Elon Musk’s leadership has been a blessing for Twitter so far, boosting the latter’s market cap almost 2x this year
Despite a climbing user base, slowing advertising spends on Twitter will likely remain a challenge for Musk in 2023
With 2.3 Cr active users, India doesn’t contribute much to Twitter’s top line
It may be an unsettling year for tech giants across the world, but for the micro-blogging site, Twitter, 2022 has been the year of rebirth. As Elon Musk rewrote the rules of a new Twitter this year, after buying the platform for $44 Bn, many questions remain unanswered on how the social media company will engage with the government, especially when Musk is strongly advocating free speech.
In India, the problems for Twitter began much before Musk’s takeover. The government and Twitter’s former leadership were involved in a legal battle over the provisions of the IT Act (2020) under which the micro-blogging site was sent a number of notices to take down several posts from its platform.
In a first-of-its-kind development that took place in India, Twitter ended up filing a lawsuit against the government, alleging that some of the takedown notices, under the provisions of the IT Act, were against the freedom of speech and expression policy of the platform.Download Annual Funding Report 2022
As of now, while a legal battle is underway between Twitter and the Government of India, the social media giant is operating with minimal resources in the country, after Musk fired nearly 210 employees this year. Following his Twitter takeover, Musk announced mass layoffs across the company. According to sources, Twitter is operating with a team of just ten employees in India.
As per some former top executives of Twitter, this was expected as Musk is highly focussed on making the platform profitable.
“In the long term, Twitter India’s user base could be used to support Musk’s other businesses. However, in the short term, Musk’s focus is on strengthening advertising revenues, building a subscription model and charging for blue ticks,” Raheel Khursheed, the former Twitter India Head said.
Although Twitter doesn’t give a breakdown of region-specific revenue, some of its former employees told Inc42 that the company is making losses.
For the first time in the last five years, Twitter Communications India, a vertical of Twitter India, reported a loss of INR 31.84 Cr in the financial year 2021-22 (FY22). It had reported a profit of INR 7.76 Cr in FY21.
However, the vertical’s operating revenue grew more than 81% to INR 156.75 Cr in FY22 from INR 86.36 Cr a year ago.
Musk’s Game Plan & Why India Could Be A Difficult Market
Right now, the commercialisation or monetisation of Twitter seems to be the top priority for Musk and his team. This is because of the company’s dismal last quarter (Q2, 2022) results. Twitter is yet to report its Q3 earnings results.
In November, the tech billionaire said the company was losing $4 Mn a day, thanks to the sliding advertising revenues. Advertising accounts for 90% of the company’s revenue. Throughout the year the microblogging site was impacted as advertisers slowed their ad spends when the company’s former leadership was busy locking horns with Musk.
Globally, Twitter’s losses soared to $270 Mn and its revenue slipped 1% to $1.18 Bn in the April-June quarter of 2022. This was despite a 16.6% year-on-year (YoY) rise witnessed in the company’s active user base, which stood at 237.8 Mn during the quarter.
Undoubtedly, Musk has boosted Twitter’s market cap, which stood at a market cap of $28 Bn at the time of acquisition, and is now trying hard for Twitter to make money. Twitter’s blue tick subscriptions, its experimentation with long-format content (which could be chargeable), and its ban on promotional content of rival social media platforms are some steps in that direction.
Why Is India A Hard Nut To Crack For Twitter?
For Musk, India could be a difficult market to crack. This is because despite being the third largest user base of Twitter, at 2.3 Cr active users, the country hasn’t contributed much to its top line.
“In India, the problems have been many. Advertising, for example, couldn’t take off in a big way since the platform charges are exorbitantly high for a price sensitive market like India. Further, the platform hasn’t been able to penetrate the markets beyond metro cities and tier 1 towns,” a former Twitter India official said, requesting anonymity.
The official maintained that in the last decade, Twitter tried its hand at various things, ranging from winning digital rights for Indian Premier League to joining hands with government functionaries/departments during elections and running hashtag campaigns for media and entertainment channels, but the results have not been on expected lines.
The owner of a Delhi-based digital advertising agency said that the brands/advertisers have now decoded the power of each social media platform. “They know that spending a hefty amount on Meta will yield them way better results compared to Twitter,” he added.
The senior managing director at Ankura Consulting Group, Amit Jaju, said that although Twitter’s user base has increased over the past few years, the platform has failed to innovate, and this is where Musk is eyeing a turnaround in his quest to make more money for the platform.
