Twitter's Risky Attempt To Position Itself As A "Good Tech Giant"

Twitter's recent political advertising prohibition excludes the company from a soaring online political advertising market at a time when the company seems to be facing struggles with advertiser interest. However the company's gamble has the potential to pay off in the long-run if Twitter is successful in positioning and branding itself as a fair and safe social media platform immune from the abuses that are alleged to be taking place at alternative forums.

If that branding contrast works then Twitter may be able to avoid both regulatory risks as well as capture greater user growth and user activity, thus bringing in renewed advertising revenue.

The End of Political Ads on Twitter

Twitter's new political advertising policy, effective November 22, 2019, is that Twitter "globally prohibits the promotion of political content" under the justification that "reach should be earned, not bought" for political messages. This stands in stark contrast to Facebook's comparatively accommodating political advertising policy. Other companies such as Spotify are joining with Twitter's policy path while companies such as Google and its YouTube subsidiary are pursuing a medium that is less accommodating than Facebook but more so than Twitter.

While all the technology companies are still in the middle of the difficult task of applying their policy to the infinitely nuanced varieties of speech, the decision to engage in such public policy stands is in response to the consistent stream of policymaker and public interest in the companies' speech policies not only in the United States but across the globe.

Twitter's ad policy seems initially to be against the company's interests by completely sidelining an entire business segment, particularly one that is growing rapidly as money continues to increasingly flow into politics and that spending is shifting to the online realm. U.S. political ad spending in 2020 is estimated to hit $9.9 billion, up significantly from $6.3 billion in 2016. Furthermore, this policy prohibition takes place at a time when Twitter was already seeing investor concern over slowing advertiser interest. Indeed long-time Twitter investor Josh Brown recently cited Twitter's political ad policy as a reason why he is selling his investment in the company.

Not Self-Sabotage, But A Risky Gamble At A Dangerous Time For Tech

However Twitter's policy also seemingly has strategic impact on its regulatory risks and, of more investor interest, its brand image. On the regulatory front, it seems Twitter wishes to avoid government regulators from seeing the need to intervene on the company and establish guidelines on the speech, whether paid or not, that takes place on its platform. With as active as Twitter is for political speech this may be a particularly important concern for the company as a risk to avoid over the benefit of getting a slice of the political advertising market.

On the brand front Twitter's gambit is far more interesting and perhaps impactful. In its most recent quarter Twitter saw the highest year-on-year percentage increase in monetizable Daily Active Users (mDAU) in years. mDAU is now at 145 million with even long-stagnant U.S. growth picking up the pace to catch international growth. Given the immense public scrutiny currently on social media and Internet services tech giants currently Twitter is clearly going the route of positioning itself as a "good tech giant" and one that wishes to put forward a platform clean of the alleged social media political manipulation that policymakers and the public across the world have begun to truly demand fixes and accountability on.

Twitter's recent Q3 2019 stock plummet was primarily seemingly the result of its poor revenue numbers for the quarter and which the company attributes to slower-than-expected advertiser interest for the season and software glitches. However both of those are not long term secular trends but rather momentary impacts. Of much greater long-term influence is Twitter potentially ramping up its user interest and activity, as well as thus advertiser interest, through branding itself as a social media platform which offers impartiality and is immune from the alleged political manipulation that is given more free reign on other platforms.

Conclusion

Whether Twitter's gamble succeeds will be seen in both its user activity metrics and its bottom line total advertising revenues. If the strategy doesn't work it is likely Twitter could re-open political advertising, as humiliating as admitting that defeat would be.

However if the strategy does pay off then Twitter could finally have found a way to establish a niche to separate it from its social media peers, particularly Facebook, that it has long struggled to distinguish itself from. As a long-term benefit to the company for Twitter to finally find a firm and distinct calling would be immense, transformative, and undoubtedly profitable.