Twitter is caught in a whirlwind of controversy in the tumultuous world of social media, and things are far from the sunny facade that Elon Musk presents. In a recent interview with the BBC, Musk confidently touted the return of most advertisers to the platform, fueling hopes of a prosperous future. However, a leaked internal presentation obtained by The New York Times tells a different tale altogether. Twitter’s US advertising revenue declined 59% YoY, totalling a mere $88 million over a five-week period from April 1 to the first week of May.
The internal documents paint a rather grim picture of Twitter, revealing a consistent pattern of disappointment. Week after week, the company has been falling significantly short of its sales projections in the United States, at times by a staggering 30%. The alarming reality is that this underperformance is not expected to turn around anytime soon, confirmed by the documents and seven current and former Twitter employees.
Twitter lost advertisers
Elon Musk’s acquisition of Twitter at an overpriced $44 billion continues to be a headline-grabbing event. The platform has undergone significant changes in an effort to reduce its reliance on advertising. However, the path to transformation has been marred by a series of challenges.
Reports of massive layoffs, the introduction of Blue Subscription, welcoming back barred Twitter users, and even employees resorting to sleeping in the office have emerged. These factors, coupled with a lack of proper oversight, have resulted in the proliferation of hate speech, pornography, and other problematic content on Twitter, as highlighted in multiple media reports. The consequences of these issues have been swift and impactful, with Twitter losing 50 of its top 100 advertisers within a mere 30 days of Musk’s acquisition. The immediate impact on ad revenue cannot be denied.
However, Elon Musk has firmly refuted claims that hate speech has increased during his tenure. In an attempt to counter the narrative, he took to Twitter himself, sharing a graph that he claimed depicted a one-third decrease in “hate speech impressions” since he assumed control.
Despite Musk’s denial, internal documents indicate a worrisome outlook for Twitter’s US ad revenue. Forecasts reveal a projected decline of at least 56% per week compared to the previous year.
Estimates from Pathmatics indicate that as of January 2023, approximately 625 out of the top 1,000 Twitter advertisers had withdrawn their advertising investments. This included prominent brands like Coca-Cola, Unilever, Jeep, Wells Fargo, and Merck. The repercussions of the advertisers’ pullback on Twitter are evident in the platform’s financial performance. From October 2022 through January 25, 2023, the monthly revenue generated from Twitter’s top 1,000 advertisers experienced a drastic decline of over 60%. The revenue plummeted from approximately $127 million to just over $48 million during that period.
Linda Yaccarino, the former NBCUniversal executive, has taken the reins as Twitter’s new CEO, inheriting the array of challenges that the platform faces.
During a recent Twitter Space audio event, Elon Musk made startling remarks regarding the pressure faced by Twitter from advertisers in Europe and North America. According to Musk, this pressure has been so intense that “half our advertising” has vanished, as advertisers actively strive to undermine the platform. Musk went as far as suggesting that these advertisers are deliberately attempting to push Twitter towards bankruptcy.
In March 2023, Elon Musk provided his first public disclosure about Twitter’s financial recovery. Musk disclosed that the company is making notable progress in its financial rebound following a substantial 50% decline in ad revenue. To improve the company’s financial health, Musk took decisive actions that resulted in slashing operational expenses by approximately $3 billion. These drastic cost-cutting measures have positioned Twitter to potentially achieve positive cash flow in its second quarter.
Despite encountering a setback with the pause in ad spending by prominent ad agencies and brands such as General Motors and Volkswagen, Musk expressed confidence in Twitter’s trajectory. He stated that Twitter remains on track to generate $3 billion in revenue in 2023, albeit down from the $5.1 billion recorded in 2021 when Twitter was a public company.
Twitter’s valuation has experienced a significant decline since Elon Musk’s acquisition. In March 2023, Musk stated that the company’s worth plummeted to $20 billion, down over 50% from $44 billion in October 2022. The downward trend continued as Fidelity, a mutual funds giant holding Twitter shares, valued the company at $15 billion.
Why are advertisers leaving Twitter?
