November 8, 2022 - 1:00pm

The backlash to Elon Musk’s Twitter deal did not not take long. Within days of his purchase IPG Megabrands — one of the four largest advertising companies — advised their clients to suspend advertising on the platform. In addition, Pfizer, General Motors and Volkswagen are among the other companies to have suspended paid adverts on the platform.

In 2021, advertising made up around 92% of Twitter’s total revenue. It is now clear, if it was ever in doubt, that for Musk’s vision for Twitter to succeed he will need to wean the company off its addiction to advertising money.

Musk’s first strategy has been to announce that Twitter will now sell its verification badges — commonly known as blue ticks — to users for a fee of $8 per month. Until now the verification process has remained shrouded in mystery. Twitter has the criteria laid out on its site, yet many users have found themselves rejected with no explanation despite meeting the explicit requirements of the verification process. It is not surprising, then, that only 0.2% of Twitter users are currently verified

Can Musk plug the gap of falling advertising revenues by selling checkmarks? Let’s consider the numbers. Of the $5.08 billion of revenue generated by Twitter in 2021, around $4.67 billion was from advertising. Given that there are currently around 424,000 verified users, this means that Twitter would need to increase the number of verified users to around 48.68 million. In other words, 23% of Twitter users would need to become verified to replace advertising revenue. That’s a lot. 

But perhaps we can be more modest in our assumptions. Twitter did not lose all its advertisers. Musk has said that it has taken a huge hit to its advertising revenues, although he has not specified a number. Since one of the four largest advertising firms recommended that their clients pull their ads, let’s assume that Twitter will lose around 25% of its advertising revenues.

In this case, Twitter would only need to increase the number of verified users from 424,000 to 12.2 million. This implies that around 6% of Twitter users would need to become verified to replace a 25% advertising revenue shortfall. That is still a very high number, but it is not outside the realm of possibility.

Yet it seems like selling blue ticks is only the beginning of Musk’s plans. In a short video released by the company, Musk and his team meditate on the idea of micropayments for paywalled content. Basically, the team are considering whether users might pay a small access fee — in the video they suggest ten cents — for access to a paywalled article at a major media publication.

While the idea is interesting in and of itself — it could have a profound impact on the online media ecosystem — it raises the larger question of whether Twitter might aim to become a payments app. If users needed to upload Twitter credits — ‘blue bucks’ or even ‘cluck bucks’, perhaps — then Twitter will probably need a banking licence. Were this to occur, it is not hard to imagine Twitter transitioning to become an integrated payments and social media app similar to WeChat.

This may be the direction Musk wants to take the company. It would also render Twitter completely resilient to attempts at blackballing it. In fact, if Musk were to turn Twitter into a Western WeChat, it could end up being Twitter that wields market power over other companies, not vice versa.


Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics

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