A Volatile Future for Advertisers on Twitter

With maverick entrepreneur Elon Musk owning Twitter, the future of the platform is anyone’s guess. Musk’s stated plans for Twitter, under the banner of free-speech, include adding new products, making algorithms open source and defeating the spam bots. Whether that makes a more palatable platform for users and advertisers is as unpredictable as his timeline, which sandwiches rocket updates next to jibes at Twitter’s features (for the last few months anyway) and vaguely veiled memes about what real genius looks like. All with a healthy dose of cynicism ("Weather is fake, I seen Truman Show!") “The problem is that most consumers still prefer to view ads in exchange for free content rather than subscribe to a digital service—and making Twitter subscription-only would change the entire framework for the service,” said Insider Intelligence principal analyst Jasmine Enberg. Slowing user growth and dependence on ads The platform already commands a pretty paltry 0.9% of total global digital ad spending, according to Insider Intelligence. By comparison, goliaths Google, Meta and Amazon absorbed 74% of global digital ad spending last year, according to Ebiquity numbers. Twitter’s revenue hit over $5.5 billion this year. While that’s an ad rebound of sorts, its ad business is significantly smaller than other digital platforms. And a chunky 90% of its revenue in 2021 was driven by advertising. Musk’s persona as a free-speech absolutist and his push to encourage more free speech on Twitter is making advertisers—who are keen to keep their brands away from inflammatory, controversial or highly politicized content—wary. Much has been made of Musk’s aversion to advertising. In a now-deleted Tweet, he urged for the removal of all ads from Twitter, writing, “The power of corporations to dictate policy is greatly enhanced if Twitter depends on advertising money to survive.” It's also been pointed out, however, that the platform needs ad revenue to grow and repay Musk's loans. Twitter’s size and mass appeal—overstated in media circles, to the point where The New York Times wants to limit reporters’ use—is spluttering. The platform is struggling to bring in new users, analysts say, and could be on the cusp of reporting a challenging quarter (which is not uncommon for platforms due to multiple headwinds). Twitter's average monthly active users globally on mobile grew 13% year-over-year in 2021, according to measurement firm Sensor Tower. However, it's lagging behind its social media peers with the fewest worldwide users and least interaction, compared to other platforms. Global mobile app installs are down 3% from last year. But Twitter users are intensely active. Driving more revenue out of that cohort is a reasonable path forward, one favored by Musk too. But early efforts are fledgling. CEO Parag Agrawal said on Twitter’s last earnings call in February that its first consumer subscription offer, Twitter Blue introduced in 2021, which gives power users features like “undo tweet” for $2.99 a month, is “not critical” to reaching Twitter’s target of $7.5 billion of revenue in 2023, according to the Wall Street Journal. Elon Musk to Acquire Twitter in Deal Valued at Roughly $44B TikTok primed to gain Musk could be the one to bring about radical change at Twitter, but it will still struggle to distance itself from its roots. Platforms like Facebook have struggled to change popular perception, no matter how much PR it spends on its association with the metaverse, sources say. It seems like Twitter’s loss could be TikTok’s gain. The latter is set to triple its worldwide ad revenues this year to reach $11.64 billion, making up 1.9% of worldwide digital ad spend, according to Insider Intelligence. “Innovation is easier for a newcomer than it is for a company like Twitter that’s more than a decade old,” said Enberg. With Twitter's earnings this week—and its NewFronts presentation around the corner—advertisers will be looking for signs of that innovation.