Twitter’s Advertisers Pull Back as Layoffs Sweep Through Company

 

Twitter’s Advertisers Pull Back as Layoffs Sweep Through Company

 

Elon Musk, Twitter’s new owner, acknowledged that ad spending on the platform had slumped. He blamed the drop on pressure from activists.

 

Tiffany Hsu

By Tiffany Hsu

Tiffany Hsu, based in San Francisco, has written extensively about advertising for The New York Times.

Nov. 4, 2022

Updated 3:38 p.m. ET

https://www.nytimes.com/2022/11/04/technology/twitter-advertisers.html

 

The pullback of advertisers from Twitter gathered steam on Friday amid growing fear that misinformation and hate speech would be allowed to proliferate on the platform under Elon Musk’s leadership.

 

The Volkswagen Group joined several other companies in recommending that its automotive brands, which include Audi, Lamborghini, Bentley and Porsche, pause their spending on Twitter out of concerns that their ads could appear alongside problematic content. The Danish brewing company Carlsberg Group also said it advised its marketing teams to do the same. The outdoor equipment and apparel retailer REI said it will also pause posts in addition to advertising spending “given the uncertain future of Twitter’s ability to moderate harmful content and guarantee brand safety for advertisers.”

 

Civil rights groups including GLAAD and the Anti-Defamation League held a conference call on Friday urging other companies to abandon Twitter, saying that mass layoffs there were gutting what they described as an already anemic content moderation staff.

 

Even Mr. Musk acknowledged the advertising slump, tweeting on Friday morning that Twitter “has had a massive drop in revenue,” which he blamed on activist groups pressuring advertisers.

 

 

The first chaotic week of Mr. Musk’s ownership of Twitter has given Madison Avenue whiplash, as advertisers struggle to reconcile the billionaire’s promises to make the platform safe for brands with concerns about a surge of extremism and false narratives, including one promoted by Mr. Musk himself.

 

A blockbuster deal. In April, Elon Musk made an unsolicited bid worth $44 billion for the social media platform, saying he wanted to turn Twitter into a private company and allow people to speak more freely on the service. Here’s how the monthslong battle that followed played out:

 

The response. Twitter’s board countered Mr. Musk’s offer with a defense mechanism known as a “poison pill.” This well-worn corporate tactic makes a company less palatable to a potential acquirer by making it more expensive to buy shares above a certain threshold.

 

Securing financing. Though his original offer had scant details and was received skeptically by Wall Street, Mr. Musk, the world’s wealthiest man, moved swiftly to secure commitments to finance his bid, putting pressure on Twitter’s board to take his advances seriously.

 

Striking a deal. With the financing in place, Twitter’s board met with Mr. Musk in April to discuss his offer. The two sides soon reached a deal, with the company agreeing to sell itself for $54.20 a share — roughly $44 billion in total.

 

Tensions arise. Not long after Mr. Musk and Twitter reached their agreement, problems began. Mr. Musk threatened to pull out of the deal if Twitter did not provide more information on how it calculates the number of fake accounts. In June, the company announced that it planned to give him access to a large swath of its data.

 

Musk backs out. In July, Mr. Musk announced that he was terminating the deal, citing the continuing disagreement over the number of spam accounts. Twitter then sued the billionaire to force him to go through with the deal. But Mr. Musk fired back in a legal filing, arguing that the company concealed the true number of fake accounts on its platform, accusing Twitter of fraud.

 

Preparing for trial. Lawyers for both sides have issued more than 100 subpoenas ahead of a trial that was expected to start in October, mostly targeting tech VIPs. In September, a judge ruled that Mr. Musk could amend his suit to include accusations from a former Twitter security chief who claimed that the company misled the public about its security practices.

 

A surprise move. On Oct. 4, Mr. Musk proposed a deal to acquire Twitter for $44 billion, the price he agreed to pay for the company in April. On Oct. 27, the purchase was completed. Mr. Musk quickly began cleaning house, with at least four top Twitter executives — including the chief executive and chief financial officer — getting fired. By Nov. 4, roughly half of the company’s work force had been eliminated.

 

In his tweet about Twitter’s faltering revenue, Mr. Musk said that “nothing has changed with content moderation and we did everything we could to appease the activists” — a claim that civil rights groups denied.

 

A minute before he posted his comment, the ad-tracking platform MediaRadar released statistics showing that the number of advertisers on Twitter dropped from May, soon after Mr. Musk’s bid for the platform was first announced, through September, when he was still fighting to get out of the deal he struck to buy Twitter in April.

 

MediaRadar, which tracks ad campaigns for millions of companies, said that data for October, when Mr. Musk took over Twitter, would not be available until later this month.

 

Twitter had 3,900 advertisers in May and 2,300 in August. The number rose to 2,900 in September, according to MediaRadar. The analytics company found that General Motors, which paused its spending on Twitter last week, had previously spent an average of $1.7 million a month on the platform.

 

There were more than 1,000 new advertisers on the platform each month before July, when Mr. Musk’s feud with Twitter began to intensify and the number of new advertisers sank to 200.

 

In September, there were 668 new advertisers, MediaRadar found. Factors such as economic conditions likely played a role in the exodus, as did uncertainty about Twitter’s ownership and content moderation policies, said Todd Krizelman, MediaRadar’s chief executive, in a statement.

 

“Clearly, this acquisition is challenging advertiser confidence,” said Mr. Krizelman. He added that Mr. Musk’s plans to look for revenue sources beyond ads could mitigate any damage caused by Madison Avenue.

 

Following Mr. Musk’s tweet, a coalition of civil rights and activist groups called a news conference to push for a global advertising boycott of Twitter.

 

“We are witnessing the real-time destruction of one of the world’s most powerful communications platforms,” said Nicole Gill, the executive director of the nonprofit group Accountable Tech, on the call. “Unless and until Musk can robustly enforce Twitter’s existing community standards, the platform is not safe for users or for advertisers.”

 

Angelo Carusone, the chief executive of the progressive nonprofit Media Matters for America, said on the call that he has worked on several efforts to use advertiser boycotts to pressure social media companies to clean up their platforms. Usually, he said, some of the advertisers he solicits will turn down his requests, saying that reaching potential customers is a higher priority than making a point to Silicon Valley.

 

But after the activist coalition reached out this week to Twitter’s top 20 advertisers, including Anheuser-Busch, Disney and Procter & Gamble, Mr. Carusone said that all the companies he has been in contact with said they are either considering a spending pause or are implementing one.

 

The companies did not immediately respond to requests for comment on Friday.

 

“I’ve never experienced that before,” Mr. Carusone said. “And I think that’s the thing that’s most revealing, and demonstrates real consensus about the current state of the crisis that Twitter is in.”

 

Tiffany Hsu is a tech reporter covering misinformation and disinformation. @tiffkhsu