In a new SEC filing, the company acknowledged that its core advertising business could now be at risk as a result of the Musk takeover, in addition to employee hiring and retention efforts. Musk hasn't offered assurances to the advertiser base that the brand will remain safe post-. Musk said only that he believes any speech not deemed illegal by a government will be allowed on the platform.
A wide range of prohibited types of content is already moderated by Twitter. The moderation policies that could be rolled back include those focused on certain types of misinformation, deepfakes, impersonations, targeted attacks, and other things.
Advertisers are worried that a lighter touch on the existing content moderation policies could allow more violence, hate speech, misinformation, and abusive content to gain ground. Advertisers don't like having their business promoted alongside divisive and hate-filled content.
They may just decide that reaching the small-ish user base of the micro-blogging site is not worth the risk. The most recent quarter ended with 229 million monetizable daily active users, which is more than any other social network.
Will advertisers flee a ‘free speech’ Twitter?
Advertiser loss is a possible risk according to the SEC filing.
The company said that there are many new risks related to the transactional nature of the Musk deal.
As the company explains in the filing, it continues to generate most of its revenue from advertising, and its loss could hurt the business. It notes that if it lost advertisers, it may be less competitive.
We believe that our ability to compete effectively for advertiser spend depends on many factors, including our reputation and the strength of our brand relative to our competitors.
This is not necessarily a new risk for the social network, but it is one that advertisers are more careful about as they budget for the months ahead.
Elon Musk’s Twitter deal includes a $1 billion termination fee on both sides
The news of the Musk acquisition has caused advertisers to be scared, according to reports.
Advertisers reacted to the news with anxiety and confusion. The report noted that brands began reaching out to agencies to help them understand and prepare, and that one agency executive said advertisers were preparing to stop spending if things seemed to be going in the wrong direction.
The FT reported recently that automakers were concerned about giving Musk deeper access to their marketing agendas, and that they were worried about being seen as giving Musk preferential treatment.
There are lots of ideas to reduce the reliance on advertisers that Musk has, but none of them would be able to keep the business afloat.
Elon Musk has reportedly lined up a new Twitter CEO, shared ideas for monetizing tweets
The company has historically struggled in growing its user base, which is related to advertiser interest in the platform. It's not yet clear if the deal will lead to the loss of existing users or if it will bring in new users. It is possible that existing users could change their behavior, which could affect the company's ability to grow its daily active user metric.
The filing suggests that growth could be impacted if influential accounts stop contributing content. Content partners not renewing their agreements with the company could be a concern.
There are a lot of risks that are applicable to any company doing business in its industry. Advertisers are taking a wait-and-see approach to the social network.
Current employees could be distracted, and their productivity decline as a result, due to uncertainty regarding the merger, as the company acknowledged a more immediate threat of employee departures and an inability to effectively recruit as other potential ramifications of the merger.
When speaking to reporters on the red carpet at the annual Met Gala in New York, Musk downplayed any worries over employee departures, saying that it's a free country. That's fine.
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