Business

Elon Musk Hates Ads. Twitter Needs Them. That May Be a Problem.


I hate advertising,” Elon Musk tweeted in 2019.

Since he began pursuing his $44 billion purchase of Twitter — and for years earlier than that — the world’s richest man has made clear that promoting was not a precedence. He has talked about earning profits from Twitter by different means, like charging some users to be on the location. He has additionally steered that he desires to calm down the service’s content moderation policies, which entrepreneurs say have helped stop adverts from showing alongside hate speech and misinformation.

However as Mr. Musk will get able to take over Twitter, he could rapidly uncover that Twitter wants Madison Avenue greater than the opposite means round.

Adverts account for roughly 90 p.c of Twitter’s income. But lengthy earlier than Mr. Musk’s acquisition, many company leaders had been lukewarm about promoting on the service. They’ve cited a litany of complaints, together with that the corporate can not goal adverts almost in addition to opponents like Fb, Google and Amazon.

Now, quite a few promoting executives say they’re prepared to maneuver their cash elsewhere, particularly if Mr. Musk removes the safeguards that allowed Twitter to take away racist rants and conspiracy theories. An advertiser exodus would weaken the corporate, underscoring the issue of balancing Mr. Musk’s imaginative and prescient of Twitter as a haven totally free speech with the enterprise relationships that maintain it going.

However Twitter’s co-founder and a minimum of some traders who joined Mr. Musk’s bid have rejected the necessity for promoting and insisted that the corporate wants to interrupt away from it. Twitter’s standing as “a public firm solely reliant on the promoting enterprise mannequin” added to its issues with bots, abuse and censorship, said Ben Horowitz, a basic accomplice on the enterprise capital agency Andreessen Horowitz, which is investing $400 million within the effort to take Twitter personal.

Jack Dorsey, the corporate’s co-founder, agreed. “That is true. It wants cowl for some time,” Mr. Dorsey said in a tweet responding to Mr. Horowitz.

Advertisers stated such a shift would harm Twitter. “On the finish of the day, it’s not the manufacturers who must be involved as a result of they’ll simply spend their budgets elsewhere — it’s Twitter that must be involved,” stated David Jones, a longtime promoting govt and the chief govt of the BrandTech Group, a advertising expertise firm. “If you happen to stated to me that TikTok went away, that may be a catastrophe. However Twitter going away? Yeah, no matter.”

Proper after Mr. Musk reached a deal to purchase Twitter early final week, the corporate’s executives started reaching out to promoting purchasers, in keeping with regulatory filings and several other individuals who acquired the messages. The executives emailed assurances that enterprise would proceed as ordinary and that the traces of communication would stay open. Model security, they stated remained a “precedence.”

Twitter representatives have additionally famous that it might most likely be months, if no more than a 12 months earlier than any critical modifications would go into impact, promoting executives stated.

On Wednesday night time, at Twitter’s annual NewFronts presentation for advertisers at Pier 17 in New York, firm representatives burdened Twitter’s worth for entrepreneurs: as a high vacation spot for folks to collect and focus on main cultural moments like sporting occasions or the Met Gala, more and more by video posts. Presenters pledged to assist manufacturers attain fragmented audiences, and executives repeatedly thanked advertisers and businesses for his or her belief and collaboration.

Mr. Musk’s pending acquisition, and what it would imply for advertisers, went unmentioned through the quick presentation.

“It has been a quiet month at Twitter,” joked JP Maheu, Twitter’s vice chairman of world consumer options.

Representatives for Mr. Musk didn’t reply to a request for remark about his plans for promoting at Twitter. Twitter declined to remark.

Twitter differs from Fb, whose thousands and thousands of small and midsize advertisers generate the majority of the corporate’s income and rely on its huge measurement and concentrating on skills to achieve clients. Twitter’s clientele is closely weighted with giant, mainstream corporations, which are usually cautious of their adverts showing alongside problematic content material.

