Elon Musk Hates Ads. Twitter Needs Them. That May Be a Problem.

I hate advertising“Elon Musk tweeted in 2019.

Since he began pursuing his $ 44 billion purchase of Twitter – and for years before that – the richest man in the world has made it clear that advertising was not a priority. He has talked about making money from Twitter through other means, like charging some users to be on the site. He has also suggested that he wants to relax the service’s content moderation policies, which marketers say have helped prevent ads from appearing alongside hate speech and misinformation.

But as Mr. Musk gets ready to take over Twitter, he may quickly discover that Twitter needs Madison Avenue more than the other way around.

Ads account for roughly 90 percent of Twitter’s revenue. Yet long before Mr. Musk’s acquisition, many agency leaders were lukewarm about advertising on the service. They have cited a litany of complaints, including that the company can’t target ads as well as competitors like Facebook, Google and Amazon.

Now, numerous advertising executives say they are willing to move their money elsewhere, especially if Mr. Musk removes the safeguards that allowed Twitter to remove racist rants and conspiracy theories. An advertiser exodus would weaken the company, underscoring the difficulty of balancing Musk’s vision of Twitter is to have a free speech with the business relationships that keep it going.

But Twitter’s co-founder and at least some investors who joined Musk’s bid has been rejected for advertising and insisted that the company needs to break away from it. Twitter’s status as “a public company solely reliant on the advertising business model” added to its problems with bots, abuse and censorship, said Ben HorowitzAndreessen Horowitz, a general partner at venture capital firm, which is investing $ 400 million in the effort to take Twitter private.

Jack Dorsey, the company’s co-founder, agreed. “This is true. It needs cover for a while, “Mr. Dorsey said in a tweet responding to Mr. Horowitz.

Advertisers said such a shift would hurt Twitter. “At the end of the day, it’s not the brands who need to be concerned because they’ll just spend their budgets elsewhere – it’s Twitter that needs to be concerned,” said David Jones, a longtime advertising executive and chief executive of the BrandTech Group, a marketing technology company. “If you told me that TikTok went away, that would be a disaster. But Twitter going away? Yeah, whatever. “

Right after Mr. Musk reached a deal to buy Twitter early last week, as the company’s executives began reaching out to advertising clients, according to regulatory filings and several people who received messages. The executives emailed assurances that the business would proceed as usual and that the lines of communication would remain open. Brand safety, they said remained a “priority.”

Twitter representatives have also noted that it would probably be months, if not more than a year before any serious changes would go into effect, advertising executives said.

On Wednesday night, at Twitter’s annual NewFronts presentation for advertisers at Pier 17 in New York, the company stressed Twitter’s value for marketers: As a top destination for people to gather and discuss major cultural moments like sporting events or the Met Gala, growing through video posts. Presenters pledged to help brands reach fragmented audiences, and executives repeatedly thanked advertisers and agencies for their trust and collaboration.

Mr. Musk’s pending acquisition, and what it might mean for advertisers, went unmentioned during the short presentation.

“It’s been a quiet month on Twitter,” joked JP Maheu, Twitter’s vice president of global client solutions.

Representatives for Mr. Musk did not respond to a request for comment about his plans for advertising on Twitter. Twitter declined to comment.

Twitter differs from Facebook, whose millions of small and midsize advertisers generate the bulk of the company’s revenue and dependence on its enormous size and targeting abilities to reach customers. Twitter’s clientele is heavily weighted with large, mainstream companies, which tend to be wary of their ads appearing alongside problematic content.

Twitter earns the vast majority of its ad revenue from brand awareness campaigns, whose effectiveness is much harder to evaluate than ads that target users based on their interests or a direct response to that push, such as clicking through to a website. The company has tried for years to make its platform a better destination for ads that generate measurable sales, and rebuild its ad server in 2019 and 2020 to meet marketer demands. In March, Twitter began offering advertisers in the United States that add shopping catalogs showcased top products for anyone visiting their profiles.

Twitter’s reach is also narrower than many rivals, with 229 million users who see ads, compared with 830 million users on LinkedIn and 1.96 billion daily users on Facebook. Stifel analysts wrote to clients recently that Twitter was “still considered a fairly niche platform by many in the advertising industry.”

Last month, Twitter said its $ 1.2 billion in revenue during the first three months of the year was up 16 percent from a year ago, but still lagged at the growth rate the company had projected. While it was profitable in the quarter, the company has lost money in the past eight years.

About 10 percent of social media budgets on Twitter accounts for about 10 percent of clients, said Jason Dille, who oversees media planning.

“Even the likes of LinkedIn have eclipsed the ability for us to target consumers beyond what Twitter is providing,” he said. “We’re going to go where the results are, and with a lot of our clients, we’ve seen a performance on Twitter from an ad perspective that we have with other platforms.”

But for Mr. Dille and many others, content controls towards Twitter’s attitude were a bright spot. In 2019, it banned all political ads. The company introduced warning labels about misinformation related to elections, took down falsehoods about vaccines and, after the Capitol riot last year, was permanently banned by former President Donald J. Trump. Last month, in response to the war in Ukraine, the platform stopped amplifying Russian government accounts and began blocking some tweets containing images of prisoners of war. Days before the deal with Mr. Musk was announced, Twitter said it would ban ads that deny climate changeGeneral Chat Chat Lounge

“Twitter’s done a better job than building trust with advertisers on many platforms – they’ve been learning more progressive, more responsive and more humble ways to get started,” said Mark Read, chief executive of WPP, one of the largest advertising companies. in the world.

Now, many advertisers say that although they will wait to see what Mr. Musk does, they are worried that a decade of protective scaffolding may be dismantled.

“We can safely say that if the content moderation policies change, and if there is no way for us to protect the brand, we are definitely going to recommend our clients that they pull back on their investments,” said Arun Kumar, the Chief Data and Technology Officer at the ad giant IPG.

Several advertising executives said they doubted that Mr. Musk would consider his concerns because of his track record with the industry.

Mr. Musk, a founder of the successful electric car company Tesla and the rocket company SpaceX, does little marketing for those businesses. On Twitter, he has criticized ads as “manipulating public opinion“And discussed his refusal to”pay famous people to fake endorse. “ When writing in a since-deleted tweet About Twitter Blue, the recently introduced $ 3-a-month subscription service, pushed for “no ads,” explaining that “the power to dictate corporations policy is greatly enhanced if Twitter relies on advertising money to survive.”

“I don’t think he cares about the advertising experience on Twitter because he never cared about advertising,” said Harry Kargman, chief executive of the mobile advertising company Kargo. “I don’t think he’s all about convincing consumers to spend money on the platform beyond what’s automated.”

Mr. Musk has suggested that Twitter focus on subscriptions; Others have suggested a pay-per-tweet model. But some ad executives hope that Musk’s competitive spirit will inspire him to reset Twitter as a powerhouse marketing machine.

“There is a fork in the road, where Path A leads to an unfiltered place with the worst of human behavior and no brands want to go anywhere near it,” said Mr. Jones of BrandTech. “And Path B is one of the world genius entrepreneurs, who knows a lot about running companies, unleashing a wave of innovation that has people looking back a few years and saying, ‘Remember when everyone was worried about Musk coming in?'”

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