Elon Musk took over a struggling Twitter and quickly made it worse

Twitter profile page belonging to Elon Musk seen on an Apple iPhone mobile phone.

Nurphoto | Nurphoto | Getty Images

When Elon Musk said last week that Twitter experienced a “massive drop in revenue” under his recent tutelage, he blamed the drop 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 tell Musk about their concerns about brand safety on the site. The group would later ask those companies to suspend advertising spending on Twitter following what its executives saw as an increase in racist messages and hate speech.

While Musk may be right to attribute some of the drop in revenue to pressure from activists, at least some of the blame lies with him. The new owner of Twitter, the richest person in the world, recently tweeted a conspiracy theory linked to the attack on Paul Pelosi, husband of House Speaker Nancy Pelosi, and made a series of crude and sophomoric jokes , some of which were quickly deleted.

Companies don’t want to tie their brands to this type of behavior and content, said Rachel Tipograph, CEO of ad tech firm MikMak.

“Advertisers worry about brand safety, and that’s really what it’s all about,” Tipograph said. “Advertisers are not currently seeking association with events currently unfolding on Twitter.”

Companies such as General Engines and Volkswagen suspended spending on Twitter after Musk’s arrival, while advertising titan Interpublic Group urged clients to do the same. The boycott poses a significant problem for the social media service, which derives 90% of its sales from advertising.

Compared to larger rivals Facebook and Google, Twitter has never managed to develop an online advertising business commensurate with the scale of its influence in popular culture and society in general. 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’s parent company Alphabet recorded $257 billion in revenue.

Twitter’s second-quarter revenue 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, assistant professor of business at Columbia Business School.

It’s a company that Musk paid $44 billion to buy. As part of the deal, he borrowed $13 billion, which he must repay.

For that investment, he secured a company with “very poor targeting capabilities in an ad-based business where it’s critical,” Sherman said. “I laugh a little because I keep getting promoted ads on Twitter in my feed for businesses that would be better directed at 13-year-old girls.”

On Wednesday, Musk is hosting an audio meeting with advertisers on “Twitter Spaces.”

Twitter did not respond to requests for comment.

The YouTube approach

Musk did himself no favors after the acquisition, which closed in late October. In addition to his own dodgy tweets and retweets, he failed to explain what he means by free speech and acceptable content on the platform, and he abruptly fired around 50% of Twitter’s staff almost immediately, raising further questions about content moderation.

Companies usually halt advertising campaigns if they believe they may suffer reputational damage. For example, the companies boycotted Alphabet’s YouTube in 2017, fearing their ads would run alongside videos of extremists.

YouTube executives reacted quickly at the time, allowing third-party verification of content, and hiring more people to remove offensive videos. Advertisers returned and business rebounded quickly.

Musk prefers to take a combative approach to advertisers. Responding to a tweet advising him to name brands boycotting Twitter so his followers can boycott those brands, Musk said “thermonuclear naming and shaming is exactly what will happen if this continues.”

Meanwhile, Musk is taking a convoluted approach to banning users. Twitter has kicked out comedian Kathy Griffin for impersonating Musk on the site, while it temporarily locked comedian Sarah Silverman’s account for a similar offence.

Jeff Seibert, Twitter’s former head of consumer products, called it “a mistake for Elon to be the face of content moderation.” In the past, Twitter has taken a team approach to policy violations.

“If you put one person in charge, I think you start to see random decisions like this that then [cause people to] lose confidence,” Seibert said.

Kathy Griffin attends the ‘A Hell of a Story’ premiere during the 2019 SXSW Conference & Festival at Zach Theater on March 11, 2019 in Austin, Texas.

Tim Mosenfelder | Getty Images Entertainment | Getty Images

Twitter’s advertising business has already started to deteriorate under Musk.

Data from MikMak, whose clients include Colgate, Unilever and General Mills, show a large decline in ad spend on Twitter. From Oct. 1 to Nov. 7, Twitter suffered a 68% drop in media traffic, which refers to the number of times people click on an ad, according to MikMak.

Before that, the numbers had increased. Twitter’s media traffic grew 56.3% from July 1 to September 30 and 326% from April 1 to June 30.

“We were actually seeing an increase in traffic on Twitter,” Tipograph said. “As soon as potential Elon Musk ownership became more imminent, we saw a significant shift in traffic.”

Whatever technology and business improvements are underway will be difficult to sustain as the mass layoffs have eaten away at Twitter’s global marketing team, whose responsibilities include advertising performance reporting and metrics, CNBC reported.

‘Now pay $8’

Musk has focused on subscriptions as the key to reviving Twitter’s finances. He offered an $8 per month plan that allows people to get “verified” and get premium features. The reviews were so fierce that Musk tweeted an image of a t-shirt on Monday, saying “Your feedback is appreciated. Pay $8 now.”

Musk has previously hinted that he wants to turn Twitter into a so-called super app, similar to China’s WeChat, that people can use to talk to friends, watch movies and buy goods.

Still, he will need partners who want to work with him. And his aggressive stance on companies that have paused ads on the site isn’t very appealing as he pursues other partnerships, said Jeanine Turner, a professor in the University’s Communication, Culture and Technology program. of Georgetown.

The “big issue for him, I think, would be confidence,” Turner said. “I don’t see people trusting him with all this information.”

When it comes to advertisers, many brands don’t view Twitter as an essential distribution channel given its less sophisticated ad tracking technology and targeting capabilities. Other opportunities are emerging, such as connected TVs and streaming services, as well as from Amazon growth in online advertising business for retail-focused businesses, Tipograph said.

Jessica González, co-CEO of the nonprofit group Free Press, was unimpressed with Musk’s antics. González was one of the civil rights leaders who spoke with Musk last week, expressing concern over rising hate speech against black and Jewish groups on Twitter. This is the same group that urged advertisers to stop their campaigns.

González said she was ready to give Musk “the benefit of the doubt” when he told the group that Twitter was aligned with them. But between his ensuing rhetoric and his halving of staff, she has serious doubts about whether it’s worth trying to work with him.

When asked if she would take another meeting with Musk to discuss Twitter’s approach to offensive content, she replied, “I don’t know.”

“Only because he made promises at that meeting and then walked back on it two days later,” González said.

Correction: This article has been updated to correct the spelling of Speaker of the House Nancy Pelosi’s name.

LOOK: The opportunities on Twitter are gigantic

The opportunities on Twitter are gigantic, says billionaire investor Ron Baron

Comments are closed.