We have been following the Twitter story closely as it COULD have implications for the rest of the social/community platforms.
For one, we know Musk is looking to charge users for certain activities on the platform. Rumors are $20 a month for its highest tier. What that offers is to be determined, however it is a significant possible change. We have also heard that the goal is to have 50% of revenue derived from subscriptions, which means the supply of inventory for ads will likely shrink on the platform.
This would be a tailwind to other platforms for two reasons. It either increases the cost per ad on the platform, which improves its competitors relative value proposition. Or the costs of ads remain similar in price; therefore, advertisers would seek alternative platforms to fulfill their remaining ad budgets.
We are also seeing some advertisers pull back now. GM pulled ads from Twitter, which makes sense given Musk is a competitor on the vehicle side. However, we are now seeing ad agencies promote a pause, which is an interesting development.
Lastly, the data today is around the signups to deactivations on Twitter. When the deal closed, we saw a substantial uptick in deactivations. While there were still net additions, the magnitude of the deactivations versus normal was 4 to 1 versus signups growing by 1/3.
Potential Investment Implications
From an investment perspective, there's a short-term and long-term view. In the shorter term, the chaos opens the door for competitors to take share. The longer-term view is that if subscriptions work this could change the dynamics of social/community platforms as we know them. This leads to more subscriptions, less need for ads, and therefore less impact from the negatives surrounding privacy. Twitter will have its best shot given it is not under the microscope of public markets.
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