The social media tag team of Twitter & Facebook have seen a combined total of $51 billion in market value wiped out since they both banned President Trump from their respective platforms. Meanwhile Twitter’s stock has fallen double digits since the ban.
Although these early indicators look bad, they could yet prove to be something of a knee-jerk reaction, as Wall Street is yet to decide what this means for the company’ stock in the long term. Facebook, it’s generally thought, will be fine, however Twitter has exposed itself to a far more significant financial risk by banning the President, as they’ve taken away the megaphone of a man with a pretty big audience. Shares of Twitter have fallen every day since the storming of the US Capitol, with Monday trading seeing the biggest drop of 12.5%. All in all Twitter has dropped $5 billion.
To say that President Trump is a divisive figure is an understatement, however the fact that he polarizes debate so much meant that his Twitter presence engaged his opposers as much as it did his supporters. The President had 90 million followers by the time Twitter banned him from the platform, however when hashtags & retweets his daily audience likely exceeded perhaps more than triple that number. Losing that colossal amount in engagement results in a huge amount of interest from advertisers.
There’s no exact science that can be used to calculate the extent of Trump’s exact engagement and advertising revenue figures in numbers, but it’s known his account received an average of 4 million retweets a day before it was suspended. Advertisers are all too aware of this, and will have reacted accordingly.
Wall Street reacts early to projected advertising revenue
Of course, Twitter’s advertising revenue hasn’t dropped overnight, but then why has the value of its stock. The reason that best explains this is the projected loss in advertising revenue due to loss of the fiercely debating audience that Trump’s Twitter account engaged. While now exact figures can be projected, the overall outlook for Twitter on Wall Street isn’t overly optimistic.
The advertising losses Twitter will incur thanks to losing Trump could be likened to the loss in shirt sales & merch sports teams suffer when a star leaves or Transfers – think LeBron leaving the Cavaliers or Cristano Ronaldo leaving Real Madrid. The difference is though, when a superstar leaves a team, there’s usually another one waiting to step into their shoes. President Trump is such a unique entity that the prospect of another Twitter account being engaging as, and therefore as lucrative in terms of ad revenue, his looks unlikely. It’s not just the engagement loss that’s put advertisers and Wall Street off – there’s also the risk of losing members, as many followers solely used the platform to hear from the President. For a look into mergers and acquisitions, take a look at our coverage of PNC Financial Services looking to buy BBVA in the US.