Advertisers Are Secretly Fearing Twitter With Musk At The Helm - And He Needs Them

Zinger Key Points
  • Twitter has seen a massive revenue drop due to advertisers pulling back, Elon Musk says.
  • Advertisers, meanwhile, are skeptical whether the platform would lay emphasis on brand safety.

As Elon Musk closed the Twitter deal, it appeared that months of uncertainty and bickering may now be a thing of the past and the billionaire could proceed unhindered to accomplish his declared intent of making the platform one for free speech.

A Tough Road To Free Speech: But the events that are unfolding in the aftermath of the deal's closure seem to suggest the drama is just getting started.

Musk has eased into his new role at Twitter, in fact, multiple roles, a couple of which are evident from the changes he made to his Twitter bio recently. From “Chief Twit,” just after the deal closure, to “Twitter Complaint Hotline Operator,” most recently.

The new Twitter owner has been left with the unenviable task of wielding the axe to make the social media platform lean and mean – an essential prerequisite for thriving in an environment that is hostile to ad-dependent platforms. After firing Twitter’s top brass, including former CEO Parag Agrawal, Musk followed up with a mass layoff, which has earned him the ire of many.

As things stand, Musk is facing an even graver threat. Twitter’s advertisers are pulling back.

Twitter’s Wheels Coming Off? Twitter currently generates almost all of its revenue from advertising. In the quarter that ended June 30, the company reported total revenue of $1.18 billion, out of which $1.08 billion, or roughly 92% was from advertising.

Any dent to most or part of this revenue can put a severe strain on Twitter’s financials, which in turn can jeopardize Musk's ability to repay the loan he has availed to finance his purchase.

News from some Twitter advertisers and third-party rumors seem to confirm this worst fear. Axios’ Sara Fischer said in a series of tweets that advertisers that she has spoken to recently are skeptical about Twitter under Musk being a brand-safe platform because of the way Musk conducted himself.

They apparently referenced Musk’s tweet about the attack on House Speaker Nancy Pelosi’s husband, Paul. Replying to former first lady Hillary Clinton’s tweet, condemning the attack, Musk shared a post containing misinformation about the assault and captioned it as “there is a tiny possibility there might be more to this story.” He has since deleted the post.

High-level ad executives came off a meeting with Musk this week less convinced that he is serious about brand safety, Fischer said. The meeting held Thursday reportedly focused on verification and new products, while the executives wanted to hear more about content moderation policies, she added.

See also: Elon Musk Polls Twitter If Advertisers Should Back 'Freedom Of Speech' or Political 'Correctness' — Majority Say...

General Motors Corp. GM was among the first companies that announced they are pausing ads on Twitter, the automaker indicated it is engaging with the platform to understand the direction it would take under the new leadership. Among the others which have taken a similar recourse are General Mills, Inc. GIS and Volkswagen AG’s VWAGY Audi unit.

Elon Feels The Pinch: The man himself has acknowledged the gravity of the evolving scenario. At the Baron Investment Conference, Musk reportedly said he has done his “absolute best” to appease the advertisers, adding that nothing has worked.

He tweeted on Friday that Twitter has seen a “massive” drop in revenue due to activist groups pressuring advertisers, despite nothing changing from the perspective of content moderation.

“We did everything we could to appease the activists,” he said.

“Extremely messed up! They’re trying to destroy free speech in America.”

Offering her take on the tweet, Axios’ Fischer said free speech is also about having the freedom to decide when and where to place one’s ads.

“Musk may want to go all in on subscribers but he needs ads to keep the lights on for now,” she added.

The $8 fee per month the billionaire plans to levy for a verification badge or for that matter any other monetization avenue may not for the time being fill the void if advertisers decide to leave the platform in droves.

Market News and Data brought to you by Benzinga APIs
Posted In: M&ANewsSocial MediaMediaGeneralElon Musk
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!