Elon Musk's battles with advertisers hurt Twitter's $5 billion annual revenue

Top brands stop using social media as its wealthy owner criticizes its CEOs for spending less

Elon Musk's battles with advertisers

Tensions over content moderation and resources have hurt Twitter's $5 billion-a-year advertising business as a result of Elon Musk's turbulent reign at the social media platform. This has caused a gap with leading brands and marketers.

In response to concerns over Musk's ad hoc approach to content policing and decision to fire many of its ad sales team, numerous leading advertising agencies and media buyers informed the Financial Times that almost all of the major brands they represent have halted spending on the social media platform.

According to a senior industry figure, Musk has attempted to personally call the chief executives of some brands that have reduced their advertising spend to chastise them. As a result, other brands have reduced their advertising spend to the absolute minimum necessary to avoid further conflict with the multibillionaire businessman.

According to four business sources, the Twitter advertisements business team has become so small as a result of waves of layoffs and departures that many agencies no longer have a point of contact there and have received little to no communication in recent weeks.

The lack of people has prevented some firms from receiving feedback on the effectiveness of prior ads, according to a media buyer. Others claim that Twitter's ad systems have gotten clumsy, making it challenging or even impossible to create campaigns.

It is pretty distinctive. Nothing of this magnitude, including the chaos and damage, has ever occurred. Never," a top executive at one of the Big Four ad agencies remarked.

Another top executive from an advertising agency commented, "He seems to turn off even those advertisers who wanted him to succeed."

Musk is under pressure to generate money from Twitter since he must pay $1 billion in interest each year after piling on $13 billion in debt to the company to help finance his acquisition of the company.

The top executive of Tesla and SpaceX sought to convince marketers on October 27, the day he concluded his $44 billion agreement to buy Twitter, that the platform would not turn into a "free-for-all hellscape" despite his plans to loosen content moderation limits.

He soon made many calls and met with key advertising agencies and businesses to reassure them. According to one email, which was sent in early November and obtained by the Financial Times, Musk is one of the world's greatest innovators and has a deep understanding of our platform and product. He wants to ship exciting things as soon as possible.

According to two agency executives, during the discussions, Musk appeared to be familiar with every aspect of the platform's operation and impressed businesses with his knowledge. "He is more knowledgeable than [previous CEO Jack Dorsey] ever was. He has immersed himself completely in the industry, according to a senior executive of a prestigious advertising firm.

But after Musk fired more than half of the company's 7,500 employees, upsetting Twitter's ad sales team and trust and safety team, and escalating worries that false information and hate speech may propagate on the site, the relationship quickly worsened.

Given the concerns about moderation, organizations like General Motors, Volkswagen, Carlsberg, and General Mills have declared they will pause their platform spending.

Many people in the advertising sector have found it difficult to keep up with the developments. Following Sarah Personette's resignation as CEO, Robin Wheeler took over management of Twitter's ad sales division under Musk. Wheeler quit the firm last week. According to Bloomberg, Musk sacked Wheeler for refusing to remove any more members of the ad sales staff. Requests for a response from both Musk and Twitter went unanswered.

Brands who worry that their content would be displayed next to harmful posts are alarmed by Musk's personal usage of Twitter, which includes reposting conspiracy theories and engaging with divisive accounts.

The self-described "free speech absolutist" further infuriated sponsors when he reintroduced Twitter Blue, the premium subscription service after impersonators took use of its "blue tick" feature to target politicians and companies like Eli Lilly and Lockheed Martin. The service was first put on hold because he waited for there to be "high confidence of stopping impersonation," but he announced on Friday that he intended to offer it the following Friday.

Last week, Musk also started to lift some long-standing bans on prominent individuals, like former US president Donald Trump, despite promising not to do so until he had assembled a council of experts to oversee content filtering.

Musk responded that "a huge coalition of political/social activist groups agreed not to try to kill Twitter by starving us of advertising money provided I agreed to this condition" when questioned on Tuesday about why he lifted the bans without creating the council as promised. "They broke the deal," he continued. Several left-leaning organizations have urged brands to cut back on their spending.

The restructuring seems to have had an impact on Twitter's ad technology. The Kite Factory's Gabby Krite, Head of Digital Operations, reported having technical issues putting or altering advertising campaigns. The Kite Factory used to spend "hundreds of thousands" of dollars annually on the site. She said that the campaign management tool was utterly unreliable due to technical problems.

Left-leaning non-analysis profit's According to Media Matters, since Musk took the leadership, 50 of the top 100 advertisers, who together will spend $750 million on advertising in 2022, have either delayed or said they will pause expenditure, while another seven have decreased investment to a trickle. According to Media Matters, only 50 advertisers generated $317 million of Twitter's $5 billion in income in 2021.

Directives have also been issued by agencies. According to three people with knowledge of the decision, Omnicom Media Group recommended customers suspend spending on the platform in mid-November after Interpublic made a similar suggestion. Two persons with knowledge of the situation indicated that last week WPP's GroupM upgraded their rating of the danger of running advertisements on the site to "high risk."

Omnicom opted not to respond. Requests for comment from Interpublic and GroupM were not immediately entertained.

If and when brands will return are up in the air. An executive at another advertising agency said, "It's difficult to have criteria [for returning to the site] when Musk manages by tweet and something changes on the platform every day that causes marketers concern."

The appointment of a new CEO is Musk's best opportunity, according to Darren Savage, chief strategy officer at Tribal Worldwide. Particularly, one who is trusted by users and advertisers, understands what Twitter is, and is given the freedom to do their job.

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