Although Twitter’s problems with advertising revenue did not come from Elon Musk’s acquisition of the platform, the change in management at the head of the social network contributed to the reduction of these sources of revenue.
Twitter’s difficulties with advertisers did not stem from its acquisition of the platform Elon Musk. In fact, Twitter already faces strong competition from larger and faster-growing social media platforms. In addition, advertisers’ focus on improved targeting with business results and a sluggish ad economy also puts Twitter’s revenue forecast at risk. So far, Elon Musk’s takeover of the social network has only cut into Twitter’s precarious sources of advertising revenue.
According to a recent report by Common Media Index* (SMI) on ad spending in November 2022, the first full month since Elon Musk took over Twitter, social network advertising costs down 46%compared to 2021. More worryingly, SMI also found that marketers who had “pre-booked” ads on the platform for the last two months of 2022 backed out of their engagement. In addition, SMI noted a decrease in the number of Twitter ad bookings for January and February 2023 compared to previous years.
In November 2022, SMI learned that Twitter had disappeared almost 31% of the total advertising funds initially planned for the social network. SMI said the sudden loss of advertising funds is unusual, with the month-long ad boycott faced by Facebook a few years ago being the only recent comparable example. The report also showed that TikTok has benefited the most from the departure of advertisers from Twitter. Market share of the platform compared to its competitors (TikTok, Facebook, Instagram, Snap and Pinterest) in November 2022 is down to 7%compared to 10% in October and 12% in September.
This sharp decline in Twitter advertising volume follows a slight annual decline prior to Elon Musk’s takeover of the platform, which ended on October 27, 2022. For example, the social network’s advertising spending over a 12-month period decreased by 12% in October, 15% in September, 5% in August and 1% in October. This decline is part of a broader context as ad spending trends affected other ad-supported social networks in the second half of 2022, with marketers expressing concerns about headwind. macroeconomics.
The number of top advertisers leaving Twitter is well documented. Marketers have shared their concern over the massive layoffs of employees within the platform, a maneuver that has a direct impact on the social network’s day-to-day operations. Marketers also fear for brand safety, given the increasing amount of fake news and hateful messages currently appearing on the platform. On the other hand, marketers want stability, which is sorely lacking in Twitter’s new owner, Elon Musk, who has a mercantile, attention-seeking personality.
However, there are other reasons why Twitter has yet to receive the advertising funds that other social media platforms have. A report recently published by foresterentitled ” Twitter Not Canceled; It has been downgraded (which can be translated as “Twitter is not removed, but brought down”), revealed other challenges facing the platform, in addition to changes in ownership and policy. As the report points out, Twitter, with its posts from politicians, artists and news agencies, maintains its cultural relevance to users and is more popular than its rival Mastodon.
However, the report shows that Twitter is no longer a priority for the advertising industry. Only 1.3% of advertising funds digital in 2022 is allocated to the platform. One of the reasons for the lack of support from advertisers is the low reach of the social network. While Facebook reaches 63% and Instagram 40% of US adults each week, Twitter trails at 22%. Additionally, half of American adults who are online have never used Twitter.
Surveying ad executives, Forrester found that Twitter’s performance-based ad products have lagged behind Facebook and the faster-growing TikTok (especially among young adults) among others. Marketers now have choices in the medium of advertising. According to advertisers, direct response ads on Twitter do not meet the requirements necessary to achieve bottom-of-funnel goals, such as brand preference and purchase. This is why marketers use Meta and other large channels to achieve these goals. Twitter is best suited for top-of-funnel goals, such as product awareness and consideration.
Advertisers also told Forrester that Twitter’s targeting and personalization capabilities, which have become important in today’s market, are too underdeveloped on the platform. Advertisers are more likely to use Facebook and other digital platforms to “hypertarget” users. Additionally, as a flood of advertisers opt out, Twitter users are exposed to more irrelevant advertising messages.
Advertising has become Twitter’s main source of revenue. In 2021, the platform reported total revenue of $5.08 billionrepresents advertising $4.51 billion. At the time of its acquisition, Elon Musk said he expected the company’s revenue to reach $26.4 billion by 2028, with revenue from subscriptions worth $10 billion. These forecasts seem highly optimistic when you consider that Twitter has only recorded revenue in the two years since its launch.
Given recent trends and advertiser concerns, Musk is unlikely to meet his revenue goals for Twitter.
*SMI aggregates actual ad agency billing data from all major holding companies and most major independents, which account for approximately 95% of brand ad spending nationwide.
Article translated from Forbes US – Author: Brad Adgate
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