Twitter earns the overwhelming majority of its advert income from model consciousness campaigns, whose effectiveness is far more durable to guage than adverts that focus on customers primarily based on their pursuits or that push for a direct response, corresponding to clicking by to a web site. The corporate has tried for years to make its platform a greater vacation spot for adverts that generate measurable gross sales, and rebuilt its advert server in 2019 and 2020 to satisfy marketer calls for. In March, Twitter started permitting advertisers in america so as to add procuring catalogs that showcased top products for anybody visiting their profiles.

Twitter’s attain can also be narrower than many rivals, with 229 million customers who see adverts, in contrast with 830 million customers on LinkedIn and 1.96 billion every day customers on Fb. Stifel analysts wrote to purchasers lately that Twitter was “nonetheless thought of a reasonably area of interest platform by many within the promoting business.”

Final month, Twitter stated its $1.2 billion in revenue through the first three months of the 12 months was up 16 p.c from a 12 months earlier, however nonetheless lagged the expansion charge the corporate had projected. Whereas it was worthwhile within the quarter, the corporate has misplaced cash in eight of the previous 10 years.

On the advert company Chemistry, whose purchasers embody well being care corporations and nationwide restaurant chains, Twitter accounts for round 10 p.c of social media budgets, stated Jason Dille, who oversees media planning.

“Even the likes of LinkedIn have eclipsed the flexibility for us to focus on customers past what Twitter is offering,” he stated. “We’re going to go the place the outcomes are, and with lots of our purchasers, we haven’t seen the efficiency on Twitter from an advert perspective that now we have with different platforms.”

However for Mr. Dille and lots of others, Twitter’s angle towards content material controls was a brilliant spot. In 2019, it banned all political ads. The corporate launched warning labels about misinformation associated to elections, took down falsehoods about vaccines and, after the Capitol riot final 12 months, permanently banned former President Donald J. Trump. Final month, in response to the struggle in Ukraine, the platform stopped amplifying Russian government accounts and commenced blocking some tweets containing photographs of prisoners of struggle. Days earlier than the take care of Mr. Musk was introduced, Twitter stated it might ban ads that deny climate change.

“Twitter’s carried out a greater job than many platforms at constructing belief with advertisers — they’ve been extra progressive, extra responsive and extra humble about initiating methods to study,” stated Mark Learn, the chief govt of WPP, one of many largest promoting corporations on the planet.

Now, many advertisers say that though they are going to wait to see what Mr. Musk does, they’re frightened {that a} decade of protecting scaffolding could also be dismantled.

“We are able to safely say that if the content material moderation insurance policies change, and if there isn’t any means for us to guard the model, we’re undoubtedly going to suggest to our purchasers that they pull again on their investments,” stated Arun Kumar, the chief knowledge and expertise officer on the advert large IPG.

A number of promoting executives stated they doubted that Mr. Musk would contemplate their issues due to his monitor file with the business.

Mr. Musk, a founding father of the profitable electrical automotive firm Tesla and the rocket firm SpaceX, does little advertising for these companies. On Twitter, he has criticized adverts as “manipulating public opinion” and mentioned his refusal to “pay famous people to fake endorse.” When writing in a since-deleted tweet about Twitter Blue, the lately launched $3-a-month subscription service, he pushed for “no adverts,” explaining that “the facility of firms to dictate coverage is drastically enhanced if Twitter relies on promoting cash to outlive.”

“I don’t suppose he cares concerning the promoting expertise on Twitter as a result of he’s by no means cared about promoting,” stated Harry Kargman, the chief govt of the cellular promoting firm Kargo. “I don’t suppose that he’s all about convincing advertisers to spend cash on the platform past what’s automated.”

Mr. Musk has steered that Twitter give attention to subscriptions; others have steered a pay-per-tweet mannequin. However some advert executives hope that Mr. Musk’s aggressive spirit will encourage him to reset Twitter as a powerhouse advertising machine.

“There’s a fork within the highway, the place Path A results in an unfiltered place with the worst of human conduct and no manufacturers wish to go wherever close to it,” stated Mr. Jones of BrandTech. “And Path B has one of the world’s genius entrepreneurs, who is aware of rather a lot about operating corporations, unleashing a wave of innovation that has folks trying again in just a few years and saying, ‘Bear in mind when everybody was frightened about Musk coming in?’”





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