Advertising Revenue at Twitter Halved Since Musk Acquisition

Elon Musk’s acquisition of Twitter for $44 billion in October 2022 has been marked by significant financial challenges, including a drastic drop in advertising revenue and a heavy debt load, resulting in negative cash flow. Musk publicly acknowledged the 50% decline in ad revenue, highlighting the platform’s precarious financial position. This revelation follows a report by Insider Intelligence projecting Twitter’s 2023 revenue to be less than $3 billion, a substantial one-third decrease compared to the previous year. The decline can be attributed to a combination of factors, primarily user and advertiser dissatisfaction with the changes implemented under Musk’s leadership. These changes have ranged from controversial content moderation policies to technical issues and limitations on tweet access.

One of the most significant shifts has been the introduction of daily reading limits on tweets. Verified accounts are restricted to 10,000 tweets per day, while non-verified users face a 1,000-tweet limit, and new unverified accounts are further capped at 500 tweets. Musk justified these restrictions as necessary measures to combat data scraping and system manipulation by third-party platforms. However, the move was met with criticism from users, particularly those reliant on Twitter for news and information. This limitation, coupled with the announcement that TweetDeck, a popular tool for managing multiple accounts, would become exclusive to verified users, further fueled user discontent and raised concerns about the platform’s accessibility.

These internal struggles coincided with the emergence of a formidable competitor: Threads, a text-based app launched by Meta Platforms, the parent company of Facebook and Instagram. Threads rapidly gained traction, surpassing 100 million users within its first five days, a feat that took the popular AI chatbot ChatGPT two months to achieve. Estimates suggest that Threads’ user base has since grown to 150 million, with India leading the way, largely due to its integration with Instagram, which boasts over two billion users. This integration provided Threads with a ready-made audience and a significant advantage over Twitter, which has struggled to maintain its estimated 200 million regular users amidst technical issues and user dissatisfaction.

The rapid growth of Threads presents a direct challenge to Twitter’s market share. While Twitter grapples with declining revenue and user attrition, Threads leverages its connection to Instagram to rapidly expand its user base. This dynamic highlights the competition in the social media landscape, where new platforms can quickly gain traction and challenge established players. Twitter’s existing challenges are exacerbated by this competition, forcing the platform to address its internal issues while simultaneously contending with a rapidly growing rival.

The rivalry between Twitter and Threads extends beyond mere market competition and has spilled into the legal arena. Musk has threatened legal action against Meta, alleging the theft of trade secrets and intellectual property. In a letter to Meta CEO Mark Zuckerberg, Musk’s lawyer accused Meta of recruiting former Twitter employees who allegedly retained access to confidential information, further escalating the tension between the two tech giants. Meta denies these accusations. This legal wrangling adds another layer of complexity to the evolving relationship between the two companies, showcasing the high stakes involved in the social media market.

Meanwhile, Threads’ aggressive data collection practices have raised privacy concerns and delayed its launch in Europe. The platform’s requirement for users to grant extensive tracking permissions clashes with European data privacy regulations, particularly the General Data Protection Regulation (GDPR). This regulatory hurdle highlights the challenges faced by tech companies operating across different jurisdictions with varying data privacy laws. While Threads navigates these legal complexities, it continues to expand in other regions, capitalizing on its link with Instagram to build its user base. The platform’s future in Europe remains uncertain, pending resolution of the data privacy concerns and compliance with EU regulations.