Twitter’s $5B deal takes off as Elon Musk clashes with advertisers

Elon Musk’s tumultuous reign at Twitter has resulted in a destructive rift with top brands and marketers, with the $5 billion social media company’s advertising business battered by tensions over moderation of content and resources.

Several top advertising agencies and media buyers told the Financial Times that almost all of the major brands they represent have stopped spending on the social media platform, citing concerns about Musk’s ad hoc approach to content monitoring and the Decision to eliminate many of its ad sales teams.

Musk, meanwhile, has attempted to make personal phone calls to berate the CEOs of some brands that have restricted advertising, according to a senior industry figure, prompting others to instead cut spending to the absolute minimum necessary to avoid more Avoiding confrontations with them The billionaire entrepreneur.

After several waves of job cuts and departures, Twitter’s ads business team has shrunk so much that many agencies no longer have contacts within the company and have received little to no communication in the past few weeks, according to four industry insiders.

Some brands have not been able to get feedback on the performance of previous campaigns due to staff shortages, a media buyer said. Others complain that Twitter’s ad systems have also become buggy, making it difficult or even impossible to run campaigns.

“It’s pretty unique. The riot, the damage, nothing of this magnitude has happened before. Never,” said an executive at a Big Four ad agency.

“He seems to scare off even the advertisers who wanted his success,” said another top advertising agency executive.

Musk is under pressure to generate revenue from Twitter as he faces $1 billion in annual interest payments after charging the company $13 billion in debt to buy the company finance.

On Oct. 27, the day he finalized his $44 billion deal to buy Twitter, the CEO of Tesla and SpaceX tried to reassure marketers that despite his plans, the platform would lift content moderation restrictions loosen, would not become a “free hell for free”.

Soon after, he was running rounds of calls and meetings to reassure top ad agencies and brands. An email sent out in early November and viewed by the Financial Times said of Musk, “He’s one of the greatest innovators in the world, and he understands our platform and our product to a level that few people have. He wants to ship exciting things, and he wants to do it quickly.”

In the meetings, Musk showed all the details of operating the platform, said two agency heads, and impressed brands with his knowledge. “He knows more than [former chief executive] Jack Dorsey ever did. He’s immersed himself in the business very deeply,” said an executive at a leading advertising agency.

However, the relationship soon deteriorated after Musk laid off more than half of the company’s 7,500 employees, turned Twitter’s ad sales team and trust and safety team upside down, and increased concerns that misinformation and hate speech could spread on the platform .

Corporations including General Motors, Volkswagen, Carlsberg and General Mills have announced they would pause spending on the platform amid moderation concerns.

Many in the advertising industry are struggling to keep track of the changes. Robin Wheeler, who ran Twitter’s ad sales business under Musk after former boss Sarah Personette resigned, left the company last week. Bloomberg reported that Wheeler was fired by Musk after he refused to let more people on the ad sales team. Twitter and Musk did not respond to requests for comment.

Musk’s own use of Twitter β€” including reposting conspiracy theories and interacting with controversial accounts β€” has also unsettled brands who fear their content will be placed alongside toxic posts.

The self-proclaimed “free speech absolutist” further angered advertisers when he relaunched Twitter Blue, Twitter’s premium subscription service, because its “blue tick” feature was abused by impersonators who used it on politicians and brands like Eli Lilly and Lockheed Martin targeted. He initially paused rollout of the service until “there is high confidence in stopping impersonation,” and said Friday he intended to launch it the following Friday.

Last week, Musk also began reversing certain permanent bans on high-profile figures like former US President Donald Trump, although he previously vowed not to do so until he convened an expert content moderation council.

Asked Tuesday why he reversed the bans without setting up the council as promised, Musk said: “A grand coalition of political/social activist groups have agreed not to try to kill Twitter by starving us of ad revenue if I agree to this condition”. He added: “They broke the deal.” Several left-leaning groups have pressured brands to reduce spending.

The reorganization appears to have impacted Twitter’s advertising technology. Gabby Krite, head of digital operations at The Kite Factory, which used to spend “hundreds of thousands” of dollars a year on the platform, said it’s having technical difficulties placing or changing ad campaigns. “Technical problems in campaign management . . . means it’s completely unreliable as a platform,” she said.

Analysis by left-leaning nonprofit Media Matters found that 50 of the top 100 advertisers — responsible for $750 million in advertising in 2022 — had paused or announced plans to stop spending since Musk took the helm took over, and another seven had reduced their expenses to a trickle. Those 50 advertisers accounted for $317 million of Twitter’s $5 billion in 2021 revenue, according to Media Matters.

Agencies have also issued guidelines. In mid-November, Omnicom Media Group recommended its customers stop spending on the platform, according to three people familiar with the move, following a similar recommendation from Interpublic. Last week, WPP’s GroupM upgraded its assessment of the risk of advertising on the platform to “high risk,” said two people familiar with the situation.

Omnicom declined to comment. Interpublic and GroupM did not immediately respond to a request for comment.

It’s unclear if and when brands will return. “It’s hard to have criteria [for returning to the platform] when Musk manages via tweet and something changes on the platform every day that worries advertisers,” said an executive at another ad agency.

“Musk’s best chance to bring advertisers back to Twitter is by appointing a new CEO,” said Darren Savage, chief strategy officer at Tribal Worldwide. “Especially someone who understands what Twitter is has credibility with advertisers and users – and is then left alone with their work.”

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