Long stories short:
- Meta was challenged by its Oversight Board to change the way it moderates drill music videos.
- Microsoft is intensifying its competition with Sony to develop games in China.
- Amazon will face scrutiny over its acquisition of Roomba due to concerns about a data monopoly.
Elon Musk is on a mission to save a dying business. Twitter has not posted a profit since 2019 and has had many more loss-making years than profitable ones. Musk has to reverse a dire financial reality, and it doesnât look like Donald Trump will help.
Twitterâs business now:
- It made $4.51 billion from advertisers and $572 million from data licensing in 2021.
- It lost $221.4 million that year, and $1.14 billion in 2020.
- It has suffered âa massive drop in revenueâ since being acquired, Musk says, and is reportedly losing $4 million each day;
- It has lost 35 per cent of its $2 billion in cash reserves since Musk announced his ambition to buy the platform.
The worsening financial situation, a massive exodus of staff and several high-profile users logging out caused #RIPTwitter to trend across the platform last week. Musk responded: âTwitter is alive.âÂ
Alive or dead? The site itself doesnât look like itâs dying. Third-party estimates suggest visits to Twitter have increased by 17 per cent (from 6.85 billion to 8.03 billion) in the past month. Musk has claimed Twitter is seeing historic levels of usage, but has also openly lied about the platformâs importance and popularity, saying that it was the âbiggest click driver on the Internet by farâ. This isnât true. Twitter drives 7 per cent of web traffic referrals, compared with Facebookâs 74 per cent.
Will downsizing help? Maybe. Traffic to the website might be growing but the workforce that maintains it has shrunk. Filings in 2021 showed Twitter had 7,500 employees. The current number could be as few as 2,500 after resignations and firings in the past month (most of which have depleted Twitterâs sales, safety and moderation teams).Â
One analyst said the reduced headcount could save Twitter as much as 41 per cent of its total costs and lead to profitability going forward. Google recently announced it would cut 10,000 jobs, following news from Meta (which plans to make 11,000 cuts) and Amazon (also 10,000 firings) of a general downsizing in the technology sector. The industryâs playbook is to fire staff, double-down on revenue-generating business lines and cut-back on unproven and experimental projects.
Twitterâs recent strategy is in line with its competitors. But the mass firings may have irreparably damaged its core business: advertising. One senior advertising executive said: âThere are alarm bells ringing with all the sales teams decimated, with multiple chains of leadership broken up and no assurance that things are under control.â
Which only heightens the risk of collapse and financial catastrophe.
What happens next? Advertisers and influencers have paused their relationships with Twitter. Omnicom, the global marketing group which represents McDonaldâs, Apple and Unilever, reportedly advised its 5,000 clients to stop spending on Twitter ads.Â
Phil Smith, Director General at the Incorporated Society of British Advertisers said: âWith such rapid organisational change and uncertainty over plans, thereâs a heightened need for verifiable assurance.âÂ
For many advertisers, Twitter was already an economically marginal platform. Phil Schiller, a senior exec at Apple responsible for the App Store, has deactivated his Twitter account after 14 years on the platform. If App Store support for Twitter is pulled, Twitter would drift further to the margin and would be unlikely to survive.
After all the departures, Twitter welcomed a new arrival in ex-President Donald Trump. Heâs currently ghosting the platform, and hasnât tweeted since his account was reactivated. Trump apparently doesnât see a reason to go back to Twitter. Advertisers might feel the same. If so, Muskâs mission is doomed.Â
A message from our sponsor
New research from McKinsey & Company suggests that consumer faith in a companyâs cybersecurity, data protections, and responsible use of AI can make or break a companyâs growth.
Companies leading in this area are more likely to see at least 10% revenue and EBIT growth annually.Â
Read the research: âWhy digital trust truly mattersâÂ to see what digital trust leaders are doing differently.
Meta: Drill down
Meta is facing calls to review its content moderation strategy after removing a drill music video which contained references to a gang shooting. The Facebook Oversight Board, a Facebook-funded body of academics, researchers and journalists tasked with reviewing the companyâs moderation decisions, challenged Metaâs call to remove a video by Chinx, who is based in the UK, arguing there wasnât enough evidence to show the content was a credible threat to anyoneâs safety. The Metropolitan Police has reportedly asked social media companies to review over 280 pieces of content related to drill music in the year to May 2022, with 89 per cent removed. Drill â which typically comments on the realities of life in violent cities â often makes reference to criminal activities. The genre has created a problem for police and platforms, which struggle to assess whether it represents incitement to violence.Â
Apple: CMA probe
The UKâs Competition and Markets Authority has launched an investigation into control over the mobile browser market by Apple and Google. Suspicions that the two companies had a âstrangleholdâ over browsing on mobile devices have been supported by the fact that they control a combined 97 per cent of the market. The probe will investigate if the duopoly limits choice and ultimately harms customers.
Microsoft: Chinese games
Microsoft and Sony are rivals in the Chinese video game development market. For a long time China has been a net video game importer â the value of the games it buys from overseas far outweighed the value of those it developed itself. This may be changing. Recent successes in the development market have seen Sony and Microsoft invest more heavily in sourcing Chinese games. Sony recently said it would expand one of its gaming incubators in the country, investing $140,000 in individual titles in an effort to find its next big success.Â
Amazon: Intrusive Amazon
Foxglove Legal, the tech watchdog that has challenged both Facebook and Palantir in the past, is now focusing on Amazonâs planned acquisition of iRobot. It has asked the CMA to investigate the deal, two months after the US Federal Trade Commission launched its own antitrust probe. The concern is over Amazon gaining an unfair advantage by learning about the layouts of peopleâs homes and lifestyles. Amazon maintains its âimmense market power with self-reinforcing incumbency advantages,â reads the 14-page letter. With access to our voices, shopping habits, food choices, medical records and front door, thereâs little else about us that it doesnât know.Â
Tencent: Problem solved
Childrenâs addiction to gaming has been âresolvedâ says Chinaâs top gaming industry association. Chinaâs Game Industry Group Committee, affiliated with the governmentâs gaming regulatory body, has published a report that claims âminorsâ gaming addiction has been basically resolvedâ. It says 70 per cent of minors play less than three hours of games a weekÂ â a sign that the government may be planning to ease its restrictions on online video games, which began in August 2021 when it said children could only play online games for three hours a week. An easing on licence restrictions could entail a massive windfall for Tencent.Â
Thank you for reading the Tech States Sensemaker and do ask your friends to sign up. Weâll send it to you every Wednesday but if youâd rather opt out, just update your preferences and follow the link sent to you by email. Please email opinions, tips or stories to email@example.com. If youâd like to arrange for your organisation or group to receive this newsletter, drop us a note here.
2:00pm 23 November: This article has been amended to remove the Google nib as the content was inaccurate