Will advertisers stick with a Twitter run by Elon Musk?
Elon Musk’s first few days at the helm of Twitter have set in motion several contentious policies and plans and seen it lose some blue-chip advertisers. Will the billionaire boss's appeal to brands to trust his judgement work?
Image: Elon Musk shares a video of him entering Twitter
Within hours of taking control of Twitter, Elon Musk had sacked key staffers, including its chief executive, chief financial officer, head of legal policy and safety and general counsel. Deeper cuts are on the way, he warned. He then set in motion the launch of paid-for blue tick verification, set up a council to debate the return of banned users like Donald Trump, and subsequently issued an appeal to the advertisers on which it depends to stick with it amid the changes.
All of this, in a mere four days.
“Twitter aspires to be the most respected advertising platform in the world that strengthens your brand and grows your enterprise,” Musk assured.
But it wasn’t enough to stop some from hitting the pause button. General Motors and Ford both curbed spend until they have reviewed what a Twitter run by Musk looks like.
“We are engaging with Twitter to understand the direction of the platform under [its] new ownership,” said a General Motors spokesperson. “As is the normal course of business with a significant change in a media platform, we have temporarily paused our paid advertising. Our customer care interactions on Twitter will continue.”
Ford is also off Twitter Ads for the foreseeable. “We will continue to evaluate the direction of the platform under the new ownership,” a spokesperson confirmed.
Of course, it’s worth noting that the car marques are major rivals to Musk’s other company, Tesla.
Despite the private motivations of the auto brands, Twitter bosses will be hoping other advertisers don’t share the concerned sentiments they've shared publicly. Twitter's ad revenue for the second quarter of 2022 came in at just over $1bn and made up more than 90% of Twitter's $1.18bn revenue for that quarter. Musk needs CMOs on board with his plans.
But experts say advertisers will be exercising extra caution in the coming weeks. A key issue is the uncertainty as to how safe the platform will be as content moderation rules quickly change. Musk has said under his steerage Twitter will be an "open digital town square" which potentially means that as long as what people say is legal they won’t face intervention. This is a major departure from the approach under Jack Dorsey which saw a doubling down on the battle against misinformation and hate speech.
What it looks like in practice is still unclear. Musk said he's setting up a “council” which will have “widely diverse viewpoints” to make moderation decisions, including the return of figures previously banned for controversial (but legal) comments. That council has yet to convene. But if he cut the workforce dedicated to policing the site that would not bode well for it as an information platform.
Andrew Graham, founder of brand consultancy Bread & Law said: "Musk can make empty gestures in the direction of civility all he wants, but the fact is that he’s been transparent about his intention to re-platform Twitter’s most toxic users and to gut content moderation. You don’t 'debate' whether, for example, vaccines work, or whether people of certain races, ethnicities, or gender identities deserve to live. And you don’t improve the health of a conversation by inviting bigots, liars, and grifters into it."
Meanwhile, there's the ongoing struggle to keep blatantly illegal content at bay, much to the anger of advertisers. Just last month, before Musk's takeover, it saw a swathe of brands including Disney, Coke and Dyson cut spend after they inadvertently appeared next to child abuse videos and images.
It's estimated that 13% of all content shared on Twitter is of pornographic nature, according to an internal company document seen by Reuters.
Raj Shah, lead for telecom, media & technology at Publicis Sapient, said that most major brands will now scale back their presence on the platform while they wait to see how content and moderation will be handled.
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“Advertisers are not reacting to Musk’s more libertarian viewpoints on censorship – they are more concerned about their products and ads being placed near controversial content,” he said. “I would expect most large brands to push advertising dollars to other platforms for a short while until they see how Twitter will handle their requirements.”
Twitter is reportedly planning to let go 25% of its workforce in the first round of layoffs, according to the Washington Post. It's not yet clear where those cuts will be made. But it could amount to nearly 2,000 employees and seriously dent advertiser confidence.
“The cuts we will see at Twitter over the next 24-48 hours will be debilitating to the platform and content governance,” continued Shah. “If advertisers feel that they can’t get user engagement, they’ll move the dollars, and if they see their investments returning similar results on other platforms, they may choose to stay there. Musk needs to convince advertisers that he is retooling Twitter, not trashing it.”
The Global Alliance for Responsible Media (GARM), backed by the biggest ad spenders globally, has been working with Twitter on ridding it of harmful content since 2019. It issued a statement today, October 31, urging Musk for ongoing “innovation and investment” into platform and brand safety.
“Platforms should be safe for all, and suitable for advertisers,” it warned. “For advertisers this is non-negotiable and we expect Twitter to uphold its commitments to GARM.”
But longer-term, Shah said advertisers will likely be disappointed at the level of investment under Musk. "The deal resembles a leveraged buyout, with Twitter taking on a massive debt load that will only interfere with any investment in the platform – so much for the millions that Musk will need to spend to attain his goals of a more efficient platform," he said. "And the brand hit and lack of service and guardrails will likely drive content creators away from the platform, which would torpedo Musk’s plans for a subscription service."
Already, celebrities, journalists, and sports stars with followers into the millions have said they will no longer use the platform.
But all hope is not lost. Shah added: “The thing is, Musk is smart enough to know all this. Unlike with SpaceX, Tesla, and PayPal, he is taking on a space with both established players and established models. If he instead pivots Twitter from the way we think of it to a Twitter as an all in one app that rivals WeChat in Asia, then there’s a way to real value generation through a retooling of Twitter."