Why are fake accounts causing Elon Musk to question Twitter’s business model?

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Tesla (TSLA) CEO Elon Musk has put his plans to buy Twitter (TWTR) on hold unless the social media company can provide convincing data concerning the number of fake accounts. Market research firm SparkToro defines fake accounts as those that don’t regularly have a human writing the tweets.

Twitter executives claim fewer than 5% of accounts on its platform are fake. Musk has demanded evidence to support that assertion, and expressed his belief that the number is at least 20%.

Fake accounts matter because the business as it currently stands depends on advertising revenue. In oversimplified terms, advertisers are generally charged based on how many real people view their sponsorship campaigns. This annual advertising revenue then largely dictates Twitter’s overall market cap. If advertisers realize they are paying money to have their brands placed in front of fake accounts, they may leave the platform, which would then impact Twitter’s valuation. This is the argument Musk is making in broad terms.

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Twitter’s Rebuttal

According to Twitter’s SEC filings, less than 5% of the platform’s accounts are fake. Chief Executive Parag Agrawal stated that it’s in the company’s self-interest to limit spam because it diminishes the customer experience. He said they routinely suspend over 500,000 fake accounts every day and lock out millions per week that aren’t verified by humans.

Musk remains skeptical and has encouraged others to join him in doing due diligence on Twitter’s reported numbers, in a sort of crowd-sourced vetting process. Agrawal essentially said good luck with that, since people outside the firm won’t have access to private data needed for accurate calculations.

The Deal Could Ultimately Fail

Some market observers have questioned whether Elon Musk remains committed to making the deal and wonder why he is raising the issue of fake accounts now. Musk stated “I relied upon the accuracy of Twitter’s public filings.” For what it’s worth, Twitter has reported the 5% estimate on previous reports as well, so it appears to be somewhat of a constant figure.

There is also speculation that Musk is using the issue as leverage to negotiate improved deal terms. While the acquisition has been on pause, Twitter shares have dipped below their level at the time of the initial offer. Musk’s fears of fake accounts are just one more turn for the Twitter takeover.


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How many lifetimes would you have to live to be as rich as Elon Musk?

 

A million seconds are close to 12 days, and a billion seconds amount to almost 32 years. According to the Bloomberg Billionaires Index, Tesla founder Elon Musk has accumulated a net worth of some $238 billion. If the 50-year old started spending a dollar every second (without accumulating further wealth and the dollar not inflating or deflating), his current riches would last him more than 7,600 years.

 

Musk leads the ranking of the world’s richest people published by Bloomberg. Like him, almost all of the richest people on this globe have made their fortunes with businesses run out of the United States.

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Luxury magnate Bernard Arnault of France, whose conglomerate LVMH encompasses brands like Louis Vuitton, Christian Dior, Givenchy, Moët and Hennessy, is one of the exceptions.

 

Reliance Industries chairman and Indian national Mukesh Ambani currently sits in rank 10 with a net worth of $89 billion.

 

The company Ambani inherited started out in synthetic textiles but moved on to become a conglomerate spanning petrochemicals, retail and telecommunications. He made headlines in October of last year when briefly entering the exclusive club of those having $100 billion dollars or more to their name – the 11th individual to do so.

 

With the coronavirus still causing frequent stock market upsets, Ambani’s net worth is currently below that line. Another incident that might unsettle the multi-billionaire: Fellow Indian Gautam Adani is sneaking up on him in the billionaires ranking. The founder of Adani Group, India’s largest port operator, even briefly overtook Ambani for net worth on Monday. Gautam Adani’s wealth has grown impressively over the last few years, making it likely that he will eventually pull ahead of Ambani or even more of the world’s top 10 of super-rich individuals.

 

Note: All amounts in U.S. dollars

 

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This article originally appeared on Statista.com and was syndicated by MediaFeed.org.

 

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Featured Image Credit: Flickr / Brad Holt.

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