This declining Twitter valuation has contributed to the loss of advertisers and a growing sense of unpredictability and chaos surrounding Twitter. According to Jason Kint, CEO of Digital Content Next, an association for premium publishers, the platform’s atmosphere is increasingly perceived as unstable. Advertisers seek environments where they can feel comfortable and convey their brand message effectively.
The platform is witnessing a decrease in demand for large specialized “banner” ads on its trends page, which are typically purchased by prominent brands to promote events, shows, or movies. These ads, which can cost $500,000 for a 24-hour placement, are reportedly going unfilled.
Twitter’s loss of advertisers can be attributed to a variety of factors, with the top three reasons being as follows:
Lack of verification process
Twitter’s public relations troubles extend to major advertisers like Disney as well. In April 2023, Twitter mistakenly granted a gold check mark, which symbolizes a paying advertiser, to the @DisneyJuniorUK account, despite Disney not owning the account. Subsequently, the account posted racial slurs, creating an uproar and prompting Disney officials to seek an explanation from Twitter.
This incident highlights the potential consequences of missteps and oversights in Twitter’s verification and advertising processes.
Communication and Trust Issues
According to six ad agency executives who have had experience working with Twitter, their clients have been consistently restricting their spending on the platform. Several factors contribute to this cautious approach, including confusion surrounding Elon Musk’s changes to the service, inconsistent support from Twitter itself, and concerns regarding the ongoing presence of misleading and toxic content on the platform.
David Campanelli, the executive VP and chief investment officer of Horizon Media, expressed his hopes for positive change with the arrival of new Twitter CEO Linda Yaccarino. He explained that media agencies, like his, faced difficulties maintaining communication with Twitter when Elon Musk overtook the company. However, he believes that Yaccarino’s presence could bring about significant improvements in this regard.
Musk’s controversial tweets
Advertisers have expressed ongoing concerns regarding Elon Musk’s tweets and their potential impact on their brand reputation. Last month, Musk made several tweets drawing comparisons between billionaire financier George Soros, who is often targeted by conspiracy theorists, and the fictional character Magneto from the “X-Men” comic book series. These comparisons raised significant alarm, particularly within the Jewish community. Ted Deutch, the American Jewish Committee’s CEO, replied to Musk’s tweet that Soros and Magneto are Holocaust survivors. Deutch emphasized that perpetuating the falsehood that Jews seek to destroy civilization has historically led to the persecution of Jewish people for centuries. “Musk should know better,” he tweeted.
As advertisers navigate these concerns, Twitter must address the potential consequences of controversial statements made by influential figures on its platform. By proactively promoting responsible content and fostering a more inclusive and respectful environment, Twitter can alleviate advertisers’ worries and create a safer space for all users.
Concerns Over Content Moderation on Twitter
Elon Musk’s approach to content moderation on Twitter has resulted in a platform where offensive and harmful speech can be posted with minimal consequences. This has created concerns among major corporations, who prioritize “brand safety” and do not want to be associated with offensive content. Musk has adopted a lenient stance on content moderation, allowing controversial figures like Neo-Nazis and white nationalists back on the platform, citing the importance of free speech.
By prioritizing free speech over strict content moderation, Musk has indeed presented a challenging dilemma for Twitter and its advertisers.
How Twitter plans to win back advertisers’ trust
Despite the decline in ad revenue, Twitter has been actively working on various strategies to recover and boost its advertising business.
To regain lost advertisers, Elon Musk has implemented new controls for ad placements on Twitter. These controls allow advertisers to prevent their ads from being displayed above or below tweets that contain specific keywords. This means Twitter advertisers will have more control over where their ads appear, ensuring they are not associated with or placed adjacent to tweets containing potentially sensitive or controversial content.
GroupM, a prominent advertising agency under the umbrella of WPP, reportedly informed its employees in May 2023 that it is removing the “high risk” and “cautiously optimistic” flags associated with Twitter. As a result, GroupM is guiding its clients to resume their activities on the platform, allowing them to make their own decisions regarding their engagement with Twitter. This indicates a shift towards normalizing business relations with Twitter within the GroupM network.
IPG, another major advertising company, has advised its clients to approach Twitter cautiously, following its earlier recommendation to temporarily pause advertising spending on the platform. This cautious approach from IPG indicates a willingness to engage with Twitter to some extent, although they still have reservations.
