Twitter Admits Overstating Number of Users for Years; Will Elon Demand a Price Adjustment?

During their Thursday morning earnings announcement, Twitter reported that an accounting error made in March 2019 led to an overstatement of the number of Monetizable Daily Active Users, or mDAUs.

The company issued a statement which said, “In March of 2019, we launched a feature that allowed people to link multiple separate accounts together in order to conveniently switch between accounts. An error was made at that time, such that actions taken via the primary account resulted in all linked accounts being counted as mDAUs,” according to Bloomberg News.

At the end of the fourth quarter of 2021, Bloomberg reported, Twitter originally reported it had 216.6 million users worldwide. Following their correction, the number was adjusted downward to 214.7 million.

The number of mDAUs is a widely watched and highly significant metric for any social media platform.

The error represents roughly one percent of total mDAUs. This may not seem like much, but one percent of Elon Musk's offer of $44 billion for the company comes to $440 million, not a small sum by any measure. There's no telling exactly how much or how little this impacted the pricing of the deal. BREAKING: Twitter is reporting earnings of $513 million for the first quarter days after it agreed to be sold to billionaire Elon Musk. The company also reported an average of 229 million daily active users in the quarter, up 16% from last year. https://t.co/W7PgnZxXHY

— The Associated Press (@AP) April 28, 2022

The company also reported that revenue for the first quarter of 2022 was $1.2 billion, which was slightly below expectations of $1.23 billion, according to CNBC . Again, that difference appears insignificant as well, but it amounts to 2.5 percent.

Bloomberg attributes the loss to a slowdown in advertising.

CNBC reported that prior to the formal announcement of the deal on Monday, there had been speculation that "Twitter might have wanted to finalize the deal before reporting earnings this weak, anticipating a disappointing quarter."

The number of mDAUs at the end of the first quarter of 2022 came in at 229 million vs. the 226.9 million expected, beating the consensus.

This figure is up 15.9 percent over the first quarter of 2021. According to the report, mDAUs were up 6.4% from the prior year, to 39.6 million in the U.S. and up 18.1 percent overseas, to 189.4 million.

The question is, does Elon Musk deserve a price adjustment based on the accounting error? Or the earnings miss?

Following the earnings report, The Washington Post, noting the revenue miss, published an article that asked, "Will the purchase pay off?" Elon Musk is buying Twitter. Will the purchase pay off?

Twitter’s fourth-quarter earnings provided some clues Thursday, when the company reported that the number of daily active users — which has grown slowly — had grown to 229 million. https://t.co/iCr2PfCiCA

— The Washington Post (@washingtonpost) April 28, 2022

Since none of us has any clue as to what was or wasn't revealed during the negotiations, it's impossible to say. If Twitter hadn't disclosed the accounting error, then the case could be made for a price adjustment. I'm sure Musk has a team of analysts digging deep into the numbers at this moment.

Although Musk didn't get to where he is today by making foolish financial decisions, I believe him when he says this deal isn't about the money. It's about free speech.

The always entertaining Louisiana Sen. John Kennedy , a Republican, joined Fox News' "Hannity" on Wednesday night to discuss the deal.

"Twitter is run by wokers," he said. "They almost always enter a swimming pool by the stairs. They also don't believe in free speech. I do. ... They don't respect any opinion but their own and they censor all others.

"They believe, for example, that kids should be able to change their gender at recess. They believe that cops are more of a problem than criminals.

"What Musk is proposing is nothing extraordinary. He just believes in free speech.

"Look, there's a new sheriff in town. Don't fill out a hurt feelings report. But things are going to be different."

And that's why Musk is buying Twitter.

This article appeared originally on The Western Journal .