3 Reasons Why Elon Musk’s “Free Speech” Dream With Twitter May Cost Him Too Much.

But if anyone can do it, it's Elon Musk.

An ardent defender of online free speech for several years, Elon Musk has recently shifted into high gear. By buying Twitter for 46 billion dollars, the Tesla and SpaceX boss has embarked on a real crusade for free speech online.

Elon Musk defines himself as a “free speech absolutist”. According to him, everyone should be free to express their opinions without hindrance. The moderators of the Twitter network have to worry about their jobs if we listen carefully to Elon Musk and his plans for Twitter. He considers the network too restricted and wants to restore it to its role as a “digital town square” where all speakers, as well as all speeches, have the right to speak.

Of course (and the European Commissioner Thierry Breton reminded the turbulent billionaire of this), there is a legal limit to this principle: Twitter must comply with the laws in force in the countries where it operates. But on the one hand, this depends in fine on the capacity of the States to enforce the rules of moderation that they decree. This is far from being the case.

On the other hand, the legal boundaries can be blurred, in terms of disinformation as well as harassment. “If it's a gray area, I would say let the tweet exist!” professes Elon Musk, who wants Twitter to be “very reluctant to delete something and very careful with permanent exclusions”.

A real risk for the Twitter audience

However, this principled stance could well come up against economic realities. Increased permissiveness on Twitter could result in a shrinking audience. When it comes to the global public square, Twitter is already a very small crossroads. With 230 million daily users, the social network is a far, far cry from the 2 billion people connected to Facebook every day. And even further from the almost 8 billion people on Earth. Will it be more attractive by putting the pedal to the metal in moderation?

For the time being, the tens of thousands of closures of politically left-wing accounts in the wake of the buyout announcement have been compensated for by registrations from users on the other side. But what if extreme positions become more common? Or if problematic behavior is less sanctioned? Not to mention that the many personalities who clash with Elon Musk himself on Twitter - from Elizabeth Warren to Jeff Bezos to the head of Ford - may no longer want to contribute to a platform that has become the property of their bête noire.

An equally real risk regarding advertising

The second major risk is that advertisers will turn away from Twitter which is considered too lax. Brands don't like to see their ads next to conspiracy or hateful publications. And where users vote with their feet, advertisers vote with their dollars.

In 2020, Facebook paid the price: faced with the advertising boycott of hundreds of companies (Coca-Cola, Levi's, Starbucks, Unilever...), Mark Zuckerberg's group had to take emergency measures to further control hate speech. This threat is still present. Last week, 26 NGOs called in a letter for the big brands to boycott Twitter if the Tesla boss would make it a platform "amplifying hate, extremism, health misinformation and conspiracy theories".

To avoid this blackmail, Elon Musk pleads for a lesser dependence of Twitter on advertising, which represented last year 90% of its 5 billion dollars of turnover. The billionaire wants to develop subscriptions.

The formula is already tested in the United States. Musk wants to lower the price to 2 dollars per month against 3 currently. However, such a change would probably result in “a strong destruction of value”, says Brian Fitzgerald, an analyst at Wells Fargo, who points out in a note that the average advertising revenue of an American user (about 66 dollars per year) is much higher than the 24 dollars that Musk plans to recover from subscribers.

Creditor pressure expected to be too much, even for Elon Musk

A completely unbridled Twitter could alienate its main distributors, which is the third and not least risk. Last year, faced with the proliferation of content deemed dangerous or reprehensible on the right-wing social network Parler (which boasted of its ability to compete with Twitter based on freedom of expression), Google and Apple banned the application from their respective stores, while Amazon refused to rent its computer servers to it: a near-death sentence.

Faced with these economic challenges, Elon Musk dodges:

“The idea is not to make money. On the other hand, having a public platform that is open to everyone and which people trust is extremely important for the future of civilization. I don't care about the economic equation.”

But is that even possible for the self-proclaimed “Technoking” Tesla? Even though he is the richest man in the world, Musk will have to take out monumental loans to buy Twitter. In addition to bringing in $21 billion in cash, he plans to put the company $13 billion in debt, and $12.5 billion in debt himself (by pledging Tesla stock).

The interest on this debt will be around 2 billion dollars per year... while Twitter should only generate 1.4 billion dollars of Ebitda in 2022 and 1.8 in 2023. If he wants to pay back his creditors, Musk will have to increase the revenues and profits of the social network. And therefore spare users, advertisers, and distributors. By probably putting a little water in his absolute “free speech” for Twitter.

Achieving these ultra-ambitious goals with Twitter seems to be something that will cost too much, even for Elon Musk. Nevertheless, if anyone can do it, we all want to believe it's him. In any case, it's a challenge worthy of this highly successful entrepreneur who doesn't seem to shy away from any challenge.

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