Categories Analysis, Technology

Twitter (TWTR): What will happen to the first social media company that banned a President?

Twitter has been making efforts to deal with toxic content on its platform by weeding out fake accounts and introducing new features to tackle misinformation

Twitter Inc. (NYSE: TWTR) made waves last week by doing something totally unexpected – banning a President from its site. The stock appears to have finally recovered from this bold move, gaining 1.8% in afternoon hours on Tuesday. The stock has dropped 15% since the beginning of this year.

Twitter was not the only one to ban outgoing President Donald Trump from its platform but it was the first one. The microblogging site was soon joined by Facebook (NYSE: FB), Alphabet’s (NASDAQ: GOOG) YouTube, Snap’s (NYSE: SNAP) Snapchat and others.

Twitter’s move to ban Trump sparked a debate with some calling it ‘long overdue’ while others remarked that this was too much power for one company. Many raised concerns calling this an attempt to curb free speech.

Usage

Like its peers, Twitter witnessed increased engagement last year during the COVID-19 pandemic. During the second quarter of 2020, Twitter saw its global monetizable daily active usage (mDAU) increase 12% on a quarter-on-quarter basis and 34% on a year-over-year basis, reflecting the highest growth rates in over two years. At the end of the third quarter, the company had 187 million mDAU, up 1% QoQ and 29% YoY.   

Twitter reports Q3 2020 earnings results

The majority of Twitter’s users are in the US. At the end of Q3 2020, mDAU in the US totaled 36 million, up 20% YoY. International mDAU rose 32% YoY to 152 million in Q3.

Revenues

Twitter generates the majority of its revenues from advertising and therefore took a hit during the first two quarters of 2020 from the reduction in advertising due to the pandemic. However, by the third quarter of 2020, advertising saw a recovery which helped Twitter deliver ad revenues of $808 million, which was up 44% QoQ and 15% YoY.

During the third quarter, Twitter reported total revenues of $936 million and 55% of this came from the US while 45% came from international markets. Revenues from the US increased 40% QoQ and 10% YoY to reach $512 million.

Reach and popularity

According to a report by Oberlo, approx. 63% of Twitter users worldwide are between 35-65 years old, suggesting that Twitter appeals to a more mature audience than Snapchat or Instagram. The report states that Twitter is one of the top five social media sites in the US and that over 20% of internet users in the US access Twitter on a monthly basis. 75% of B2B businesses market their products and services on Twitter.

Based on data from Business of Apps, Twitter had 353 million monthly active users (MAU) in the third quarter of 2020. The highest number of MAUs were in the US amounting to 68.7 million.

Content efforts

Twitter has been making efforts to deal with toxic content on its platform by weeding out fake accounts and introducing new features to tackle misinformation. The move to ban Trump from its platform could be seen as part of these efforts as the outgoing President used Twitter the most to connect with his followers and to express his opinions on all topics, which was seen by many to have a negative effect.

Aftermath

Several experts believe the ban on Trump will impact Twitter negatively in the near-term in the form of a decline in users or a reduction in advertising revenues. The ban has led to criticisms against the company over censorship of free speech which could be another challenge. The general opinion appears to be to wait and watch how things play out and what effect it has on the stock.

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