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Elon Musk’s Twitter Deal: Could Fake Accounts Stop It?

Elon Musk, the business magnate and richest man in the world worth $265 billion USD, is looking to buy Twitter. The social media platform with roughly 463 million monthly active users (MAU) may no longer rank in the top 10 most popular social media networks in the world, but it remains a significant presence and is a household name in the industry.

The news since Musk made his offer to purchase the platform has been somewhat chaotic—and complications are all too common for such a large business deal. However, there is one thing that could put the deal on ice even though Twitter’s board of directors accepted Musk’s initial offer of $54.20 per share: Fake accounts and bots on the Twitter platform.

Let’s review the history of the deal, why fake accounts and bot activity are a problem for this deal, and how Twitter’s board of directors, Elon Musk, or anyone looking to advertise on the platform could deal with bot accounts on social media.

Elon Musk Is Looking to Buy Twitter: The Story So Far

So, what’s the timeline of events to Musk’s offer to buy Twitter? Here are a few milestones in the road to his Twitter deal:

March 26, 2022: Musk Expresses Interest in Launching a New Social Media Platform

According to CNBC, Elon Musk tweeted “Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy. What should be done?”

When another Twitter user asked if Musk planned to build a new social media platform, he replied “Am giving serious thought to this.”

The CNBC article noted many of the difficulties of trying to launch a new platform that could compete with industry giants like Twitter, Facebook, or YouTube. In the article, Matt Navarra, a social media consultant, was quoted as mentioning that “Musk would need huge financial capital and a team of experienced product managers and engineers. Most importantly, [the platform] also needs to have people on it that others want to engage with.”

April 4, 2022: Musk Becomes Twitter’s Largest Shareholder

Before he announced his intention to buy the platform in its entirety, Musk purchased 9.1% of Twitter’s stock—making him the largest shareholder. However, Tech Crunch reported that this caused the Securities Exchange Commission (SEC) to probe Musk because “he failed to file a form that is required when purchasing over 5% of a company’s shares.”

The Wall Street Journal published an article where University of Pennsylvania accounting professor Daniel Taylor estimated that “this failure to disclose his purchase likely saved Musk more than $143 million.”

Twitter’s board of directors offered Musk a seat on the board—along with a restriction that would limit how much of the company’s shares that Musk could own to 15%.

April 14, 2022: Elon Musk Offers to Buy Twitter for $54.20 a share

Instead of trying to launch a completely new platform and building it up to the point where it could compete for attention in an already-saturated market where other Twitter and Facebook hopefuls already struggle to attract users and advertisers, Musk makes the offer to buy Twitter outright from its current board of directors.

This move would give Musk control of a platform with a large and well-established user base and plenty of revenue from the robust network of advertisers and investors already on the platform.

April 25, 2022: Twitter’s Board of Directors Accepts Musk’s Proposal

The Verge reported that, on April 25, 2022, Twitter’s board of directors decided to accept Musk’s proposal to buy the company for a total of $44 billion USD.

May 13, 2022: Musk Places Twitter Deal on Hold Pending Details on Fake Accounts

On Friday, May 13, 2022, Elon Musk released a tweet stating “Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users.” CNBC reported that “Twitter’s stock plummeted 18% in premarket trading following the initial announcement, but trimmed some losses after the second tweet.”

Fake accounts controlled by bots have long been an issue for Twitter and other social media platforms—driving ad fraud schemes that cost companies millions of dollars each year. Bots controlled by special interest groups and foreign actors can also compromise the integrity of free speech on the platform.

Considering that one of Elon Musk’s stated goals in acquiring Twitter is to preserve it as a public forum for free speech, bot accounts that contribute to misinformation campaigns and the harassment of individuals is an obvious concern.

May 24, 2022: Musk Increases the Cash Portion of the Twitter Deal

On May 24, 2022, Elon Musk filed a document looking for more investors to help him fund the Twitter deal. As reported by The Washington Post, “Musk is now committed to paying $33.5 billion in cash for Twitter, up from the $27.3 billion he had previously committed to.”

This move demonstrates that Musk is still committed to purchasing Twitter. Additionally, it can help him reduce the long-term cost of the deal by minimizing the amount of interest he would pay on financing it.

May 25, 2022: The Federal Trade Commission and Justice Department Fine Twitter

According to a report by The Washington Post, “Federal regulators Wednesday announced that Twitter will pay a $150 million fine to settle allegations that it deceptively used email address and phone numbers it had collected to target advertising.”

While the penalty is a small amount compared to the total value of the deal (about 0.3% of the total value), a scandal like this could affect Musk’s decision to purchase Twitter and affect the stock price of the company at the time of the deal’s completion.

Could Fake Accounts Really Stop the Purchase?

Although Musk’s decision to up the cash portion of his Twitter purchase does highlight his intent to complete the transaction, the question remains: could fake accounts really stop the deal?

Just how big of a threat are bot accounts on social media platforms like Twitter? Social media bots can do damage in a variety of ways, such as:

  • Feeding advertisers fake leads. This harms the advertisers on the platform by minimizing their ROI from their ad spend—which can cause them to leave the platform.
  • Triggering Telephone Consumer Protection Act (TCPA) violations. The fake leads that social bots feed to marketers often use data stolen from real people. So, when marketing teams reach out to their “prospects,” the prospects then complain to the Federal Communications Commission (FCC) that they never opted in to receive communications—triggering TCPA fines and even class action lawsuits.
  • Damaged company reputations. When companies get hit with TCPA violations or annoy consumers while reaching out to fake leads, it can have a negative impact on their corporate reputation. Additionally, bot accounts can share false or misleading claims about companies on social media to harm the company’s image.

Each of these problems, if left unaddressed, can have a lasting impact on a social media platform’s continued viability. For example, if enough advertisers abandoned the platform because of continued problems with their ROI for ads or fake accounts causing damage to their reputation, the costs to maintain Twitter could eventually outpace the revenue generated by the company.

While this scenario is currently theoretical, it’s the kind of risk that investors and business magnates have to consider before closing a deal as big as this one.

In fact, Twitter itself acknowledged that the platform has a number of “false or spam accounts” in their Q1 2022 quarterly earnings report. However, they maintain that these accounts “represented fewer than 5% of our mDAU during the quarter.”

If the amount of bots on Twitter is revealed to be significantly higher than the company stated following a larger review of the platform’s user base, then that could be enough to dissuade Musk from completing the deal. However, only time (and possibly a review of Twitter’s user base with an accurate ad fraud solution for identifying bots) will tell.

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