Twitter's ad revenue plummets 59% after Elon Musk's takeover - Why advertisers are shying away from Twitter
Twitter's US ad revenue plunges 59% after Elon Musk's takeover, as concerns over hate speech, porn, and confusing changes drive advertisers away.
Twitter's advertising revenue in the United States has taken a significant hit following Elon Musk's takeover of the platform. According to a report by The New York Times, an internal presentation from Twitter reveals a staggering 59 percent decline in American ad sales over a five-week period, with only $88 million generated compared to the previous year. This sharp drop can be attributed to legitimate concerns surrounding hate speech, pornography, the sudden surge in advertisements for cannabis products and online gambling, as well as the confusion caused by Musk's modifications to the platform. As a result, advertisers have become apprehensive and are drastically reducing their investments in Twitter.
Although Elon Musk recently claimed that Twitter's advertising business was on the mend, internal documents and testimonies from current and former Twitter employees paint a different picture. Twitter's ad sales team is apprehensive that the proliferation of hate speech, pornography, and controversial advertisements has made advertisers cautious about investing in the platform. An internal document indicates that the company anticipates a minimum 56 percent weekly decrease in U.S. ad revenue for the current month compared to the previous year.
Linda Yaccarino, a prominent executive at NBCUniversal, has been appointed by Musk as Twitter's CEO and is expected to assume her role soon. However, Yaccarino will likely inherit the challenges posed by declining ad revenue and advertiser concerns. It's important to highlight that Twitter's financial success heavily relies on advertising, accounting for approximately 90 percent of its revenue. However, the changes implemented by Musk, including the removal of key sales executives, the promotion of conspiracy theories, and the reinstatement of banned users, have created a rift with advertisers. This has resulted in major brands like General Motors and Volkswagen temporarily halting their advertising investments on the platform.
As a consequence, Twitter's valuation has suffered greatly. Musk, who acquired the company for $44 billion and took it private, previously claimed that Twitter's advertising platform would gain widespread respect. However, the company's value has plummeted, with Musk stating in March that it was now worth $20 billion, more than a 50 percent decrease from his initial investment. Mutual funds giant Fidelity recently valued Twitter at $15 billion. Large advertisers such as Apple, Amazon, and Disney have reportedly reduced their spending on the platform compared to the previous year, leading to a surplus of unclaimed premium banner ads on the trends page.
Twitter has also encountered difficulties in maintaining positive relationships with major advertisers, as exemplified by a recent incident involving Disney. In April, Twitter erroneously verified a non-affiliated Disney account that subsequently posted offensive content. Disney officials demanded an explanation from Twitter and assurances that such an error would not happen again.
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Ad agency executives have voiced concerns about Musk's platform changes, the inconsistent support provided by Twitter, and the presence of misleading and toxic content. While some advertisers are cautiously returning to Twitter, many remain hesitant. Twitter is actively working on streamlining the ad purchasing process to attract more advertisers and has experienced growth in sectors that were previously restricted, such as online gambling and marijuana products. However, the presence of adult content, which is permitted on the platform, has become a concern among sales staff.
Industry experts are hopeful that Linda Yaccarino's appointment as CEO will bring about positive changes to address these challenges. Media agencies have struggled to establish consistent communication with Twitter since Musk's arrival, and advertisers are seeking improved transparency and solutions to the ongoing issues plaguing the platform.