Twitter and Co.: the fragile economy of social networks

December 14, 2022

Since its inception in March 2006, Twitter, like other social networks, has faced the almost insurmountable problem of policing millions of messages spread in dozens of languages ​​and containing numerous racist, defamatory or even blatant calls for violence and murder. and used by professionals to manipulate and bias information[1]. However, this is not only a deontological problem, but also, above all, an economic threat.

Advertisers appreciate the effectiveness of social networks, which allow them to precisely target their audiences. But above all, they don’t want their ads to be mixed with hate messages. This damages their image and, especially in the US, they fear it will encourage consumer unions to boycott them. Here, interest overlaps with ethical concerns.

Infiltration of advertisers

However, Elon Musk seems to have ignored these limitations, at least initially, thinking that his success in the rocket and automobile industries would secure the understanding of his advertisers. As soon as he announced his intention to buy Twitter, he announced that he would limit the control of the content of messages in the name of freedom of expression. He confirmed his intention after taking over the company’s management and promptly accepted the reinstatement of a large number of tweeters who had been fired in recent years because their comments were unacceptable. One of the first beneficiaries of this amnesty was Donald Trump, who has been banned since the January 6, 2020 riots.

The result of this slowdown, reinforced by the virtual disappearance of the service responsible for content moderation, was not long in coming. the New York Times December 2 provides significant figures based on the work of several organizations specializing in the analysis of the production of digital platforms. So, for example, attacks against black people went from 1,282 to 3,876 per day. Similarly, anti-Semitic messages have increased by 61% since the arrival of Elon Musk. In addition, accounts belonging to supporters of the Islamic State or followers of the dissident conspiracy site QAnon have returned en masse, greatly altering the platform’s image. In total, the site has recovered 62,000 accounts, 75 of which have more than one million subscribers.

Contrary to Elon Musk’s claim, the impact on advertising revenue, which accounts for 90% of Twitter’s resources[2] it was immediate. according to New York Times As of Dec. 3, U.S. fourth-quarter revenue was expected to be just $1.1 billion, well below its target of $1.4 billion. Similarly, the number of advertisers in this period would fall to 2,315 against 3,980 in the previous quarter.

Unstable management of a company in crisis

For the sake of a libertarian vision with poorly defined contours, Elon Musk has established himself as the sole moderator of the giant network, accepting or excluding one or the other. His erratic decisions exacerbate Twitter’s financial woes, which unlike other platforms have never turned a profit since its inception. The financial world, which has faithfully followed Elon Musk on his spectacular rise, is now questioning his ability to save the bluebird. His concern is not limited to America. Thierry Breton, the European commissioner responsible for digital, explained to the billionaire that he must comply with European directives in terms of content under the influence of sanctions. But Twitter cannot do without the rich European market.

These prospects are even bleaker as all digital activities are going through an unprecedented crisis. Meta, Amazon and Apple have been forced to make massive layoffs due to declining revenue, a slowdown in the American economy, and sluggish usage in favor of other platforms. Meta seems to be particularly vulnerable with its subsidiaries Facebook and Instagram: in the last quarter of 2021, Facebook announced that it recorded the first decrease in users in its history, with a daily loss of 4 million users between September and December.

Its audience is threatened by the success of Tik Tok, a Chinese platform that caters to the under-25 audience, and Mark Zuckerberg’s huge investments in virtual reality have so far not been a hit with the public, and therefore with advertisers. This strategic failure ultimately threatens the survival of Facebook and therefore Meta.

Justice comes into play

Justice is finally interested in the status of social networks and is waiting for several decisions of the US Supreme Court. The main controversy is over a law passed by Florida Governor Ron DeSantis that prohibits social networks from excluding messages from journalists and politicians. DeSantis’ motivation is to end what he calls systematic hostility toward the right by platforms allegedly afflicting dangerous leftists. Major digital players have taken legal action against this law. Notably, Twitter joined DeSantis’ potential presidential candidacy despite Musk’s public support, but the Telsa chief is no exception.

When the Supreme Court hears the platform’s appeal, it will have to take a position that will have profound repercussions on the legal and therefore economic status of platforms. If it agrees with Florida and Texas, which have taken similar measures, it calls into question Section 230 of the Communications Decency Act of 1996, which exempts digital platforms from all legal proceedings related to the content they broadcast.

The economic impact of these decisions will be significant, especially for Twitter, which has to be sued for accepting violent political messages that could drive advertisers away. As the head of the Freedom of the Press Foundation noted: “If Elon Musk really cares about free speech, he should call his new friend Ron DeSantis and ask him to stop attacking Section 230.”

So it appears that the world of digital communications is about to face a period of change that may be painful for some, after a decade of immense prosperity. The general consensus is that the most vulnerable company is Twitter, which has become the property of a leader who follows consistent and irrational impulses without defining any long-term strategy.

[1]. See Richard Roberts, “Democracy in the Face of the Business of Hate,” bonesApril 2, 2022.

[2]. For more information, see Daniel Pereira, “The Twitter Business Model,” Business Model AnalystNovember 23, 2022.

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