Advertisers may hesitate to spend on Twitter as Elon Musk moves forward with his plans to promote unfettered speech on the social media platform, analysts said after the world’s richest person struck a deal to buy the company for $44 billion .
Although Mr. Musk, a self-proclaimed free speech absolutist, has not given details on how he intends to “improve and fix” Twitter, he has repeatedly slammed and slammed the microblogging platform for not doing enough for free speech Content Moderation Policy.
Advertising is Twitter’s main source of revenue, and analysts worry that unbridled freedom of expression could lead to misinformation and hate speech, potentially leading advertisers to distance themselves from the service.
Only about a tenth the size of far larger social media platforms like Meta Platforms Inc.’s Facebook. Twitter is credited with spawning the Arab Spring uprising and has been accused of playing a role in the storming of the US Capitol .
“We expect advertisers will be less willing to spend money on Twitter if [Mr.] Elon Musk is lifting content moderation to encourage freedom of expression,” said MoffettNathanson analyst Michael Nathanson.
If Mr. Musk delivers on his promises, advertisers on Twitter could switch to platforms like Alphabet’s Youtube, TikTok or other channels to drive brand awareness, Mr. Nathanson said.
Mr. Musk, who has amassed more than 80 million followers since joining Twitter in 2009, has himself used the platform to make several announcements, including the one in 2018 about Tesla’s privatization that caught him in regulatory crosshairs .
The 16-year-old company with over 200 million users reported $4.51 billion in ad revenue for 2021, accounting for about 89% of its total revenue.
“The challenge (for Twitter) will be to sustain and grow revenue as the controversy (Mr. Musk) hopes to give advertisers more free rein,” said Susannah Streeter, an analyst at Hargreaves Lansdown.
Mr. Musk has also hinted at a subscription-based business model. But that could shift ad spend to smaller players like Pinterest and Snapchat, analysts at MKM Partners said.
“We believe that as Twitter goes through this ‘Go Private’ process over the next few months, there will be a significant impact across the entire online advertising ecosystem,” they said.
The deal has been approved by Twitter’s board of directors and shouldn’t face any regulatory hurdles, according to analysts.
Twitter shares fell 1.7% to $50.85 in morning trade, still falling short of Mr Musk’s bid of $54.20 per share.
