Elon Musk hates ads.  Twitter needs them.  This can be a problem.

Elon Musk hates ads. Twitter needs them. This can be a problem.

i hate advertising“, tweeted Elon Musk in 2019.

Ever since he started pursuing his $44 billion purchase of Twitter — and for years before that — the world’s richest man has made it clear that advertising isn’t a priority. He talked about making money from Twitter in other ways, like charging certain users to be on the site. He also suggested he wanted 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 prepares to take over Twitter, he may quickly discover that Twitter needs Madison Avenue more than the other way around.

Ads make up around 90% of Twitter’s revenue. Yet long before Mr. Musk’s acquisition, many agency executives were lukewarm about advertising the service. They cited a litany of complaints, including that the company can’t target ads as well as competitors like Facebook, Google and Amazon.

Now, many ad executives say they are ready to shift their money elsewhere, especially if Mr. Musk removes the safeguards that allowed Twitter to suppress racist speech and conspiracy theories. An exodus of advertisers 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 sustain it.

But Twitter’s co-founder and at least some investors who joined Mr. Musk’s bid dismissed the need for publicity and insisted the company needed to get away with it. Twitter’s status as a “public company solely dependent on the advertising business model” has added to its problems with bots, abuse and censorship, says Ben Horowitzgeneral partner of venture capital firm Andreessen Horowitz, which is investing $400 million in the effort to privatize Twitter.

Jack Dorsey, the company’s co-founder, agreed. “It’s true. He needs to be covered for a while,” Mr Dorsey said. said in a tweet responding to Mr. Horowitz.

Advertisers said such a change would hurt Twitter. “At the end of the day, it’s not the brands that have to worry because they’re just going to spend their budget elsewhere – it’s Twitter that has to worry,” said David Jones, longtime advertising director. date and managing director of the Brandtech Group, a marketing technology company. “If you told me TikTok is gone, that would be a disaster. But Twitter is going away? Yeah whatever.”

Just after Mr. Musk struck a deal to buy Twitter early last week, company executives began contacting advertising clients, according to regulatory filings and multiple people who received the messages. Executives emailed assurances that business would continue as usual and lines of communication would remain open. Brand safety, they said, remained a “priority.”

Twitter representatives also noted that it would likely take months, if not more than a year, before any serious changes take effect, advertising executives said.

At Twitter’s annual NewFronts presentation for advertisers at Pier 17 in New York City on Wednesday evening, company representatives highlighted Twitter’s value to marketers: as the destination of choice for people to bring together 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.

The impending acquisition of Mr. Musk and what it could mean for advertisers was not mentioned during the short presentation.

“It’s been a quiet month on Twitter,” joked JP Maheu, Twitter’s vice president of global customer solutions.

Representatives for Mr. Musk did not respond to a request for comment on his publicity plans on Twitter. Twitter declined to comment.

Twitter differs from Facebook, whose millions of small and medium-sized advertisers generate the bulk of the company’s revenue and depend on its enormous size and targeting capabilities to reach customers. Twitter’s customer base is heavily made up of large, mainstream companies, which tend to be wary of showing their ads alongside problematic content.

Twitter derives the vast majority of its ad revenue from brand awareness campaigns, the effectiveness of which is much harder to gauge than ads that target users based on their interests or drive a direct response, such as clicking on a website. The company has tried for years to make its platform a better destination for ads that drive 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 the best products presented for anyone visiting their profiles.

Twitter’s reach is also narrower than many rivals, with 229 million users seeing ads, compared to 830 million users on LinkedIn and 1.96 billion daily users on Facebook. Stifel analysts recently wrote to clients that Twitter was “still considered a fairly niche platform by many in the advertising industry.”

Last month, Twitter said its revenue of $1.2 billion in the first three months of the year was up 16% from a year earlier, but was still down. lower than the growth rate expected by the company. While profitable in the quarter, the company has lost money in eight of the past 10 years.

At advertising agency Chemistry, whose clients include healthcare companies and national restaurant chains, Twitter accounts for about 10% of social media budgets, said Jason Dille, who oversees media planning.

“Even the likes of LinkedIn have overshadowed the ability for us to target consumers beyond what Twitter offers,” 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 advertising 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 election-related misinformation, removed lies about vaccines and, after last year’s Capitol riot, permanently banned former President Donald J. Trump. Last month, in response to the war in Ukraine, the platform stopped amplifying Russian government accounts and began blocking certain tweets containing images of prisoners of war. A few days before the announcement of the agreement with Mr. Musk, Twitter said that it ban ads that deny climate change.

“Twitter has done a better job than many platforms of building trust with advertisers – they’ve been more progressive, more responsive and more humble in initiating ways to learn,” said WPP chief executive Mark Read. , one of the largest advertising companies. in the world.

Now many advertisers say that while they will wait to see what Mr Musk does, they fear a decade of protective scaffolding will be dismantled.

“We can safely say that if content moderation policies change, and if there is no way for us to protect the brand, we will definitely recommend that our customers withdraw their investments,” Arun said. Kumar, the chief data and technology officer at advertising giant IPG.

Several ad executives said they doubted Mr. Musk would consider their concerns because of his background in the industry.

Mr. Musk, founder of the successful electric car company Tesla and rocket company SpaceX, does little marketing for those companies. On Twitter, he criticized the ads as “manipulate public opinionand referred to his refusal to “pay famous people to pretend to endorse.” When you write in a tweet since deleted about Twitter Blue, the recently introduced $3 per month subscription service, he pushed for “no ads”, explaining that “corporate power to dictate policy is greatly increased if Twitter depends on the advertising money to survive”.

“I don’t think he cares about the advertising experience on Twitter because he never cared about advertising,” said Harry Kargman, chief executive of mobile advertising company Kargo. “I don’t think he’s just convincing advertisers to spend money on the platform beyond what’s automated.”

Mr. Musk suggested that Twitter focus on subscriptions; others suggested a pay-per-tweet model. But some ad executives hope Mr. Musk’s competitive spirit will inspire him to reset Twitter as a powerful marketing machine.

“There’s a fork in the road, where Path A leads to an unfiltered place with the worst human behavior and no brand wants to go near it,” said Brandtech’s Mr. Jones. “And Path B has one of the genius entrepreneurs in the world, who knows a lot about running businesses, setting off a wave of innovation that has had people looking back a few years from now and saying, ‘You remember when everyone was worried about Musk coming?'”

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