If you’ve been following the news at all recently you’ve probably seen all the buzz surrounding Elon Musk planning to purchase Twitter and take the platform private. As an avid Twitter user, the often controversial Tesla founder has got himself into some hot legal water with his tweets in the past.
Bumps In The Road
In 2018, he tweeted that he was thinking about taking Tesla private at $420 per share (a nod at a Stoner insider joke), which caused the stock prices to skyrocket and investors to question his motives. After an SEC, Musk and Tesla were liable to pay a $40 million fine.
In the same year, Musk made an offensive tweet toward a cave diver who rebuffed his attempt to supply a mini-submarine during a rescue expedition in Thailand. This mistake landed him a defamation lawsuit (which he managed to win), but not before causing some damage to his public image.
These experiences have likely fueled Musk’s love/hate dynamic with the platform. He loves to have his voice heard by his millions of followers. Simultaneously, he hates when the consequences of his tweets come crashing down on top of him. So, when he announced his attempted Twitter takeover, he cited his desire to uphold freedom of speech as his main motivator.
“By taking the platform private, Elon Musk would have full control over the content that is allowed to be posted and the types of ads that are shown. He could also institute some big changes – like getting rid of advertising entirely (which is something he has hinted at in the past).”
Why Is Elon Musk Buying Twitter?
While principle might be Musk’s main driver for buying Twitter, there’s no doubt that he also sees the business potential in such a move. After all, Twitter is one of the most popular social media platforms in the world, with just over 200 million daily users.
By taking the platform private, Elon Musk gets full control over the content people or companies can post and the types of ads that are on display. He could also institute some big changes – like getting rid of advertising entirely (which is something he has hinted at in the past). Of course, this would have a major impact on Twitter’s bottom line, so it becomes a question of which is more important to Musk — freedom of speech or revenue generation? With so many unknowns, advertisers are starting to get nervous.
Lessons Learnt From YouTube
In today’s climate, advertisers are hesitant to place their ads next to content that could potentially be offensive or controversial. Back in 2017, fellow social media platform YouTube experienced this problem first-hand, when a large-scale advertiser boycott began to affect their revenue streams. A lack of content moderation led marketers to the harsh reality that offensive and extremist video content was being displayed right next to their ads.
“[Musk] believes that the platform should be a free-speech haven, where users can say what they want without having to worry about censorship. However, he also knows that this type of environment is a major turn-off for advertisers. So, the question becomes, can he have his cake and eat it too?”
YouTube had to clean up its act or face losing out on a lot of business. What ensued was a complete overhaul of their advertising rules and community guidelines. This led to increased creator censorship and far more stringent moderation practices. Advertisers could now safely return to the platform, but at the cost of YouTube’s once-laissez-faire attitude.
In the eyes of Musk, this is precisely what he hates most. He believes that the platform should be a free-speech haven, where users can say what they want without having to worry about censorship. However, he also knows that this type of environment is a major turn-off for advertisers. So, the question becomes, can he have his cake and eat it too?
What Changes Is Elon Musk Planning For Twitter?
A leaked internal email from Twitter heads showed that they were trying to reassure advertisers that Musk’s Twitter takeover would not affect them. It stated that even if Twitter descended into a cesspit of extremist, offensive content, their ads would be displayed completely “separate”. This may quell some fears in the short term, but it’s unlikely to last. Twitter currently makes around $4.5bn a year from ads — 90% of its revenue — and Musk wants to cut this down to 45%. How will he do this? Apparently, by introducing subscription fees – although it’s unclear how many people would be willing to pay for a service that has always been free.
It makes sense that Elon Musk wants to reduce the platform’s reliance on ad revenue. When a business closely relies on advertisers for revenue, they are beholden to their demands. This leaves them in a vulnerable position, which was evident in YouTube’s advertiser exodus. If even a small handful of major companies pulled their ads, it would cause a huge drop in revenue. This would then place greater pressure on the platform to make changes — whether that’s increasing censorship or demonetizing certain content.
Twitter’s Loss Is TikTok’s Gain
By successfully orchestrating his Twitter takeover, Musk would be free to emancipate it from the whims of advertisers. He could finally make the platform into the free-speech utopia that he so desires. However, this would come at a cost – advertisers would likely leave for other platforms, like TikTok.
This would be great news for TikTok, which is already seeing a surge in popularity. The platform has been downloaded over 3 billion times and is currently the most downloaded app in the world. In terms of ad revenue, it’s expected to generate $11.64 billion this year. This is a huge increase from the $3.88 billion it made in 2020. And is largely due to the fact that more and more advertisers are flocking to the platform. For context – Twitter’s ad revenue last year was just $5.58 billion.
“TikTok’s user base has exploded in the past couple of years, and the amount of time users spend on the app is extraordinary,” – Debra Aho Williamson, Analyst at Insider Intelligence
If Twitter becomes increasingly hostile to advertisers, TikTok is in position to benefit. The platform offers a much friendlier environment for marketers, as well as a huge and engaged user base. Should Musk, in fact, succeed in taking Twitter private, even more advertisers will likely make the switch to TikTok.
TikTok’s Incredible Growth
Industry analysts have been paying close attention to TikTok’s incredible growth trajectory, and marketers are also starting to take notice. “TikTok’s user base has exploded in the past couple of years, and the amount of time users spend on the app is extraordinary,” stated Debra Aho Williamson, an analyst at Insider Intelligence. But TikTok’s audience is not only enormous, it’s also incredibly youthful. This makes it the perfect environment to promote emerging industries such as crypto, NFTs, and blockchain technology. Twitter may have introduced many users to the Dogecoin craze, but TikTok is where advertisers can make a real and sustained impact. TikTok is already becoming the go-to platform for crypto and blockchain-related content and a potential Twitter advertiser exodus would only accelerate this trend.
The Bottom Line
All factors considered Elon Musk’s hostile Twitter takeover could be great news for TikTok. It would allow the platform to continue its rapid growth and provide marketers with a safe and welcoming environment to promote their products and services. So, even though Musk’s intentions for Twitter may be noble, the beneficiaries could end up being TikTok and its users.
To learn more about how TikTok advertising can help you drive business growth, reach out to us at House of Marketers today.
House of Marketers (HOM) is a leading TikTok Marketing Agency. Our global agency was built by early TikTok Employees & TikTok Partners, which gives us the insider knowledge to help leading brands, like Redbull, Playtika, Badoo, and HelloFresh win on TikTok. Want us to convert more of Gen Z and Millennials with TikTok? Get in touch with our friendly team, here.