Twitter's antics of Musk keep some advertisers at bay, limiting sales

Hundreds of advertisers paused spending on Twitter Inc. in the weeks following Elon Musk's acquisition of the company, trembling that the mercurial billionaire might bring about changes to the popular social media platform as a result of his acquisition. The sales team of Twitter has spent months trying to woo users back to the site with steep discounts and the promise of new safety tools, but many have yet to return despite Twitter's efforts to win them back.

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According to Pathmatics, the top 10 advertisers on Twitter spent $71 million on ads between September and October of last year, a significant increase over the previous year. The research firm said that the number has dropped to just $7.6 million in the past two months, which is an 89% decline compared with the previous two months. HBO, Amazon, IBM, Coca-Cola and the like have historically been some of Twitter's top advertising customers who buy ads on the platform.

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It is estimated that Twitter's daily users have increased by a slight amount since the beginning of this year, but the company's revenue has fallen by 50% since October as a result of a "massive decline" in advertising, Musk said earlier this month. Several major brands such as Mondelez International Inc., Coca-Cola Co., Merck & Co., AT&T Inc., Hilton Worldwide Holdings Inc., Nokia Corp., and others still have not resumed ad spending on the platform as of February, according to Pathmatics.

After Musk took control of Twitter, major media agencies such as IPG and Horizon Media, which advised clients to pause or consider suspending their Twitter campaigns after Musk took over, haven't yet encouraged marketers to return, according to people familiar with the situation. The initial recommendation after Musk took over the company was a "red light," that is, their advice to clients was to stop spending as soon as possible after Musk took over. Clients are still being advised to proceed with caution - the light has changed to amber - because it seems the company is still in a chaotic state. It has been reported that Twitter is planning to remove verification from accounts that do not pay a monthly subscription fee. Musk has also been embroiled in a public spat with a disabled ex-employee in recent weeks. It was disclosed by the company this week that the source code for its software had been leaked online.

Musk has taken steps to shore up the confidence of advertisers in the company. Several weeks after the billionaire bought the San Francisco-based company in November, as hate speech was on the rise, Twitter tried to make a comeback by rolling out a new product that would enable marketers to block their ads from appearing alongside tweets containing certain keywords or images. This product is called adjacency controls and it would allow marketers to block the ads from appearing alongside tweets that contain certain keywords or images. "A family-friendly brand probably won't want to advertise right next to a scene of a train wreck or a war scene," Musk said at the Morgan Stanley technology conference in early March, explaining that in the case of a train wreck or a war scene, the brand might want to avoid advertising nearby.

As Twitter scrambled to win back marketers who had fled, late last year, the company started to offer advertisers major discounts - in some cases hundreds of thousands of dollars in free ads - as a way of encouraging them to start spending again. The Twitter deals are no longer broadcasted by the company, but several advertisers have said they know they can get them again if they decide to return. Requests for comment regarding the company's advertisers were not answered by the company.

Advertisers say that Musk's own behavior on Twitter is one of the biggest barriers to Musk's ability to get people to spend more money. In the last month alone, Musk defended the cartoonist who created the famous cartoon “Dilbert” after he went on a racist tirade and made a sexist joke about women being “dangerous and violent.” In the wake of the school shooting in Nashville, Tennessee, Musk responded to a tweet that promoted an anti-trans narrative and thereby amplified it.

Advertisers are concerned about Musk's erratic decision-making and about the blurring between his personal brand and Twitter's corporate image as a result of his erratic decision-making. Musk, for example, was asking engineers to adjust the algorithm so that his own tweets would appear higher on users' feeds on the same weekend as the Super Bowl, traditionally one of the most important advertising events for Twitter.

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"It's this intangible wild card that Musk possesses," the media buyer said about Musk, asking for anonymity out of respect for Twitter relationships. “We have to work with clients to understand from a values perspective: Is this a business partner you want to be doing business with?” The short answer to this question for most advertisers at the moment is no.

