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Twitter’s demise would cost marketers an important, useful channel

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Twitter's demise would cost marketers an important, useful channel

Looking at Twitter’s financials, it is difficult to see a way for it to survive. The company was in bad financial condition long before Elon Musk bought it, only turning a profit twice in the last decade. Musk’s purchase has made its finances even worse by adding debt and scaring off revenue.

For brands Twitter has provided a unique, immediate channel for connecting with consumers. Many companies have boosted their reputation for customer service by rapid response to complaints. Others have broadened their brand values in radical, unexpected and positive ways.  

Take Steakumms, for example. It has gone from a thin meat product to a substantial voice on difficult, important issues.

So, if Twitter does implode, marketers will lose a significant, useful tool. 

But agile customer service and/or significant contributions to public debates, while raising brand profiles, isn’t advertising and doesn’t make Twitter any money.

Trouble from the beginning

The fact is the company’s problem wasn’t something Musk or anyone else could solve. It has been evident since Twitter was founded in 2003. To quote historian/humorist Will Cuppy: “The Dodo never had a chance. He seems to have been invented for the sole purpose of becoming extinct.”

That problem: Twitter can draw in users, but it can’t make money off them. 

Worldwide it’s the 10th most popular social media site, with 217 million active users per month. In the U.S. it’s the 5th most popular social media site, with 41.8% of all adult users — only .4% behind fourth place TikTok. While its number of users is far, far behind Facebook’s, so is every other social media platform.

The fact that it is the fourth best social media platform for average revenue per user would be good news if it weren’t for the gap between third and fourth place.

  1. TikTok $46.86
  2. Facebook $30.75
  3. LinkedIn $25.97
  4. Twitter $9.39

Twitter would have been great as an app or a feature for a larger platform. Google understood that and offered $10 billion for the company in 2010. But, despite earnings to the contrary, its executives continued to believe it could flourish on its own — until Mr. Musk made them an offer they couldn’t refuse.

Why did he buy it?

It is difficult to believe someone could make a $44 billion impulse purchase, but it is hard to see this as anything else. That is the amount Musk paid for Twitter and double its estimated fair market value. The only comparable tech deal is Time Warner spending $100 billion to merge with AOL more than two decades ago. That did not end well either.

This would explain suing to get out of the deal. 

In April, when Musk made his offer, the economy and social media companies were doing very well. But even then many analysts said it would be difficult for Twitter to ever earn back the purchase price. Musk himself has since said he overpaid for it.

A very high price is paid

Just the offer was enough to hurt Twitter’s prospects. Moody’s and S&P Global both immediately downgraded its credit rating to junk status. They believed Musk’s divisive, controversial persona would make advertisers nervous and they were right. 

Dig deeper: FTC hits Twitter with snark and $150 million fine for allegedly selling security data to advertisers

According to advertising intelligence platform MediaRadar, the number of advertisers spending on Twitter dropped from almost 4,000 in May to 2,300 in August. Since then numerous agencies have said they are advising clients not to advertise on Twitter because of brand safety risks. 

Musk has tried to blame this exodus on pressure from the left. However, this was immediately debunked on Twitter by MMA Global president Lou Paskalis who was, as they say, in the room where it happened.

In addition to his notoriety, Musk added a lot of debt to Twitter and that will likely prove the final nail in the coffin. Last year, Twitter’s interest expense was about $50 million. With the new debt taken on in the deal, that will now balloon to about $1 billion a year. Yet the company’s operations last year generated about $630 million in cash flow to meet its financial obligations.

Right now, Twitter is generating less money per year than what it owes its lenders.

Musk is using a kitchen sink approach to increasing revenues and, unfortunately, that is not working out.

Consider the plan to charge a monthly fee for the blue verification check. If it’s the case that users will be allowed to self-authenticate in order to receive the check, the value of the check becomes questionable. As was demonstrated when Musk cracked down on the countless blue-checked users who changed their display names to Elon Musk.

What will be lost

Twitter has always punched above its weight in the media. Journalists love it because it is very much a real-time medium. When news breaks Twitter is a firehose of information and misinformation. It is also a fast, easy (and some say lazy) way for reporters to get public reaction quotes.

Despite all of Twitter’s public and political problems over the years, many users — including brands — have found and/or created communities on it. Those kind of connections are hard to replace.


