Twitter ‘rudderless’ as Musk saga hurts publicity
Twitter is suffering from declining morale, staff layoffs and an uphill battle to keep its $4.5 billion-a-year advertising business afloat as its management grapples with the fallout of the intermittent lawsuit of Elon Musk against the social media company.
Company insiders, former staff and advertising industry executives told the Financial Times that Chief Executive Parag Agrawal was leading an increasingly strenuous effort to keep the company running smoothly in the amid a legal battle to stop Musk from walking away from a $44 billion deal to acquire Twitter.
Agrawal has sought to spend more time with advertisers in recent months to address their growing concerns, according to several people familiar with his thinking.
The effort comes as the San Francisco-based group blamed “uncertainty” over the Tesla chief’s takeover and a slump in digital ad spending among the reasons for lower second-quarter revenue.
Tensions between Twitter staff and management have grown since Musk’s initial takeover bid in April. The company laid off about 30% of its talent acquisition team in early July. This follows its decision in May to implement a hiring freeze and cost-cutting measures. On Tuesday, Twitter said it had “significantly slowed hiring” in the second quarter and seen “our attrition rate increase.”
“Everyone has given up leadership,” said a senior Twitter employee, speaking on condition of anonymity. “It seems like the take on Twitter is” This man is awful [but] he should run the business”. Either way, it looks like the loser gets Twitter.
The disruption hurts Twitter’s main source of revenue: its advertising business.
Some ad executives are warning that the appetite for allocating digital ad spend to the social media company will dwindle, fearing a messy legal battle against Musk could distract management, hamper the development of products – and only dwindles its ranks further as key employees leave.
Twitter “appears a bit rudderless,” said a former Twitter executive. “It’s hard not to be a little compassionate, because nothing is chosen by anyone, forced to do what they didn’t want to do on the whim of a rich man.”
The company’s costs rose 31% to $1.52 billion in the three months to the end of June. During that time, more than $33 million was spent on Musk acquisition-related issues, while severance costs were around $19 million.
“Twitter is hurting,” said Ed East, chief executive of creative agency Billion Dollar Boy, which advertises brands on social media. “The ongoing Elon Musk saga has created a lot of uncertainty on the platform.”
East added that his company estimated a 14% drop in overall creator ad volume on Twitter since May 13 – the day Musk announced he was suspending the deal.
Another ad agency executive said he had already noticed talent leaving Twitter’s ad sales team in particular, though several others noted that all of his top ad managers were still with the company.
Regardless of the Musk effect on Twitter, advertisers are tightening their belts amid a steeper slowdown in digital advertising. Inflation and supply chain issues are hurting businesses as consumers emerge from pandemic shutdowns, spend less time online and become more mindful of discretionary spending.
Analysts said Twitter’s reputation for having a slow pace of product innovation and a thinner ad offering compared to rivals such as Instagram leaves it more dangerously exposed.
“It still underperforms its peers in terms of revenue and users,” said Jasmine Enberg, senior social media analyst at Insider Intelligence. “If he hadn’t been so distracted by the Musk saga, he probably could have addressed those concerns.”
Rivals such as Facebook, TikTok and Google “will take [market] share of Twitter in the next few months,” predicted an executive from an ad agency. “There will be no new advertising products, people will leave. Others will start stealing stuff.
They added: “This is a sad indictment of the board and management. They had a good offer – [but] management and the board presented no contrary view in Elon’s absence. They didn’t have a plan B. Personally, I wonder if Twitter will survive all of this.
Twitter said the company is focused on “delivering priority solutions in areas such as performance marketing, measurement, buying, branding, and more.” and remained committed to “brand safety” – ensuring that ads weren’t run alongside toxic content.
Inside Twitter, where office walls are decorated with neon signs of inspirational phrases such as #lovewhereyouwork, many staff said they were puzzled by the company’s legal approach – which, if successful, would mean it would ultimately belong to someone who doesn’t seem to want it.
For those who remain on Twitter, the decline in the group’s share price since Musk began attacking it may provide less incentive to stay, given that shares are at the heart of employee compensation.
Twitter said: “Our attrition is slightly above best practice in normal macro times, but remains in line with current industry trends.”
An employee added that some staff were increasingly afraid to speak up on public channels such as Slack’s internal message board, as it had been actively discouraged by management – moving instead to discuss the Musk saga in private messages on apps such as Signal.
“We get asked about our year-end goals when we have no idea what state the business will be in. It’s laughable,” the person said. “There has been a failure to truly recognize and resolve the crisis we find ourselves in.”
Additional reporting by Patricia Nilsson in London