Today | Written by Ralph Rozema
Elon Musk is "mercurial" and "uncontrollable" which is a "dangerous mix" when you are trying to sell housewives breakfast cereals," says one advertising executive, ruminating on the Tesla boss's impact as Twitter's new owner. There is little doubt that the advertising industry is waiting with bated breath to see what changes Musk will introduce to Twitter, the ad-dependent social network he snapped up for $44bn.
With 229m active users, Twitter is dwarfed by the user bases of Meta and TikTok, but it still banked $4.5bn in advertising revenue last year. Furthermore, the social media platform is cherished by marketers for its cultural importance; high engagement levels; trendlists; and reasonable ad rates. Will Musk, though, make a mess of Twitter, they wonder?
To date, the advertising reaction can largely split between apprehension, particularly at Musk being a free speech champion, and anticipation, at new advertising opportunities. One immediate red light for advertisers has been the threat from users to abandon a Musk-owned Twitter, fearing a relaxation of rules will make it a cesspool of toxicity. Paul Thompson, UK country manager, Seedtag, the contextual advertising business said: "Twitter needs to think carefully about how Musk manages the advertising community, brands and creatives to encourage the use of Twitter as an advertising platform and channel. "Musk has at times been the best advocate of Tesla and also the worst and he is likely to do the same on Twitter."
What history tells us!
Musk is a disruptor and his CV, coupled with his pronouncements on Twitter about his plans for the social network, tells us he will not be a passive owner but that he is buying Twitter to shake it up-and his CV suggests he might be a success. Let's not forget Musk had the foresight to disrupt the finance industry by being a co-founder of PayPal, the digital payments and transfer payments platform, which was acquired by eBay in 2002 for $1.5bn in stock, netting Musk a personal fortune of $175m.
And under Musk's ownership, Tesla has not only become the most valuable car company in the world but it has revolutionised the sleepy automotive industry. Electrification and driver automation, both pioneered by Tesla, are now being mimicked by rival car brands around the world. Advertisers will be hoping that Musk can spring similar stardust on Twitter. On the debit side, Musk is a divisive and often controversial figure and new owners of social media companies sometimes fail to flatter: think MySpace and Tumblr.
Musk a critic of Twitter advertising
Musk, a prolific Tweeter himself, has hit out at Twitter's advertising model and is a big advocate of free speech, calling it a "bedrock of functioning democracy". One big fear felt by advertisers is that Twitter, under Musk, will U-turn on its previous clamp down on hate speech and will now welcome all and sundry onto the platform, irrespective of their extreme views. In 2017, brands and publishers said they would yank money from YouTube after their ads were displayed alongside videos promoting terror and anti-Semitic content, a threat to which Google-owned YouTube responded to by giving advertisers more control. But will the combative Musk be so compliant?
Twitter calming advertiser fears
Aware of unrest by advertisers, Twitter has been rushing out to reassure advertisers that Twitter will remain a safe place to advertise, in light of its new ownership. The move by Twitter comes amid campaign groups that spearheaded a Facebook boycott in 2020 warning of potential toxicity and abuse on the platform under Musk's ownership The social media platform has written to agencies in the wake of the deal, reaffirming that it remains committed to ensuring ads will not be seen next to harmful or offensive content, according to an email seen by the FT.
Jonathan Greenblatt, chief executive of the Anti-Defamation League, which led 2020's Stop Hate for Profit campaign against Facebook, when well-known brands including Unilever, Ford and Coca-Cola pulled spending from the social network. said: "Twitter has made some strides in tackling online hate and extremism in recent years, and so while we want to be cautiously optimistic about how Elon Musk will run the platform, he has not demonstrated any focus on these issues to date. "We worry that he could take things in a very different direction."
Twitter moderation to be relaxed?
Sjef Kerkhofs, managing director, Daily Dialogues, the social media platform, says many advertisers will not be happy about the takeover. Kerkhofs said: "Most advertisers are strong supporters of Twitter moderation because they don't want to advertise in the middle of hate speech tweets or fake news. So I think not a lot of advertisers are happy with the Musk takeover of Twitter."
Likewise, Thompson thinks advertisers on Twitter could be in for a rocky ride. Should Musk adhere to his principle of free speech, Thompson said, Twitter will become an "increasingly difficult place for brands to navigate and to avoid unsafe content, misinformation and fake news". He says relaxed moderation rules mean that Donald Trump's controversial call on Twitter for the storming of the capital to "stop the steal" would be permitted.
