Yahoo Finance’s Julie Hyman, Brian Sozzi, and Myles Udland discuss President Trump’s social media existence with D.A. Davidson Senior Research Analyst, Tom Forte.
- All right. Let's stay on the topic of Trump's association with social media companies and what the companies are to do, and whether these moves to banish Trump from some of these platforms could impact their business going forward. Tom Forte is a senior research analyst over at DA Davidson. He joins us now.
Tom, always great to talk with you. So let's just begin by getting your initial thoughts on the news, late breaking on Friday night, of course, Twitter indefinitely, or permanently, I guess, removing Trump from the platform.
The business impact. Is there one immediately discernible in your view? Certainly the market today thinks there is. But how do you read this decision?
TOM FORTE: Sure. So the answer is absolutely. And first, you know, stating the obvious, what happened at the Capitol is deplorable. But Twitter is making a decision here, and it will have some very significant ramifications for Twitter. I think the best lens to look at it is through the antitrust cases on Google. So if you look at the first antitrust case on Google, it was the federal government and 17 Attorney Generals that were all Republicans. And then that was joined by a Democrat Attorney General from California.
If you look at the second and third case antitrust case against Google, it's more bipartisan. So when you look at the excess influence that big tech has on consumers' lives, and you think Amazon, Apple, Facebook, and Google, in this case, you have to throw Twitter into the picture. And I think they're putting themselves at risk, in particular, of losing the protection that content on their platform, they cannot be held accountable for that. So yes, I do think Twitter has business ramifications of this decision.
- Perhaps it's a little wonky on my part here, but have you run this situation through your Twitter model? And what's the output on this? President Trump gets kicked off of Twitter. He's not on there every day tweeting out to almost 90 million people equals $0.10 per share future earnings for Twitter this year. What have you come up with? Have you come up with anything?
TOM FORTE: OK. So that's a very analytical approach, which I greatly appreciate as an analyst. The way that I would think about that is that you had touched on this earlier in the show, there's a different risk for Twitter. The risk is that Trump, perhaps, starts his own social networking platform or moves his content to a different platform. And now they have some sort of competitive pressure to the extent that user engagement for their platform goes down some percentage point.
So I would say that you could argue that it's 10% earnings risk for Twitter on the notion that they may have a negative impact on their audience share. And then that could have a negative impact on their ability to draw advertising against their audience share.
JULIE HYMAN: You know, Tom, it's Julie here. We keep talking mostly about Twitter because the stakes do seem the highest for Twitter. What about the other social media networks? I mean, there's a long list of companies now that have taken him offline. There's Amazon Web Services, also, that has blocked Parler, is not allowing them to be hosted by AWS any longer. But is it the right way to think about it, that really there are repercussions for Twitter that don't exist for these other companies?
TOM FORTE: So Julie, great question. And I would say absolutely, Twitter's not alone. So Facebook is clearly at risk here as well. They also stand to be negatively impacted should they lose the protection of not being held liable for content on their platform.
I think for AWS, for Amazon, it's a little different. They can point to contractual language that says that if you're doing things that go against the contract, we have the ability to take you off our platform in the case of AWS. But all you have to look at is the Department of Defense contract JEDI going to Microsoft and see that there is political risk for Amazon as well.
So Facebook, I would say, is the most close proxy to Twitter. But there is risk for Amazon as well, even if it is doing what is right from a contractual standpoint.
- Tom, I just want to go back to that regulatory discussion because I think my read on this, to some extent, was, oh, these companies have just admitted that they do control what is on their platform. They are capable of policing that, to some extent. Is that the kind of, maybe, regulatory misstep, perhaps, that these companies have walked themselves into?
Now granted, again, what happened last week can't just go unmentioned by these platforms. But that is really the base of the defense they've used, was it's too unruly for us to be able to have a say. And yet here they are having a say.
TOM FORTE: So one, I would absolutely agree with your assertion that they are making a stand here, or taking a stand, either by intent or de facto, that they do influence or determine what is and what is not on their platform.
I do think, though, stepping back, that the technological challenge for Facebook and Twitter is significant, meaning they could use artificial intelligence. They can use other means to try to determine what is offensive content, and take it down and things of that regard. I suspect that what you'll see is some sort of, perhaps, disclaimer next to tweets saying that this tweet may offend some, or things of that nature, to try to take some of the economic or business pressure off of Twitter.
And then I also think there's the potential that there would be a delay, meaning that someone would post a tweet, the computer would try to determine if it was something that was potentially offensive before posting it, things of that nature.
But to your original question, absolutely. They cannot claim that they do not determine what is and what is not on their platform.
- Tom, does this once and for all remove Twitter from, I would say, the perpetual watch list it's on of being a potential takeover candidate? It wasn't too long ago that Disney and then CEO Bob Iger was well down the road of acquiring Twitter. But at the last minutes he pulled the plug because he was concerned about the content on this platform. I can't imagine that thesis gets improved or has improved in light of this current situation.
TOM FORTE: You know, it's a good question. And I would say maybe it increases the risk to the potential parent that may decide to acquire Twitter. But ultimately, I think it would be still a business decision for Disney or others. If they feel like they could purchase the company at an appropriate price while cognizant of all the risks, then I think they would still move forward with the transaction, just cognizant of the risks.
- All right, Tom Forte with DA Davidson. Tom, always great to get your thoughts. Thanks so much for hopping on this morning to discuss.
TOM FORTE: My pleasure. Thank you.