It’s probably back to the drawing board on profit estimates for Wall Street analysts who cover Twitter (TWTR) in light of the social media giant’s new permanent ban on President Trump’s account.
“The risk is that perhaps Trump starts his own social networking platform or moves his content to a different platform, and now they [Twitter] have some sort of competitive pressure to the extent that user engagement for their platform goes down by some percentage point,” explained D.A. Davidson tech analyst Tom Forte on Yahoo Finance Live. “You could argue that is 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.”
At least in the early going on Monday, Mr. Market agrees with Forte’s assessment.
Twitter shares tanked more than 10% Monday morning in the wake of the company’s late Friday evening permanent ban on Trump’s account, which had about 88.7 million followers and was used by the president to convey often divisive messages to loyalists. The now most infamous of those messages came a week ago, as the president fanned the emotional flames on the November election outcome on Twitter and incited an insurrection at the Capitol.
Twitter says those provocative comments by Trump were the final straw.
“After close review of recent Tweets from the @realDonaldTrump account and the context around them — specifically how they are being received and interpreted on and off Twitter — we have permanently suspended the account due to the risk of further incitement of violence,” Twitter said in a blog post.
The post added, “In the context of horrific events this week, we made it clear on Wednesday that additional violations of the Twitter Rules would potentially result in this very course of action. Our public interest framework exists to enable the public to hear from elected officials and world leaders directly. It is built on a principle that the people have a right to hold power to account in the open. However, we made it clear going back years that these accounts are not above our rules entirely and cannot use Twitter to incite violence, among other things. We will continue to be transparent around our policies and their enforcement.”
Twitter rival Facebook (FB) has also banned Trump indefinitely, citing the recent violence at the Capitol.
“We believe the risks of allowing President Trump to continue to use our service during this period are simply too great, so we are extending the block we have placed on his Facebook and Instagram accounts indefinitely and for at least the next two weeks,” Facebook said in a post of its own on Jan. 7.
Forte says Facebook isn’t immune to a financial hit as well from its decision on Trump’s account.
“I would say absolutely Twitter is not alone. 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,” Forte explained, referencing potential changes to Section 230.
Facebook shares fell about 3% on Monday.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
What’s hot from Yahoo Finance:
Melinda Gates: we are giving $250 million more to the COVID-19 relief effort
Olympics great Michael Phelps: the COVID-19 pandemic hasn’t been all smiles for me
Watch Yahoo Finance’s live programming on Verizon FIOS channel 604, Apple TV, Amazon Fire TV, Roku, Samsung TV, Pluto TV, and YouTube. Online catch Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, and reddit.