According to a report, the company’s monetisable Daily Active Users (mDAUs) grew 74% YoY in the fourth quarter of 2020, and India is in the process of achieving 315 Mn mDAU by the fourth quarter of 2023.
David Vs. Goliath: Twitter’s Scuffle With Indian Government
Ever since the Indian government introduced the IT Act (2020) to govern content moderation practices, block accounts violating the laws of the land and make social media intermediaries more accountable, Twitter has been on a warpath with the government.
Following the filing of criminal cases against former Twitter India head, Manish Maheshwari in 2021, 2022 didn’t begin on a good note for the tech firm in the country.
The Indian government and Twitter’s legal battle continued this year, with the social media company filing a lawsuit against the government over several takedown notices.
In July this year, Twitter in its lawsuit said that the government’s orders to block the content of some political parties were in violation of the freedom of speech guaranteed to the citizens and the users of the platform.
The micro-blogging site also alleged that the government threatened to open criminal proceedings against its chief compliance officer if the company failed to comply with the orders.
Meanwhile, the government has maintained that Twitter will need to comply with the country’s IT Act regardless of the latest takeover by Musk.
“Our rules and laws for intermediaries remain the same regardless of who owns the platforms. So, the expectation of compliance with Indian laws and rules remains,” IT minister Rajeev Chandrasekhar said in October.
As of now, India is already working on the Personal Data Protection law in addition to the IT Act, which as per legal experts, will add to the compliance burden of the platforms like Twitter and Meta that deal with the personal data of millions of users.
As such it will be interesting to see how Musk-led Twitter will engage with the government officials, especially after the new leader has said that Twitter’s reputation as a free speech platform will not be compromised.
So, What’s Next For Twitter?
Many say Twitter’s futuristic model will be subscription based, which will charge its users for premium content. The senior managing director at Ankura Consulting Group believes that Twitter has a unique positioning among all social media platforms currently.
“If you look at various social media platforms, there is a huge divide. While on the one hand there is entertainment, on the other hand there is knowledge and news. Facebook, I think, is more on the entertainment and lifestyle side. The same goes for Instagram. However, YouTube is more about knowledge and infotainment, and Twitter embraces news. So, I think, it has a unique positioning,” Jaju added.
But making money is where Twitter might falter again in a geography like India, where users traditionally do not like to pay for content.
Further, Musk’s plan of charging $8 per month from blue tick subscribers is also in question. It is still uncertain whether the same charges will be applicable across India or the rates will be applicable, keeping in mind the power purchasing parity (PPP) of each geography.
Twitter’s former executives, Manish Maheshwari (ex-India head) and Raheel Khursheed (erstwhile government and politics head), believe that charging $8 per month and offering blue ticks will not be a success in India, where the company has already tried various user engagement models earlier.
“Twitter Blue tick signifies exclusivity and has been a USP of the platform for long. I think making this common is not a good idea. However, charging the blue tick holders could ultimately fetch some revenue,” Maheshwari said.
The best way forward as per analysts and the former Twitter India employees, will be to offer subscriptions or charge a section of Twitter users for the premium content and largely make the platform free.
But what if the entire Twitter goes behind a paywall? Experts say that in this situation, India wouldn’t stay relevant to the micro-blogging site. They believe that the company will not want to experiment with its 23 Mn user base in India.
Perhaps Netflix’s example, especially for a demography like India, may serve Twitter some good. Netflix lost a million paid subscribers globally in the second quarter of 2022 to other streaming apps.
Last year in December, Netflix slashed its subscription charges in India by 18-25% to engage more people. However, this impacted the company’s Asia-Pacific (APAC) revenue, as it depends only on subscriptions.
Therefore, it would be tricky for Musk to build a profitable Twitter while only depending on increasing its user base. Musk has been highlighting that various decisions that he has taken have enhanced mDAUs engagement, which have grown by two million since November.
According to Sensor Tower, which provides app store optimization (ASO) data and key metrics to monitor apps’ marketplace performance, Twitter’s mobile app was downloaded 7.6 Mn times globally between October 27 and November 7, up 21% from the corresponding period of 2021.
This shows the positive impact of Musk’s approach in handling Twitter operations and creating a more rigorous work culture in the company.
However, analysts are sceptical as to how far the current approach will work for the micro-blogging site, especially in a price-sensitive market like India.Download Annual Funding Report 2022