Elon Musk, as you probably know by now, backed out of his $44 billion bid to buy Twitter in July, to the delight of corporate litigants everywhere. Days after Musk’s announced withdrawal, the social media company filed a lawsuit against Musk to force him to complete the acquisition. And now this week, Musk filed a fiery 127-page counterclaim — the full text of which accuses Twitter of several “sins” and has just been made public.
The document is long and loaded with legalese, but at its heart, Musk’s legal team appears to be betting on one argument to win: that Twitter knowingly artificially inflated its profitable user base by more than 10 times its actual size, and thus its offer to buy Twitter was based on faulty data.
Musk’s argument sounds familiar simply because it is. Bloated users are a point that he embed IN some from his earliest thoughts outlining why he might try to buy the company: that Twitter’s current user base isn’t as strong as Twitter claims it is, he claims, because bots and various spam accounts are being counted as people.
User metrics are central to Musk’s argument
Twitter claims it accounts for bots in its self-reported metric, called mDAU, which stands for global daily active users. These are people who use Twitter, see ads or pay for the service, and earn money from Twitter. But Musk is trying to invalidate Twitter’s mDAUs through an onslaught of claims that appear to be a combination of his investigation and information Twitter has shared with his team.
“Twitter’s own disclosures to the Musk Parties show that although Twitter claims to have 238 million ‘daily monetizable active users,’ those users who actually see ads (and thus would reasonably be considered ‘ monetized’) are about 65 million lower than what Twitter represents. “, it is stated in the counterclaim. “In fact, most ads are served to fewer than 16 million users — a mere fraction of the 238 million mDAU figure that Twitter misrepresents to the market.”
The countersuit goes on to call mDAUs a “fabricated” metric that Twitter invented after three-quarters of Twitter users declined in 2020 — claiming that Twitter only created mDAUs as a way to protect executive bonuses.
“In 2020, Twitter based its executives’ bonus cash pool on revenue, operating income and adjusted EBITDA. After Twitter missed those targets in 2020, and only 32% of the cash bonus pool was funded, Twitter determined that mDAU (a highly manipulable number) should be considered in determining whether executives received these bonuses.” , the lawsuit says. “Following this change, in 2021, 100% of this executive bonus pool was funded.”
Twitter claims Musk’s numbers are meaningless
On its own, Musk’s arguments seem damning. However, while the public is just seeing Musk’s countersuit for the first time, Twitter’s lawyers have already gotten a pass — and they actually filed a rebuttal yesterday.
You can read Twitter’s full response here, but as Elizabeth Lopatto broke down a company argument for Threshold, Twitter’s response is that it has no idea what Musk is talking about, neither with his bot count nor his mDAU.
“Musk is not measuring the same thing as Twitter or even using the same data as Twitter,” the lawsuit says, indicating that much of its investigative analysis stems from an app called Botometer. Twitter also took the opportunity to imply this Musk’s own critical discourse culminated in a wry emoji.
Of course, last April, Twitter revealed that it had been miscounting its users for three years, overstating its number by nearly two million people per quarter between 2019 and 2021. But Musk is still arguing that, when it comes to Twitter users to actually make the company money, Twitter reports are few tens to hundreds of millions of people, and not just a few.
The case is expected to reach court on October 17.