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About The Author

Constantine von Hoffman

Constantine von Hoffman is managing editor of MarTech. A veteran journalist, Con has covered business, finance, marketing and tech for CBSNews.com, Brandweek, CMO, and Inc. He has been city editor of the Boston Herald, news producer at NPR, and has written for Harvard Business Review, Boston Magazine, Sierra, and many other publications. He has also been a professional stand-up comedian, given talks at anime and gaming conventions on everything from My Neighbor Totoro to the history of dice and boardgames, and is author of the magical realist novel John Henry the Revelator. He lives in Boston with his wife, Jennifer, and either too many or too few dogs.

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MARKETING

Amazon announces AWS Clean Rooms

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Elon Musk has acquired Twitter

This week, Amazon announced AWS Clean Rooms, a service that will enable customers who use AWS Advertising and Marketing, as well as other data and media partners, to build data clean rooms. These clean rooms, which can be built in minutes, will keep data secure, while advertisers can use insights from the data to optimize campaigns and make other advertising and marketing decisions based on these insights.

“Using AWS Clean Rooms, customers can collaborate on a range of tasks, such as more effectively generating advertising campaign insights and analyzing investment data while improving data security,” said Dilip Kumar, vice president of AWS Applications, in a company release.

AWS Clean Rooms will become available in early 2023 in some U.S. markets, as well as in Europe and Asia Pacific markets.

Why we care. Through a number of partnerships over the last year, clean rooms have become more widely available for campaigns on the open web, as well as within “digital giants” (aka walled gardens) such as Amazon.

By including partners across identity, measurement and media, AWS can provide clean rooms for advertisers to execute campaigns outside of Amazon while gaining intelligence on campaign performance, all while keeping customer data secure.

Media partnerships. For instance, Fox Corporation is on board with their sports, news and entertainment properties. “It can be challenging for our advertising clients to determine how to best leverage our deep, differentiated set of data sources to optimize their media spend across our combined portfolio of entertainment, sports, and news brands, which reach hundreds of millions of monthly viewers,” said Lindsay Silver, senior vice president of data and commercial technology at Fox Corporation, in a release. “AWS Clean Rooms will enable data collaborations easily and securely in the AWS Cloud, which will help our advertising clients unlock new insights across every Fox brand and screen while protecting consumer data.”

Additionally, DISH Media will allow advertisers and agencies to run their own analysis in AWS Clean Rooms to optimize future campaigns across their audience of 31 million consumers.

Identity. Amazon says new identity capabilities will roll out to advertisers in the coming months to help brands match and link customer records across channels without compromising anonymity. They’ve announced information services company Experian as an AWS Clean Rooms partner in helping brands enrich their first-party data.

“By combining Experian’s identity resolution capabilities with AWS Clean Rooms, customers can securely unify and analyze their collective data to derive deeper insights and deliver more personalized customer experiences,” said Aimee Irwin, senior vice president of strategy and partnerships at Experian, in a statement.

Measurement and analytics. Comscore is also signed on as an AWS Clean Rooms partner. This means that they will be using the AWS cloud to host brands and connect them to Comscore’s Media Metrix suite, powered by Unified Digital Measurement 2.0 and Campaign Ratings.

These partnerships insert the AWS Advertising and Marketing cloud into the digital ad ecosphere at a time when privacy and first-party enrichment are top priorities for brands.

Dig deeper: Why we care about data clean rooms


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About The Author

Chris Wood

Chris Wood draws on over 15 years of reporting experience as a B2B editor and journalist. At DMN, he served as associate editor, offering original analysis on the evolving marketing tech landscape. He has interviewed leaders in tech and policy, from Canva CEO Melanie Perkins, to former Cisco CEO John Chambers, and Vivek Kundra, appointed by Barack Obama as the country’s first federal CIO. He is especially interested in how new technologies, including voice and blockchain, are disrupting the marketing world as we know it. In 2019, he moderated a panel on “innovation theater” at Fintech Inn, in Vilnius. In addition to his marketing-focused reporting in industry trades like Robotics Trends, Modern Brewery Age and AdNation News, Wood has also written for KIRKUS, and contributes fiction, criticism and poetry to several leading book blogs. He studied English at Fairfield University, and was born in Springfield, Massachusetts. He lives in New York.

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