(Photo illustration by Jakub Porzycki/NurPhoto via Getty Images)
Key takeaways
- Twitter introduced post limits over the weekend in what Musk called a bid to tackle data scraping and “manipulation”
- The pressure is on as Meta is set to introduce a direct competitor, Meta Threads, this week
- Twitter’s revenue is set to drop to $3 billion as advertising revenue has plunged nearly 60% since last year
Elon’s at it again. Twitter has introduced a temporary limit to the number of posts its users can see daily to deter data scraping and manipulation, according to the Twitter owner and eccentric billionaire Elon Musk.
The move has been met with an outcry from its users, and the sharks are beginning to circle as competitors like Bluesky and Mastodon capitalized from tweeters flocking to other platforms. As the head-scratching decisions continue, Wall Street is beginning to wonder if Twitter’s time is up. Here’s the latest.
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What’s happening with Twitter?
Twitter went through a wild ride over the weekend. Users suddenly couldn’t see any posts, panic rose – and then Elon dropped the bomb that due to “extreme levels of data scraping” and “system manipulation”, all accounts would have different post limits.
Paid users had a higher limit of 6,000, while new unverified accounts could only access 500. The limit changed several times over the course of Saturday night, with many users outraged that they were soon seeing ‘rate limit exceeded’ messages.
The move is another step in Elon’s crusade against generative AI companies, like OpenAI, using Twitter’s extensive data for training their models. Recognizing the value of Twitter’s data, in March Elon implemented a new tiered pricing structure for Twitter’s API which goes up to $210,000 a month for access to 200 million tweets.
It’s also a clear bid to bring more Twitter users onto the premium service, Twitter Blue, which Musk soon introduced after taking over the company. Another change is that the popular content management system TweetDeck will now be behind a paywall in a few weeks’ time, in a bid to boost Twitter’s bottom line.
Have its competitors benefited?
It’s clear that Twitter users weren’t happy with the sudden changes, with many fleeing to Twitter rivals to show their discontent. Bluesky, which Twitter founder Jack Dorsey co-founded, said it experienced “record-high traffic” on Saturday after Elon announced the news. The company is still in its invite-only stage, which paused temporarily over the weekend so the emerging platform could handle the influx of new traffic.
Mastodon, which relies on a decentralized structure where users build the network themselves, also saw a huge user boost. CEO Eugen Rochko wrote on the platform that Mastodon’s active user base had added 110,000 new sign-ups in just one day. “I would prefer it if Elon Musk was destroying his site during the work week,” Rochko wrote in another post.
But these two platforms are small fry compared to what’s coming: Meta is set to release its own competitor, Threads, this week. The app will be linked to Instagram’s user base, with Meta describing the new platform as a “text-based conversation app”. Instagram has well over two billion active users and is said to be courting top celebs to encourage growth on the platform, so the new rival could destroy Twitter’s dominance. “Thank goodness they’re so sanely run,” was the snide remark from Musk yesterday.
Is Twitter too big to fail?
Arguably there’s no such thing as ‘too big to fail’ in the tech industry, but we could see the beginning of a slow downfall for Twitter. While Twitter was taken private when Musk finally – and after nearly going to court about it – bought the company, many investors have said Twitter is no longer worth the $44 billion Elon paid for the social media platform.
Asset manager Fidelity said in a corporate filing that its stake in the company, which was previously valued at $20 million, is now worth just $6.6 million. With that logic, Twitter is worth a mere third of what Musk paid for the platform.
When it comes to social media, advertising is king – and Twitter’s ad revenue has fallen. Twitter’s ad sales have apparently dropped 59% from the previous year for April, a sign that companies have fled the platform after a string of controversial decisions since Musk’s takeover. In a bid to restore corporate confidence, Musk appointed former NBC executive Linda Yaccarino as CEO, but whether her appointment has had any effect yet is still to be seen.
With 90% of its revenue tied up in advertising, Twitter is set to post a big loss in 2023. The company’s revenue is expected to fall to $3 billion this year, way down from the $5.1 billion revenue it made in 2021 as a public company. It doesn’t help that some of the biggest companies in the world, including Disney, General Motors and Volkswagen, have all paused their ad spending on the platform, which could be influencing smaller companies to stay away.
Unless Musk and Yaccarino can convince advertisers to hop back on board and boost the bottom line with Twitter Blue subscriptions, it’s pretty clear why Meta is launching a competitor – there’s a market share gain to be made.
The bottom line
Twitter faces multiple challenges right now, some of which are undoubtedly its own fault. Alienating its user base while other competitors lie in wait, advertisers running for the hills and a major new competitor from a fellow Big Tech titan are just some of the issues it faces should the company wish to restore user – and investor – faith.
But Twitter has survived up until this point, and other companies have copied some of Musk’s bolder moves such as Reddit monetizing its API and Meta introducing a paid subscription. We wouldn’t count Twitter out just yet, but the company needs to climb a big mountain first.
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