Twitter tangle: Mismatch in user data rings alarm bells in the ad world
While some observers say the turmoil involving Twitter is making the industry wary, others don’t see a big cause for concern & doubt if the platform’s appeal as an advertising medium would take a hit
Days after the hoopla around the acquisition of microblogging site Twitter, Elon Musk on Tuesday asked the US Securities and Exchange Commission (SEC) to probe whether Twitter's claim on the number of its user base is true. He has already spoken about putting the deal on hold citing a massive mismatch between the total and real users’ database of Twitter.
"My offer was based on Twitter's filing with the Securities and Exchange Commission (SEC) in which it says that fewer than 5% of accounts on its platform are fake. However, over 20 percent of accounts are fake/spam/bot accounts. This could be much higher,” Musk said on Tuesday, surprising the media and social media fraternity.
Musk has also announced that his proposed $44 billion Twitter buyout can't move forward until Twitter's CEO provides proof that the platform has fewer than 5% fake accounts. Musk and Twitter CEO Parag Agrawal’s banter on Twitter has got a lot of public attention.
Technology website The Verge said in an April report: “Twitter overstated the number of daily users on its service for three years straight, overcounting by up to 1.9 million users each quarter.”
But why did Twitter allow bots on the platform and why did it fail to curb them, this was Elon Musk’s question.
Turns out that this issue has been a topic of discussion among marketers for years now, but most of it has been a hush-hush one.
This controversy now raises a bigger question – Are Twitter and other social media platforms as transparent as they are supposed to be?
The answer is crucial since many brands are spending 30-40 per cent of their digital AdEx on social media and influencer marketing, perhaps without realizing that a significant chunk of the social media base could be fake.
According to Shashank Srivastava, Executive Director (Marketing & Sales), Maruti Suzuki, “Fake accounts exist on all social media platforms and it is an open secret to all advertisers. Hence, I don’t think that the mismatch in user databases will affect the credibility of Twitter unless the company is found to be involved in creating and maintaining the fake user ecosystem itself.”
“So far, we don’t know whether Twitter has 5 per cent or 20 per cent fake accounts. We spend on platforms assuming that a fraction of their user base may be fake. Besides, there are a large number of multiple accounts. Many social media companies and influencers are also involved in keeping fake accounts that help them to inflate likes, retweets and views,” Srivastava said. He also expressed hope that the uncertainty comes to an end soon.
Lloyd Mathias, Business Strategist and Independent Director, says, “All that’s transpired over the past few weeks is creating doubts among advertisers and will impact Twitter’s appeal as an advertising medium in the short run. How the platform uses this period to clean up and assure advertisers that their spend is worthwhile will be important.”
As for ad industry veteran and MD of Rediffusion Sandeep Goyal, “Twitter is not alone. The problem of fakes is all over social media. The same problem abounds on FB, Insta, YouTube. Likes and followers are all highly inflated.”
Goyal points out, “Advertisers are well aware of these facts. We all have our own way of discounting claimed numbers.”
Hinting that the trouble may not be that grave, Rahul Vengalil, Managing Partner of Isobar, says: “The lion's share of social media spends is on platforms like Facebook, Instagram and YouTube and not on Twitter.”
“We should remember that YouTube or Facebook are already putting in stringent measures as fraud and do a regular clean-up and price correction based on AI data available to them.”
Talking about the mess, Harish Bijoor, business & brand strategy specialist, says, “This is really a lot of muck churned. Not good for brand Twitter, not good for its valuation, and certainly not good for the brand from the advertiser's perspective.”
Twitter generates the majority of its revenue through selling ad space on its platform to global advertisers. And to attract advertisers, it needs a large and growing user base.
It measures its user base using a metric it calls monetizable daily active users (mDAU), which is broadly defined as the total number of user accounts that were logged in and accessed Twitter on any given day. Twitter added 6 million more users in the Q4 2021, an increase of 13% year over year, taking it to 217 million mDAU.
In 2021, Twitter generated more than $4.5 billion in advertising service revenues, up from $77 million a decade ago. Additionally, the micro-blogging platform produced around $571 million in data licensing revenue, up from $508 million in 2020.
In India, leading auto and other major brands have partnered with Twitter for marketing campaigns and launch purposes.
Marketers now wonder if the controversy will affect the businesses and ad revenue. Will the Twitter bot issue lead to an overall correction in the unit cost, is a question to ponder upon, ad experts say.
“There could be some setback in ad revenue, in the short run - but not significant,” Mathias assures.
As per Vengalil, “Brands will not shy away from advertising on social media as long as they are meeting their targets or KPI. If independent bodies are to investigate and report the number of fake accounts to be a significant part of the numbers shown, then there could be a unit price correction.”
Sharing the stock market perspective, Vipul Taneja, Co-Founder and CEO, Adsparkx, says, “The Twitter controversy has the potential to cause panic amongst stock market retail and early investors. There are chances of a drop in the stocks and it can turn out to be a good move for Elon to fix the deal at a much better price.”
Taneja adds, “Advertisers who wish to drive performance via social media won’t get affected on the spot. However, brands may want to decrease their budget or pull out until all of this gets cleared. There may not be an immediate impact but it will affect revenue in the long run when the response of the ad spend won’t come out as expected.”
An email sent to the Twitter India team to understand their strategy with regards to addressing the user base issue and the concerns of the ad industry remained unanswered till the time of publication of this story.
CEO Parag Agarwal had posted a thread on Twitter on Monday explaining why Musk's earlier suggestion of sampling 100 random accounts to determine the proportion of fake ones wouldn't work. Musk responded to Agrawal's post with a poop emoji.
Agrawal said in his thread that Twitter's estimate of what proportion of accounts are spam was based on "multiple human reviews (in replication) of thousands of accounts". He said Twitter's internal teams randomly sampled accounts the company considered to be "monetizable daily active users."
The CEO said the company suspends more than half a million spam accounts daily, "usually before any of you even see them on Twitter."
Many human-run accounts act like bots — they collectively repost and retweet lies or attack someone. "Many accounts which look fake superficially – are actually real people," Agrawal has said.
Trick to downsize cost?
It is common for many to have a second thought over the cost of acquisition. Marketers are speculating that it's possible Musk is using his concern over fake accounts to get a better price for his deal.
Researchers also claim that the bots have been helping Musk throughout his company Tesla’s battle with short-sellers over the past decade.
Instagram, LinkedIn, Twitter, Facebook & Youtube