Tucker Carlson & Twitter's Catch-22 Problem
Elon wants to give a platform to creators like Tucker, but those same creators alienate the advertisers that Elon hopes to attract.
This week, Tucker Carlson announced that he will be bringing his show to Twitter. At first, this might seem like a strange decision to anyone who understands social media monetization because, as a creator, there is a lot more money to be made on YouTube than on Twitter.
In 2021, Twitter’s revenue was $4.4B. Let’s assume that Twitter shared 55% of ad revenue with creators (it doesn’t do this today, but Elon says he plans to launch ad revenue share soon). That means that creators would have received approximately $2.4B from Twitter in 2021. Meanwhile, YouTube paid creators $15B in ad revenue in 2021. There is no better platform than YouTube for large creators to make money.
So why is Tucker choosing Twitter instead of YouTube?
The likely reason is because Tucker fears being demonetized by YouTube due to the nature of his content. Most recently, right-wing commentator, Matt Walsh, revealed that YouTube had demonetized him for repeatedly attacking Dylan Mulvaney, the trans creator who was at the center of the recent Bud Light campaign. By some estimates, Matt was earning $1.6M per year on YouTube and has now decided to upload his episodes to Twitter instead.
At this point, it is important to differentiate between demonetization and a ban. A ban happens when a creator violates the community guidelines, which cover basic things like nudity, hate speech, violence, harassment, and more. Then, there is an even stricter set of guidelines that creators must follow for videos they would like to monetize via YouTube’s Partner Program (ad revenue sharing). One of several sections covered in the advertiser-friendly content guidelines includes hateful and derogatory content, which states that any content that portrays ideologies or beliefs in a malicious way by generalizing or disparaging is not eligible for monetization. For example, negatively characterizing individuals, groups, ideologies, or beliefs, such as stating “feminism is sick,” is not eligible for monetization.
Therefore, while Tucker may be able to say the things he wants to on YouTube, he might not be able to monetize his content there, especially if he wants to be even more uncensored than he was on Fox News.
Enter Twitter.
Elon wants Twitter to be a town square for free speech where people like Tucker can participate in the rewards (i.e. they can participate in subscriptions and ad revenue share). However, there is a major flaw with this plan: Advertisers do not want their ads to appear alongside controversial content. YouTube doesn’t demonetize creators because their content conflicts with YouTube’s own beliefs and values. It demonetizes creators purely based on a business decision, which is that advertisers do not want their ads to show up before/after a video that upsets viewers. For example, Coca-Cola would never want their ad to appear in between a video of Tucker talking about white supremacy being a hoax. That ad would be unlikely to convince people to buy a Coke and, even worse, is more likely to damage the Coca-Cola brand. So Elon has a catch-22 problem because he wants to attract advertisers, but also give a platform to all kinds of voices, including extreme ones, which alienates advertisers, who are predominantly drawn to brand-safe content.
When platforms like YouTube allow certain creators to monetize and not others, there are direct and indirect ways in which the content on the platform is influenced. For example, YouTube is incentivized to directly influence content distribution by creating algorithms that distribute more of the monetizable content to viewers, which leads to more revenue for the platform, but also limits the distribution for creators like Tucker. Indirectly, YouTube is incentivizing creators to prioritize making brand-safe content, since that is the only content that can earn them money. Any publicly-traded, ad-driven platform eventually shifts its content ecosystem in this direction because that is the best way to attract the largest advertisers and maximize revenue. A decade ago, YouTube’s largest creator was PewDiePie, who made anti-semetic jokes. Today, YouTube’s biggest US creator is Cocomelon, a brand-safe, children’s animated stories and nursery rhyme account that attracts large advertisers.
Twitter was moving in a similar direction as YouTube, and that was Elon’s primary concern. So his mission became turning Twitter into the town square for public discourse. First, it was important for the company to go private so that it would not be at the mercy of shareholders, who seek to maximize profits, since that would have required Twitter to lean further into appeasing advertisers to increase ad revenue. By going private, Elon now has the flexibility to move more quickly towards his vision.
There are a lot of things that still need to be done, and here are four that can help Twitter solve its catch-22 problem:
Create multiple tiers of brand-safety that advertisers can opt into so that almost all content can be monetized. For example, Twitter should give Pepsi, a brand that seeks to avoid controversial content, the ability to opt into the highest tier of brand-safety such that its ads only appear adjacent to mainstream content. Meanwhile, Twitter should also allow MyPillow, which has lower brand safety standards, to opt into less strict ad products that place ads adjacent to all types of content, including more extremist content.
Enable more direct-selling for creators like Tucker. The majority of ads slots on social media are sold via an auction, where advertisers bid for the audience they want to target. However, top creators, such as the NBA on YouTube, are given direct sales rights, which means the creator can directly sell its ad slots to specific advertisers. Platforms usually want to avoid direct selling because it is cumbersome, but it greatly benefits creators like Tucker, who could likely sell ad slots to the various companies that already advertised on his Fox News show. If top controversial voices cannot participate in traditional ad monetization, then at least giving them the ability to bring in their own advertisers would allow them to still monetize.
Improve personalization to avoid alienating users. If Twitter wants to create a more open platform, then it needs to ensure that potentially offensive content is not surfaced to the users who would be offended by it. Putting users into clusters based on their interests and surfacing appropriate content to those clusters is what TikTok is so good at, and it’s something that Twitter should lean into. This becomes especially important for a platform that wants to allow potentially offensive content.
Make Twitter more valuable to users to unlock new business models, such as subscriptions. If Twitter can become less reliant on advertising revenue, then it has to worry less about advertiser brand safety and the challenges associated with that. Elon is eager to build a subscription business, but the problem is that people generally do not like to pay for user-generated content. Especially in Twitter’s case, it would be impossible to convince users to pay for short-form text content. This is, in part, why Elon talks about adding payments to Twitter and creating a superapp. He realizes that based on its content alone, Twitter cannot expand to other business models that can generate as much revenue as advertising. For Twitter to move beyond an ad-based model, it needs to create move value for users.
Each of these initiatives poses new challenges. For example, would creating lower-tier, less-brand-safe ad products result in a lower eCPM and reduce Twitter’s revenue potential? Would enabling more direct sales be good for creators, but worse for Twitter’s business? Would giving a platform to more extreme voices alienate users who prefer to consume mainstream content? On the other hand, would increased personalization lead to more echo chambers and rabbit holes, the way it has on TikTok? I will not be addressing these questions here, but if you want to chat through them, feel free to reach out.
So where does this leave Tucker? Ultimately, he’s making a long-term bet that Twitter can figure these things out, giving him a platform where he can say what he wants without the risk of demonetization.
Final Thoughts
I will end by saying that I do not agree with any of Tucker’s views and I am not convinced that Twitter can be a great business (financially) as the town square for public discourse. The right financial decision for Twitter would be to focus less on the extreme voices and focus on solving needs of the core user base, while also building the features that attract more advertisers, including brand safety features. There is no better, bigger business model for a social media company than maximizing ad revenue, so any other CEO would focus on that. What makes Elon and Twitter such an interesting case study, though, is that Elon seems less concerned with maximizing revenue and instead is laser-focused on his mission of making Twitter the digital town square. And he seems willing to make the necessary financial sacrifices to get there.
PS. I have a lot of thoughts about how Twitter can improve the product for its core user base. If you found this interesting and want me to write a part 2 that is more product-focused, let me know.