Likewise, Ciaran Deering, head of online, The Grove Media said Musks's focus on free speech could be problematic for users and advertisers. Deering said: "What kind of controls will Twitter have to ensure that brands aren't exposed to views that aren't misaligned with their own values? With a focus on free speech, will Twitter become a niche platform, struggling to maintain ad revenue? "And let's face it, Twitter is really a niche platform for advertising. Good if you are business, in say finance, education, design, fashion looking to associate with outspoken opinion. "But if Twitter really wants to appeal to more advertisers it will need to have a big and broader, mainstream audience. And there is little prospect of that."
Richard Morris, a partner at the creative firm Whistlejacket London, likens the "knee jerk" outrage from advertisers to that which accompanied the launch of GB News, the new UK TV channel which was criticised for bringing highly partisan Fox News-style programming to the UK. Morris points out that this outrage from advertisers soon died down after the channel launched, and that advertisers have taken a longer-term view of the channel. "I suspect exactly the same thing will happen with Twitter," he said.
Free speech could be a positive
Carola Verschoor, strategy & experience design officer at Wunderman Thompson Amsterdam, meanwhile, says free speech equals advertiser opportunity. She says: "Advertising and freedom of speech are best buddies; they need each other. "Any way in which free speech is encouraged offers an opportunity to open up the conversation and interact organically as brands. "Of course, freedom of speech requires more than just a statement to be genuine; at the very least there should be sufficient diversity and inclusion so that biases are avoided. This is a risk to oftoo little and too much moderation. "So, it will depend on how people actually behave within the platform. If it becomes a shouting match or a competition for attention, it loses traction. "If that happens, regardless of the level of moderation, it loses relevance and becomes less interesting for everyone, including advertisers."
Weaning Twitter off ads?
Musk famously once said he "hates advertising" but the billionaire might well have to bite the bullet and keep Twitter ad-funded unless he wantsTwitter to run at a loss or he is prepared to prop it up with funds from his $268bn fortune. Currently, Twitter ads as seen as less valuable than rivals as it tracks only limited data like age, name and phone number. The most obvious alternative main revenue stream would be a subscription model. Should Musk charge just $10 a month per user, he would end up with $23bn compared to the $4.5bn he currently makes from advertising.
Musk has told banks he plans to develop features to grow business revenue, including new ways to make money out of tweets that contain important information or go viral, sources told Reuters. In tweets subsequently deleted, he also suggested changes to the platform's premium subscription service, Twitter Blue, including slashing its price (currently priced at $2.99 a month), banning advertising and giving an option to pay in the cryptocurrency dogecoin. Kerkhofs thinks Musk could "kill ads on Twitter" in the future, though not in the short-term because of its immediate reliance on ad revenue. Kerkhofs adds: "I think Musk will definitely try to find ways to reduce the ad income dependability." Morris points out that should a new Twitter ad-free subscription service becomes a hit with users, massively reducing the user numbers seeing ads, then brands will have to rethink their advertising strategy, with their own organic feeds becoming more important. Verschoor thinks, under Musk, the definition of what constitutes an advert will change. "That makes it a very interesting space for reinvention and different types of engagement," she adds.
New revenue opportunities
Thompson says Musk will definitely want to drive alternative revenue streams- which could include sponsored content, revenue share with mainstream media for traffic acquisition and content distribution and maybe via original Twitter content created by professional creators. Thomspon adds: "But I suspect it will be by charging a subscription for users. Remember in the grand scheme of advertising Twitter is a relatively small player and has only made a profit twice in its history so Musk and his co-Twitter investors could lose an awful lot of money if he doesn't correct this." Kerkhofs agrees on alternative revenue streams, saying unique content via partnership and creator/influencer content could be a viable revenue stream. But Kerhofs adds: "Unique content means a lot of users and viewers, which means a lot of users and viewers, which means value/money. However, the most used way to make money from those users is still…..ads." Like others, Verschoor says there are plenty of opportunities to make Twitter money by making the platform more relevant, engaging and fun. Verschoor says: As a metaphor, we see Twitter as the virtual equivalent of "Speakers Corner" in Hyde Park. "It can really become a symbol and amass a community that would make it much more relevant in terms of content and of size. "Becoming a hub at the crossroads of emerging culture, real-time dialogue and creative expression. Each intersection of those crossroads is an opportunity for emerging revenue models." Thompson adds that as a creator platform Twitter could be a "world-beater". "As a mainstream content provider with professional paid for verified content it could be a global media platform," Thompson adds.