Is Twitter Broke?

Twitter is currently embroiled in another legal battle as it is being accused of failing to compensate for services provided to its offices in London, Dublin, Sydney, and Singapore. Facilitate, an infrastructure company based in Sydney, is seeking collective payment exceeding A$1 million ($666,000) for outstanding payments dating back to October of the previous year when Elon Musk acquired Twitter.

According to court documents obtained by The Guardian, Facilitate had undertaken various tasks, including sensor installation in London and Dublin, an office fit-out in Singapore, and the decommissioning of Twitter’s Sydney office along with temporary storage of its contents. The claimed amounts are £203,115, SGD$546,596, and A$61,318, respectively.

The lawsuit was filed at the end of June in the US District Court of Northern California. Facilitate contends that Twitter, under Musk’s leadership, did not challenge the invoices but has neglected to make the necessary payments. As a result, Facilitate is seeking damages and compensation for costs incurred.

In the court filings, Facilitate highlights that it is not the sole company taking legal action against Twitter since Musk assumed control. The firm argues that Musk’s moderation decisions, including the reinstatement of far-right and neo-Nazi accounts, have alienated advertisers and triggered a financial crisis for the social media platform.

“Twitter responded with a campaign of extreme belt-tightening that amounted to requiring nearly everyone to whom it owes money to sue. Twitter stopped paying rent on some of its offices and stopped paying several vendors whose services it was still using. Twitter also canceled many contracts and stopped paying people to whom it owes money,” the company said.

Twitter has already faced lawsuits regarding its alleged failure to pay office rent globally. In January, the platform reportedly failed to pay the $3.36 million December rent and the $3.42 million January rent for its offices at 1355 Market Street in San Francisco, California, pushing the building owner Sri Nine Market Square LLC to file a lawsuit in state court.

The social media firm is also set to be evicted from one of its Boulder offices, after the landlord lodged a complaint to the county judge alleging that Twitter, which signed a lease for four office suites in 2020, has fallen behind on its rent payments.

In a May lawsuit filed by six former Twitter execs against the firm, one of the plaintiffs reportedly said a member of Musk’s transition team at the time the billionaire took over the platform said, “Elon told me he would only pay rent over his dead body.”

Not paying cloud rentals, too

It’s not only physical spaces that Musk’s Twitter has a problem paying rent on. According to a report by Platformer in June, Twitter has ceased paying its Google Cloud invoices as part of Musk’s cost-cutting efforts since taking ownership of the company.

In 2018, Twitter had signed a multi-year contract with Google to host various services on its servers, including combating spam and removing child sexual abuse material. The platform relies on Google Cloud for systems used to identify violent extremism and media with graphic content.

One such service is Smyte, a company acquired by Twitter in 2018, which provides tools to combat harassment, abuse, and spam.

Although Twitter had continued to pay its Google Cloud bills due to significant advertising revenue generated from the platform, Platformer reported that at some point, the company changed its stance and ceased payment, intending to discontinue its usage of the platform entirely. Twitter was reportedly in a rush to migrate its services off Google Cloud before the contract’s expiration on June 30. However, the process took longer than expected, and the outcome for certain services remains uncertain.

But in a Bloomberg piece the following week, Twitter was reported to have resumed payments for its Google Cloud contract. Linda Yaccarino, the recently appointed CEO of Twitter, played a role in getting the relationship with Google back on track. The two companies are apparently engaged in negotiations for a broader partnership, which may include areas such as advertising and Google’s use of Twitter’s paid API.

The report stated that the contract has been costing Twitter between $200 million and $300 million annually, making it an early target for Musk’s cost-cutting measures. Google reportedly had difficulty contacting Musk to discuss Twitter’s unpaid bills and even attempted to reach him through SpaceX, another company that has business dealings with the tech giant.

Amid all the brouhaha, observers noticed that Twitter seems to be launching DDOS (distributed denial of service) attack on itself, causing a sizable outage of its services.

Twitter recently implemented a change where only logged-in users can access the site. Previously, non-logged-in users would eventually be prompted to create an account or sign in while browsing. However, the new update completely blocks access to the site unless the user is logged in with an active account.

This change has led to a situation where Twitter is constantly requesting data that it never receives, resulting in a feedback loop that potentially strains their servers. Some users have reported that due to the site being blocked on various platforms, the servers are overwhelmed and generate an excessive number of data requests that cannot be fulfilled. In essence, this creates a scenario where the servers are overloaded and continuously generate requests that cannot be satisfied.

Limiting tweets, limiting ad revenue

Furthermore, speculation has arisen that Twitter’s recent decision to restrict unpaid users to viewing only 600 posts per day was a result of the company’s financial struggles in settling service-related bills to ensure the smooth operation of the site. Musk has claimed that the limitation was implemented to prevent data scraping.

However, according to professionals in the marketing industry, Musk’s decision to temporarily restrict the number of posts Twitter users can read on the platform could hinder Yaccarino’s efforts to attract advertisers.

Advertising industry experts believe that this move poses a challenge for Yaccarino, who has been working to rebuild relationships with advertisers that had withdrawn from the site following Musk’s acquisition of the company.

The imposed limitations are seen as detrimental to both users and advertisers, who have already been unsettled by the “chaos” introduced to the platform by Musk, as stated by Mike Proulx, Research Director at Forrester, on Sunday. Proulx emphasized that Linda Yaccarino cannot solely rely on her industry credibility to overcome the increased “advertiser trust deficit” caused by these limitations.

Initially, unverified accounts were restricted to 600 posts per day, while new unverified accounts had a limit of 300. Verified accounts were allowed to read up to 6,000 posts per day, as announced by Musk in a post on the site. However, a few hours later, Musk revised these limits, raising them to 10,000 posts per day for verified users, 1,000 posts per day for unverified accounts, and 500 posts per day for new unverified users.

In its effort to create new revenue streams, Twitter also implemented in June new restrictions targeting direct messages (DMs), reportedly lowering the limit of the total number of DMs an unverified account can send from the current limit of 500. According to some unconfirmed reports, the new limit will just be 30. The move aims to lessen spam DMs.

Another restriction would limit the ability to send DMs to people who don’t follow you. This restriction has been seen to be another move that makes the platform more unfriendly to journalists. Journalists often use Twitter to reach out to sources privately. 

Twitter is also reportedly skimping on paying royalties for music use, pushing a group of music publishers, representing iconic artists like Taylor Swift and Beyoncé, to file a lawsuit against the platform. Unlike other social media platforms such as YouTube, Facebook, Instagram, Snapchat, and TikTok, which have established licensing agreements to remunerate artists when their music is used, Twitter stands alone as the largest platform refusing to do so, the lawsuit alleges.

With an estimated $250 million in damages sought for over 1,700 songs and countless infringements, this lawsuit marks the first major confrontation between the music industry’s heavyweights and the influential social media platform.

Back in May, Fidelity Blue Chip Growth Fund’s stake in Twitter was marked down, signaling yet another significant decline in the company’s worth since it was acquired by Musk. The fund was valued at about $19.66 million in October but has dropped to $7.8 million as of January 31, and down to $6.55 million as of April 28.

Musk himself has admitted that he overpaid for Twitter, which he acquired for a staggering $44 billion. His erratic decision-making, and mass layoffs, coupled with challenges in content moderation, have caused advertisers to leave en masse. In March, Musk said that Twitter is worth less than half of what he paid for it.

Information for this story was found via The Guardian, Reuters, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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