More than the edit button, Elon Musk needs reset button for Twitter India

Nearly all its revenue in the country was received as payments from a Singapore-based subsidiary: Just a few lakh rupees are shown as earned in India.

Elon Musk is elated to land a deal to acquire Twitter. You can see it in his tweets. In one, he likened Twitter to “the digital town square where matters vital to the future of humanity are debated”.

Musk might also want to debate the future of Twitter in India--its third largest market by the number of users--not just as a social media platform but also as a corporate entity.

To look at Twitter’s corporate presence in India, one needs to navigate through a small maze. The social media platform operates in India through an entity named Twitter Communications India. Regulatory filings in India, Ireland, and the United States show Twitter Inc as the ultimate owner of Twitter Communications India through a Dublin-based entity named Twitter International Company.

Financial documents across jurisdictions studied by 'Business Standard' show Twitter’s business model is unusual. In 2019-20, Twitter India earned revenues of Rs 86 crore--up from Rs 57 crore the previous year--of which as much as Rs. 64 crore came from “marketing support” and Rs 16 crore from “research and development”. Given that Twitter has 18 million users in India, this works out to Rs. 33, or less than half a dollar, earned from each user.

But that may not come as too big a surprise to Musk. Globally, Twitter earns most of its revenues from advertising, rather than directly from its user base.

In response to Business Standard’s questions seeking clarifications to the points raised in this story, Twitter India replied to say it won’t comment.

Nearly all of Twitter’s revenue in India was received as payments from its Singapore-based subsidiary: Twitter Asia Pacific Pte. Smaller amounts were received from its Ireland-based holding company and the US-based Twitter Inc. Just a few lakh rupees are shown as earned in India.

A look at Twitter’s Singapore financial dealings show it clocked revenues of $704 million--more than Rs 5,300 crore at the prevailing exchange rate-- in 2020. It paid $1.4 million in taxes in Singapore, but less than half of that in India. The number of Twitter users in India is five times the total population of Singapore.

Twitter reported global revenues of $5.08 billion in 2021, up 37 per cent as more people used the platform during the pandemic times. The United States, its largest market, accounted for $2.8 billion. Japan, its second biggest market, brought in $675 million.

A tax agreement signed by 136 nations in October 2021 could also have an impact on Twitter India. According to the “two pillar” solution in the agreement, 25 per cent of a company’s residual profit (profit in excess of 10 per cent of revenues) will have to be necessarily taxed in jurisdictions where it derives at least 1 million Euro in revenues. This revenue sharing key for these jurisdictions is still a work in progress. However, the agreement covers only corporations with annual turnovers of more than $20 billion.

Twitter’s global revenues are still just about a fourth of that. For it to reach the $20 billion threshold, Musk, who has spoken about his desire to introduce an edit button on Twitter, will have to find a reset button for Twitter Communications India.