Last month, the company announced that it would extend its adjacency controls to allow brands to block their ads from showing up next to specific user accounts, as well. With Author Exclusions, as Twitter calls them, advertisers are able to set up a list of up to 1,000 handles they want their ads to be kept away from in addition to keywords and topics that they want their ads to avoid. "It is important for brands to pay attention to the source and what a person stands for," says Jason Lee, brand safety officer at Horizon Media, one of the top media agencies in America. 

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Another media buyer from a large agency hinted at the irony of the situation when he said that “the No. 1 or No. 2 account that we’re going to avoid the most is the owner of the company.”

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With annual revenue of over 85% generated by advertising, Twitter, which has historically derived more than 85% of its revenue from advertising, has specialized in brand advertising for years, offering marketers the chance to put their message right in the middle of the conversation around major events like the Super Bowl or the World Cup. However, most major events aren't always feel-good moments. Brands have also been concerned about spikes in hate speech and other unsavory content during these times.  

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The company is currently in the process of auditing its advertising adjacency tools in conjunction with outside agencies such as DoubleVerify and Integral Ad Science in order to make sure that the ads are not appearing next to inappropriate content. In addition, Sprinklr, a social media strategy and analytics firm, has been hired by the company to audit the prevalence of hate speech on the platform. The results from the various audits have either not been clear enough to allow marketers to continue spending on them, or the results haven't been revealed yet.

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There are also other issues that need to be addressed. Due to economic pressures and a reduction in ad effectiveness after Apple Inc. implemented new privacy rules on iPhones, advertisers are reducing their digital spending in general, which is impacting Twitter's competitors, as well, since they are cutting their digital ad spending.

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Despite Musk's efforts, it does not appear that he has scared away all of his advertisers. During an interview on Bloomberg Television, in late February, WPP Plc's chief executive Mark Read, who runs the largest media agency in the world, said that whereas Twitter seemed to be unsteady a few months ago, it now appears to be a lot more stable now. According to him, "I think clients are starting to think about ways in which they can get back on Twitter in the future," he concluded. In his Morgan Stanley interview, Musk thanked Read for his support, and he pointed out Apple and Walt Disney Co. as two advertisers who "stuck with us throughout the whole process."

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There are a few smaller advertisers who are filling the spots available until more big names return to Twitter, reaching the service's still-large audience, which Musk estimates to be 250 million daily users. As a result of Musk's takeover of FinanceBuzz, which is a personal finance website, the company has spent more on Twitter ads each quarter and hasn't even considered leaving the platform, according to Franck Delbecque, a senior media buyer who leads FinanceBuzz's social media activities.

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“We have not reconsidered as long as it meets our platform goals,” said Delbecque, who in the first quarter spent less than $1 million on advertising on his site.

FinanceBuzz has actually seen an improvement in the performance of its ads since Musk took over as CEO. As a company, the company measures performance primarily as a result of conversions, or how many people visit a website after viewing an advertisement on the company's website. Delbecque believes that the changes to Twitter's algorithm that determines where, when, and why ads are shown have resulted in better conversion rates as a result of changes to Twitter's algorithm. I think Twitter is "definitely on par with other platforms," he stated.

During the past few weeks, Musk seems to have taken a greater interest in Twitter's sales organization, and he changed the reporting structure so that around half a dozen sales leaders now report directly to Musk, according to a person familiar with the change. In an attempt to keep more workers from leaving, Musk has offered employees new equity grants to begin vesting after six months which will allow them to cash out some of their equity in about a year. This is an attempt to prevent more workers from leaving the company.

Despite this, Twitter's sales team has been thinned through multiple rounds of layoffs since October, causing advertisers to worry about churn. There are some marketers who have said that they have had several new account managers or sales reps during that time period, which has damaged the relationship between them and has made them less confident in Twitter's ability to deliver as promised. A second round of personnel cuts occurred in early March, which brought these concerns back to the forefront. After it was reported publicly that Chris Reidy, Twitter's head of sales, had been laid off, colleagues, employees, and partners later realized that Reidy was still employed by the company - which caused further confusion among marketers - and determined that Reidy was still employed by Twitter.

"There must be a clear understanding of what their organization is all about," said one executive from a media agency. “Regardless of Elon's presence, who is in charge here? ”