Chemistry News

May 05, 2022

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


Jason Dille [Quoted in Article]

Many marketers were already lukewarm on the service. Now, some may move their money elsewhere if the content moderation policies are relaxed.

By Tiffany Hsu and Kate Conger

“I hate advertising,” Elon Musk tweeted in 2019.

Since he started pursuing his $44 billion purchase of Twitter — and for years before that — the world’s richest man has made clear that advertising is 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 cannot target ads nearly as well as competitors like Facebook, Google and Amazon.

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

But Twitter’s co-founder and at least some investors who joined Mr. Musk’s bid have rejected the need 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 Horowitz, a general partner at the venture capital firm Andreessen Horowitz, 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 the chief executive of the Brandtech Group, a marketing technology company. “If you said to 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, the company’s executives began reaching out to advertising clients, according to regulatory filings and several people who received the messages. The executives emailed assurances that business would proceed as usual and that the lines of communication would remain open. Brand safety, they said, remains 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, company representatives 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, increasingly 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 has been a quiet month at 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 at 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 depend 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 that push for a direct response, 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 rebuilt its ad server in 2019 and 2020 to meet marketer demands. In March, Twitter began allowing advertisers in the United States to add shopping catalogs that 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 earlier, but still lagged the growth rate the company had projected. While it was profitable in the quarter, the company has lost money in eight of the past 10 years.

At the ad agency Chemistry, whose clients include health care companies and national restaurant chains, Twitter accounts for around 10 percent of social media budgets, 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 haven’t seen the performance on Twitter from an ad perspective that we have with other platforms.”

But for Mr. Dille and many others, Twitter’s attitude toward content controls was 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, permanently barred 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 change.

“Twitter’s done a better job than many platforms at building trust with advertisers — they’ve been more progressive, more responsive and more humble about initiating ways to learn,” said Mark Read, the 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’re definitely going to recommend to 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 their 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, he pushed for “no ads,” explaining that “the power of corporations to dictate policy is greatly enhanced if Twitter depends on advertising money to survive.”

“I don’t think he cares about the advertising experience on Twitter, because he’s never cared about advertising,” said Harry Kargman, the chief executive of the mobile advertising company Kargo. “I don’t think that he’s all about convincing advertisers 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 Mr. Musk’s competitive spirit will inspire him to reset Twitter as a powerhouse marketing machine.

“There’s 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 has one of the world’s genius entrepreneurs, who knows a lot about running companies, unleashing a wave of innovation that has people looking back in a few years and saying, ‘Remember when everyone was worried about Musk coming in?’”

Tiffany Hsu is a media reporter for the business desk, focusing on advertising and marketing. Previously, she covered breaking business news. Before joining The Times, she wrote about the California economy for The Los Angeles Times. @tiffkhsu

Kate Conger is a technology reporter in the San Francisco bureau, where she covers the gig economy and social media. @kateconger A version of this article appears in print on , Section B, Page 1 of the New York edition with the headline: Twitter Has Ad Problem, And Musk May Not Help.

Full Article Here.

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