Twitter needs Apple more than Apple needs Twitter

Elon Musk launched a tirade against Apple this week after he said the phone-maker had mostly stopped advertising on Twitter and threatened to block the social media giant from its app store.

In some ways, the billionaire seemed to be picking a losing fight. The amount Apple spends advertising on Twitter and the rules it sets for apps in its app store could play a big role in whether Twitter will be able to generate enough revenue to make Musk's $44 billion deal to buy the platform worth it.

"If there's one company for him not to pick a fight with in the world, it's Apple, and he just poked the bear," said Dan Ives, a financial analyst with Wedbush Securities. "It's just another head-scratching battle that Musk has waged since his ownership of Twitter."

In a series of tweets, Musk criticized Apple's app store as a "monopoly" and raised whether the phone-maker supported censorship. Musk also signaled in a tweet that he intends to "go to war" with Apple.

It's a risky strategy. Apple wields significant power over Twitter as the social media platform seeks to diversify its advertising business and boost subscription sales, according to experts. For starters, Twitter depends on Apple to reach the tens of millions of people who use Apple devices to search the web - a large and attractive market for the social media giant.

At the same time, Apple's privacy rules probably will hurt Musk's plans to build out Twitter's targeted advertising business. And the 30 percent fee Apple extracts from app sales could put a dent in Musk's plan to make money from subscriptions.

Musk joins a long line of other app-makers and regulators that have, so far, unsuccessfully sought to significantly rein in the power Apple wields over social media platforms. Facebook has launched a similar unsuccessful public relations campaign against Apple's privacy rules, which cost Facebook billions in lost ad sales. Lawmakers to date have been unable to pass legislation that would give users the ability to download apps outside of Apple and Google's app stores. And courts in the United States have so far not compelled Apple to significantly change the fees it collects on app sales.

Musk said Monday that Apple had threatened to remove Twitter from its app store; Apple has yet to confirm or deny the allegation. If Apple were to block Twitter from its App Store, new users would be unable to download the Twitter app on their iPhones and iPads, and existing users would be unable to access updates - a prospect that could devastate Twitter's ability to grow its user base, experts say.

Musk's public criticism of Apple also stands out in part because of how central the phone-maker was to Twitter's advertising business. In the first quarter, Apple was the top advertiser on Twitter, spending $48 million on ads on the social network, according to a document reviewed by The Washington Post that was compiled from internal Twitter data. Apple's spending accounted for more than 4 percent of Twitter's revenue that quarter, The Post has reported.

Before Musk bought the platform, Apple often turned to Twitter to launch glitzy promotions of its new devices such as the latest iteration of the iPhone.

"Apple has put Twitter at the center of their product launch efforts and they have produced epic events on Twitter," said Lou Paskalis, a frequent Musk critic and member of the Twitter Influence Council, a group of advertisers who offer feedback to the company. "I would be sending flowers, candy and chocolates to Apple."

Apple also wields significant power over Twitter's ability to diversify the way it generates advertising revenue, which is how it makes the lion's share of its money. Twitter is best known for being a platform that big corporations turn to increase awareness of their companies in front of a large and diverse audience through broad brand advertising campaigns.

More recently, though, Twitter has sought to mimic some of Facebook parent Meta's success by improving its ability to allow marketers to target their advertising campaigns to a narrowly tailored section of users who are most likely to buy the product after seeing or clicking on the ad - a phenomenon known as direct-response marketing. Twitter said this year that the revenue split between brand and direct-response advertising was 85-15, but the company has been striving to reach a more even split in the future.

But privacy rules Apple imposed in April 2021 could limit Twitter's ability to give marketers enough data on users to effectively target ads. Apple's rules forced apps such as Facebook and Twitter to explicitly ask users if they could track their activity across the internet - a request many people turned down. Meta has estimated that Apple's rules will have cost it $10 billion this year and has argued publicly that the moves would hurt small businesses that don't have a lot of money to spend on marketing.

"It's an uphill battle for Twitter to get brands on board [and] get retailers on board to do that in the first place," said Andrew Lipsman, an analyst at market analysis firm Intelligence Insider.

Additionally, Apple could affect Musk's ability to generate revenue from new subscriptions. Musk this month allowed any user who paid an $8 subscription fee to obtain a blue check mark verification badge - a designation once reserved for public figures. The program was later paused after users began impersonating businesses, political leaders, government agencies and celebrities.

Even if Musk successfully restarts the program, Apple's rules could limit how much money it manages to collect. Apple charges developers a 30 percent fee on most purchases made inside apps, though sometimes Apple charges 15 percent for smaller developers. That fee could have "a significant impact on the potential revenue for a subscription business," said Lipsman, cutting every $8 collected to just $5.60.

That issue could win Musk allies in the tech world. Tech companies such as Spotify and Fortnite maker Epic Games have long criticized Apple for imposing the fees, and last year a federal judge ruled in a lawsuit filed by Epic that Apple must allow app developers to "steer" customers to alternative payment processing services. But the judge declined to rule Apple's App Store a monopoly, and Apple still cast the ruling as a victory.

Epic Games founder Tim Sweeney used Musk's disagreement with Apple as an opportunity to press its case again in public.

"Apple is a menace to freedom worldwide," Sweeney tweeted Monday. "They maintain an illegal monopoly on app distribution, they use it to control American discourse, and they're endangering protesters in China by storing sensitive customer data in a state-owned data center."

But it seems unlikely Musk's adherence to Epic's position will make a major difference.

Lawmakers so far have taken little action to curb Apple's power. Legislation that would force Apple and Google to allow people to download apps outside of their stores and allow them to install alternative stores has gone nowhere, and the bills are viewed as unlikely to pass under Republican leadership in the House.

Without regulatory action that forces Apple's hand, Musk probably faces an uphill battle attempting to shame Apple into adopting more favorable rules, experts say.

"Twitter certainly needed Apple much more than Apple needed Twitter," Paskalis said.

The Washington Post