer not to have their business advertisements run along with divisive and hateful content. This risk, coupled with the relatively smaller user base of the platform, could make advertisers think twice about ad spending.
Twitter’s 229 million monetizable daily active usage (mDAU) at the end of the recent quarter is nowhere close to competitors such as Facebook’s 1.96 billion daily active users in Q1 of 2022. Even though Musk believes that making the platform a haven for free speech would draw more users, it is still uncertain how the changes will affect the engagement of current users.
Twitter also admitted in the filing that there is a risk to the platform’s growth if the influential accounts would cease sharing content, which is a possibility if the platform’s plans to alter content moderation make it a space for hate speech.
This relatively smaller user base and almost flat user growth could scare away advertisers, especially when paired with the risk of running with unmoderated hateful content in the spirit of free speech.
In fact, according to AdAge, advertisers are already anxious about Musk’s ownership of Twitter. Multiple ad executives said that brands are consulting their agencies if it is ideal to stick with the platform. With Musk’s takeover, it also noted that advertisers are preparing to halt spending if things proceed in unwanted directions.
The company also recognizes in the filing that the majority of its revenue comes from advertising, and its loss could have adverse effects on the business. Twitter also stated that its capability to compete for advertiser spends is influenced by factors such as the company’s reputation, as well as the advertiser’s perceptions regarding the platform’s health and safety. Meanwhile, in a now-deleted tweet, Musk shared that he intends to steer Twitter from depending on advertisements for revenue, citing ideas for monetizing tweets.