Twitter has experienced a remarkable upswing in advertising within industries it previously steered clear of or placed restrictions on, such as online gambling and marijuana-related products. Astonishingly, during a particular week last month, 4 out of Twitter’s top 10 advertisers in the United States hailed from the online gambling and fantasy sports betting sectors.
In another intriguing development, Twitter has now approved ads promoting cannabis accessories like bongs, vapes, and rolling paper, as well as products and services relating to the sensitive topic of erectile dysfunction. This newfound openness in Twitter’s advertising policies has brought an interesting and unexpected shift in the platform’s revenue streams.
However, amid this evolving landscape, Twitter faces an unexpected challenge. The permissibility of adult content on the platform has raised concerns among the company’s sales staff. During attempts to attract advertisers for occasions like Mother’s Day, employees encountered an unwelcome surprise. Potential sponsored search terms like “MomLife” led to the emergence of pornographic videos, causing complications and highlighting the delicate balance Twitter must strike between allowing adult content and maintaining a safe and advertiser-friendly environment.
At the Morgan Stanley conference, Elon Musk shared his optimistic outlook on Twitter’s advertising prospects, stating that the implementation of targeted advertising would lead to a substantial revenue boost. This new advertising model for Twitter is set to resemble the approach employed by Google.
Musk’s proposal for targeted advertising aims to address the challenge of delivering more relevant ads to users based on their interests. By analyzing users’ tweets and utilizing machine learning algorithms to predict their preferences, Twitter aims to enhance the overall ad experience. Musk emphasized the historical issue of Twitter’s advertising being largely irrelevant, which he believes has resulted in wasted time for users. To rectify this, Twitter is committed to prioritizing highly relevant and useful advertising moving forward.
In a nutshell
Elon Musk has always been vocal about his ambition to transform Twitter into a subscription-based platform with reduced reliance on advertising. The launch of Blue subscription feature, available for $8/month, is considered a first step towards that direction.
In Musk’s strategic vision, Twitter is set to prioritize its premium subscription service, Twitter Blue, over ad sales. Musk’s ambitious projections indicate a target of 69 million subscribers for Twitter Blue by 2025, with an even more impressive estimate of 159 million paying users by 2028. Based on these calculations, Musk envisions Twitter Blue generating over $6.6 billion in annual revenue by 2025, and an impressive $15.2 billion by 2028. These forecasts highlight Musk’s strong belief in the potential of Twitter’s subscription model as a significant driver of the platform’s financial success in the coming years.
The Blue subscription model, however, hasn’t been well received by users worldwide, yet. The $8 monthly fee for premium features like tweet editing, longer tweets and videos, etc., is perceived as too expensive, especially considering that competitors like Facebook and Instagram offer similar features for free. This pricing model has faced criticism, particularly in countries like India, known for their price sensitivity. Many Twitter users from India are content without the additional features provided by the Blue subscription.
While some users may appreciate the idea of premium services, the majority appears to be resistant to paying for features that were previously available for free. The Information revealed that only a fraction of users, approximately 0.2% or around 180,000 people in the U.S., have opted for the Blue subscription.
A similar strategy for brand accounts is even more weird. Twitter expects brands to pay a whopping $1,000 monthly for verification.
The lower-priced Twitter Blue subscription, effective content moderation, innovative ways to monetize its platform beyond traditional advertising, etc., may help Twitter win back advertisers and cultivate a thriving community of engaged users, paving the way for a promising future, albeit it’s a bit early to be conclusive about it!
Elon Musk’s impact on various industries is undeniable, and his dedication to Twitter seems stronger than ever. The recent appointment of Linda Yaccarino as the new CEO of Twitter is seen as another significant step forward, generating positive expectations for the platform’s future.
As advertisers continue to play a pivotal role in Twitter’s quarter-over-quarter growth, the question arises: Can Musk turn the tables and make Twitter the preferred social media platform for advertisers who pay top dollars for ad inventory? We value your opinion! Share your views in the comment section below and join the discussion on whether Musk’s influence can revive Twitter’s advertising potential. Don’t miss this opportunity to voice your thoughts on the future of advertising on Twitter!
