Connect with us

SOCIAL

Elon Musk needs Twitter advertisers, but they’re not coming back

Published

on

Elon Musk needs Twitter advertisers, but they’re not coming back

There’s no getting around it. Twitter’s survival in the coming months depends on how its new owner, Elon Musk, manages his relationship with a key group of people: advertisers.

It’s been a rocky pairing since October, when Musk officially took over and many big-name advertisers paused spending on the platform. Almost five months later, the company’s standing with the advertisers that historically make up 90 percent of its revenue still hasn’t measurably improved.

More than half of Twitter’s top 1,000 advertisers before the acquisition have stopped advertising on the platform as of February, according to data from digital marketing analysis firm Pathmatics and shared with Vox. Out of Twitter’s top 10 advertisers pre-acquisition, only six still advertise on the platform, according to the firm. That affects Twitter’s bottom line: The company’s revenue was down by 40 percent, according to a December report by the Wall Street Journal. Fewer people also appear to be visiting Twitter’s website where advertisers create ad campaigns: The number of users visiting Twitter’s advertising portal page was down 18 percent in February compared to a year before, according to data from digital intelligence firm SimilarWeb.

Vox spoke with several advertising executives, former Twitter employees, and other industry insiders who explained why Twitter’s relationship with advertisers continues to suffer.

Sources described a lack of confidence in Musk’s ability to keep his promises about stopping Twitter from turning into a “free-for-all hellscape,” high turnover in Twitter’s sales department, and confusion about the company’s policies regarding content moderation.

Chief among their concerns is a perception that Musk has turned Twitter into a place where people can post racist, sexist, or otherwise harmful speech without much consequence. Major corporations don’t want to jeopardize what they call “brand safety” by associating with offensive content. Musk has taken a lax approach to content moderation — such as allowing Neo-Nazis, white nationalists, and other controversial figures back on the platform in the name of free speech.

Companies also worry about affiliating with Musk himself as he continues to post offensive tweets, including a recent one mocking a disabled Twitter employee (Musk apologized after facing widespread backlash). Making matters worse, some advertising executives say they no longer know who to talk to about their concerns because Musk has fired or laid off many key members of Twitter’s sales and brand safety teams. All of this, insiders say, has resulted in weaker trust in Twitter among a relatively small group of people who control major ad budgets.

“Elon doesn’t understand how advertising works,” said Lou Paskalis, a longtime ad industry executive and founder of AJL Advisory, a firm that consults with brands on their marketing strategies. “I think he thinks it’s a science first and then an art, when in fact, it’s an art first and then a science.”

Twitter did not respond to repeated requests for comment. Musk, however, discussed the company’s relationship with advertisers who may be hesitant to return to the platform in an interview at a Morgan Stanley conference earlier this month.

“What I’d say to advertisers and brands is: Use Twitter for yourself and believe what you see on Twitter, not what you read in the newspapers,” said Musk. “Because what you see on Twitter is the real thing and what you read in newspapers is not.” Musk said that hate speech on Twitter is actually lower than it was before he took over and that brands worried about their reputation can choose what kind of tweets they want to run their ads next to. Several recent outside studies have found a sustained increase in hate speech such as anti-LGBTQ and antisemitic slurs in the months since Musk took over, but Twitter has said that the “reach” of hate speech, or how much it’s being seen, has decreased (which is hard to verify independently without access to Twitter’s data).

In the end, Twitter needs advertisers more than advertisers need Twitter. Compared to Facebook, YouTube, and Instagram, Twitter has a much smaller, niche user base. Brands can easily shift their advertising budgets to the bigger players in social media. Whether or not Musk can win back brands — or figure out a feasible alternate plan to make money — will determine whether the company will ultimately go bankrupt. While Musk says Twitter is close to breaking even now that he’s drastically cut costs, he warned in November of the possibility of bankruptcy, and will see that risk increase if advertisers fail to return.

Although Twitter is smaller than its competitors, it has had an outsized influence in shaping world politics, news, and culture. So the precarious state of Twitter’s finances ultimately reflects the fragility of the future of Twitter itself and the future of discourse online, since there still isn’t a replacement nearly as popular.

