How China became big business for Twitter

China is one of the top non-U.S. cash generators for Twitter and its local authorities are spending lavishly on worldwide advertising on the network even as 1.4 billion of its inhabitants are prohibited from using it.

Local government authorities and Chinese Communist Party propaganda offices for cities, provinces and even districts across the nation have flocked to Twitter (TWTR.N) to buy advertisements, according to a Reuters review of publicly available government tenders, budget documents, and promoted tweets from 2020 to 2022.

The advertisements, which were frequently contracted out to state media by local governments, sold regional attractions as well as cultural and economic accomplishments to a global audience and were allowed thanks to a loophole in Twitter’s policy on state-media advertising.

The evaluation demonstrates for the first time how crucial China has grown to be for Twitter as it faces pressure from investors to reach growth objectives as its American business stagnates. Elon Musk, the CEO of Tesla (TSLA.O), who is seeking to withdraw his unsolicited $44 billion offer to acquire Twitter, is fighting the business in court. 

Operations in China became a point of internal conflict between teams eager to maximize the sales opportunity and others worried about the perception of doing business with state-affiliated entities at a time of escalating tension between Beijing and Washington, according to four sources who spoke to Reuters.

Tuesday’s hearing by the U.S. Senate Judiciary Committee to review a whistleblower complaint brought forth by Twitter’s former security head Peiter “Mudge” Zatko brought Twitter’s activities in China to light.

When explaining how the FBI informed Twitter that a Chinese spy was working at the firm, he cited this Reuters report.

In his 84-page lawsuit, he made several allegations, including that “Twitter executives knew that accepting Chinese money could put users in China in danger” and that “Mr. Zatko was told that Twitter was too dependent on the revenue stream at this point to do anything other than try to increase it.” Reuters was unable to independently confirm the assertions.

Twitter disputes the charges. Zatko had originally declined to speak through an attorney.

U.S. Senator Chuck Grassley stated at the hearing that according to Zatko’s admissions to the committee, Twitter was informed by the FBI that at least one Chinese agent worked there.

During the hearing, Zatko stated that the agent was allegedly from China’s Ministry of State Security, the largest espionage organization in the nation.

The former executive testified at the hearing that Twitter staff members had been “disturbed” by the fact that, although being outlawed in China, the site was still taking donations from entities linked to the Chinese government, creating an “internal paradox.”

We’re already in bed was the response. Find a way to make them comfortable with it since losing that source of income would be tough, Zatko advised the senators.

According to two people with direct knowledge of the situation, Twitter’s sales staff in China actively courted local governments there as part of its global effort to compete with internet rivals like Alphabet’s Google and Meta’s (META.O) Facebook for the advertising business.

According to two sources, major Twitter customers in China include gaming, e-commerce, and Internet companies. According to the sources, Twitter sells “hundreds of millions” of dollars worth of Chinese clients abroad advertising each year, with the majority originating from these businesses.

Those with knowledge of the situation rejected it.