Experts on Wall Street discuss what the planned sale means about the social media revolution, what implications it will have on the larger digital advertising space, and whether the mercurial Tesla CEO will be a good fit for the firm.
According to MoffettNathanson, an analyst with a "neutral" rating on the stock, Elon Musk's offer was a false scheme for shareholders given the operating, monetization, and valuation difficulties at Twitter. The sale of Twitter for $54.20 is the third evidence that Twitter's value has been far more valuable than Twitter's actual long-run operations."
After Monday's deal announcement, Twitter founder Jack Dorsey described it as an idea and a possibility, adding that: "It's everything that matters to me, and I will do everything I can to protect them."
Mark Mahaney, an Evercore ISI analyst, addressed key questions that investors may seek, including whether Twitter will be a "better" platform under Musk's ownership. "Hard to say," the Wall Street expert said. "We have been consistently aware of Twitter's product innovation for years. So the easy conclusion is that Twitter is unlikely to become worse in terms of product innovation. Whether it gets better or not, is unclear."
Mahaney addressed a potential advertiser disgruntled. Despite Musk's announcement, he said, There is a certain possibility that marketers will take their ad campaigns to other platforms (Google, Facebook, Snap, TikTok, Reddit, etc.), he added.
We're skeptical that less moderation will result in significant user growth, with only 13 percent of respondents in our latest survey expressing concern. That said, Musk's ideas of allowing tweet edits and eliminating text character limits nous deem to be extremely user-friendly.
Did Twitter's board make the appropriate decision by shareholders with the acquisition to Musk? That depends on two things, Mahaney said. How much confidence one has about Twitter's board and management team delivering on their publicly stated 2023 goals ($7.5 billion in revenue and 315 million daily active users, DAUs) after all. Musk's bid with its significant premium occurred during a tech bear market when Twitter shares were 50 percent off late 21 highs, according to an Evercore ISI expert.
Ahead of Twitter's most recent financial update on Thursday, analyst Nathanson discussed the board's performance announcement just three days before Twitter reported its first quarter earnings. It's interesting the board accepted the Musk deal, as a result of rising inflation, supply chain shortages, and the war in Ukraine. We believe Snap's relative flaw in brand advertising (which we estimate accounts for approximately a quarter of Snap's ad revenues) was a negative read-through to Twitter, which is the most exposed to brand
What does all of this impact on the future of mobile advertising on social and digital channels? We anticipate advertisers will be less willing to spend on Twitter if Elon Musk removes content moderation in order to promote free speech, Nathanson said. We continue to believe that performance advertising is the major driver of digital (and total) US ad spend going forward, but we do not expect Twitter's acquisition by Elon Musk to significantly alter this trajectory.
The board may have considered a possible future impact on Twitter's brand advertising in a short to medium timeframe, owing to the prevailing macro problems (rising interest rates, rising inflation, and supply chain issues).
Blackledge noted that the social media business has felt the need to revamp its ad business : Twitter's management has worked over the years to continue to improve the platform for users and advertisers, most recently upgrading its ad tech stack in an effort to increase the amount of DR advertising to 50 percent of total advertising revenue mix, compared to 15 percent currently.