When Elon Musk said last week that Twitter has experienced a “massive drop in revenue” under his recent tutelage, he blamed the decline on “activist groups pressuring advertisers.”
There was some merit to his claim. A group of civil rights leaders had sent a letter to the CEOs of major companies, including Anheuser-Busch, Apple, Coca-Cola and Disney, urging them to relay their concerns about brand safety on the site to Musk. Later, the group would call for those businesses to halt ad spending on Twitter following what its leaders saw as a rise of racist posts and hate speech.
Businesses don’t want to link their brands with that sort of behavior and content, said Rachel Tipograph, CEO of advertising technology firm MikMak.
“There are concerns with advertisers around brand safety, and that’s really what this is all about,” Tipograph said. “Advertisers right now are not looking to be associated with the events that are currently happening at Twitter.”
Companies such as General Motors and Volkswagen have paused their spending on Twitter following Musk’s arrival, while advertising titan Interpublic Group recommended that its clients do the same. The boycott poses a significant problem for the social media service, which derives 90% of sales from advertising.
Compared with larger rivals Facebook and Google, Twitter never managed to develop an online ad business that matched the scale of its influence in popular culture and society at large. Twitter has lost money in six of the eight years since its IPO. Its revenue in 2021 reached $5 billion, while Facebook generated sales of $118 billion and Google parent Alphabet recorded $257 billion in revenue.
Twitter’s revenue in the second quarter declined from a year earlier.
“In my humble opinion, to use a very technical term, their business sucks, and they need a radical transformation,” said Len Sherman, an adjunct professor of business at Columbia Business School.
It’s a business that Musk shelled out $44 billion to purchase. As part of the deal, he borrowed $13 billion, which he has to pay back.
For that investment, he got a company with “very poor targeting capabilities in an ad-based business where that’s essential,” Sherman said. “I kind of laugh because I keep getting Twitter-promoted ads in my stream for companies that would be better directed to 13-year-old girls.”
On Wednesday, Musk is holding an audio meeting with advertisers on “Twitter Spaces.”
Twitter didn’t respond to requests for comment.
The You Tube Approach
Musk did himself no favors after the acquisition, which closed in late October. In addition to his own questionable tweets and retweets, he’s been inconsistent in laying out what he means by free speech and acceptable content on the platform, and he abruptly fired roughly 50% of Twitter’s staff almost immediately, raising further questions about content moderation…….