“I don’t trust Elon at his word”

The advertising business — especially the kind of big-brand advertising that happens on Twitter — is built on establishing close working relationships between powerful advertising execs who control multimillion-dollar marketing budgets and the people who run Twitter’s sales team.

But many of those relationships have deteriorated in the past few months as the initial uncertainty around Musk’s takeover has turned into more permanent chaos.

One advertising executive who oversees tens of millions of dollars in ad spending for major brands on Twitter told Vox that a majority of their clients temporarily paused spending on Twitter in the 72 hours after Musk took over “just to avoid being caught up in something unpredictable” but thought that the situation would settle down. (This source spoke with Vox on the condition of anonymity due to fear of professional repercussions.)

“There’s a lot of noise in this industry,” they said. “If a platform is having issues and bad things are happening, you stop and wait for the issues to go away,”

But then, new issues emerged. Mass layoffs and resignations hit key leaders on the sales and brand safety teams. Musk began abruptly rolling out controversial product and policy changes, like the botched initial rollout of his Twitter Blue verification service which people used to impersonate public figures, or his “general amnesty” plan to reinstate thousands of accounts that were previously banned for things like hate speech or bullying. At the same time, Musk himself kept fanning flames by posting polarizing tweets, like a conspiracy theory about the violent attack on Nancy Pelosi’s husband. And so a majority of clients extended their Twitter spending pause.

In recent months, Twitter has offered steep discounts and promotions, the advertising executive said, to encourage clients to resume advertising. But advertisers are reluctant to make deals when they don’t know who they’ll be working with.

“I don’t know if the person I’m negotiating with today will be there today, tomorrow, or by the end of the week,” the ads executive said. “Trust is such an important currency in advertising. I don’t trust Elon at his word.”

If advertisers don’t trust Musk, it would help if he had a reliable lieutenant. But many trusted executives — even some who Musk initially praised — have left the company, including chief customer officer Sarah Personette, head of trust and safety Yoel Roth, and VP of client solutions Robin Wheeler. Several sources Vox spoke with were unsure if recently appointed sales head Chris Riedy is still working at the company. News outlet Platformer reported in February that Riedy was cut in a recent round of layoffs, but other sources close to the company said he is still working at Twitter.

Twitter has also halted a practice that’s an industry standard: convening its advertising influence council, a quarterly group meeting with around three dozen top advertisers, according to sources. The council was an important venue for Twitter execs to discuss “real business issues” with some of its biggest advertisers, said Paskalis. It allowed Twitter executives to build key relationships over time with powerful chief marketing officers of major brands and ad agency executives. When prior Twitter CEO Jack Dorsey met with the council, for example, he explained his mission to make Twitter a global town square while still balancing user safety, Paskalis said. Musk met once with the council in November shortly after he took over, but according to Paskalis, the group has not met since.

Making things more complicated is how Musk initially took a publicly combative approach, at times, to the same advertisers Twitter needs to woo. In November, he publicly threatened to “thermonuclear name & shame” advertisers who left Twitter.

“There are other places I can spend my money without having to worry that I’ll be attacked by Elon, or my clients will be, or that he will say something that will force me to turn off my ads,” one advertiser said.

Musk, who has long been a provocateur on social media, has shown no signs of buttoning up his public persona to minimize advertiser fallout. In recent weeks, in addition to his public dispute with a disabled former Twitter employee, he has tweeted comments defending the “QAnon Shaman” who stormed the US Capitol on January 6, 2021, and shared a sexist joke meme comparing women to volatile “creatures.”

“What we hear from Elon every single day gives us new outreach and entree to advertisers,” said Rashad Robinson, president of civil rights group Color of Change, which is pressuring advertisers to drop Twitter because it says the platform is promoting harmful content.

Robinson said his group is planning to increase pressure on advertisers that continue to stick with Musk.

What Twitter could do to save its business

It’s clear that Twitter needs to change its advertising approach if it’s going to keep the lights on. Musk has tried changing the company’s strategy to rely less on big-name brand advertisers. But the easiest solution would be to salvage Twitter’s relationship with brands — which some executives said is still possible if Musk gives up control.

Musk has his own ideas about how to make Twitter more profitable.

At first, Musk’s plan to deal with advertiser fallout was to become less reliant on advertising. Musk said he wanted to move Twitter to a subscription-based model in which the company would make most of its money by charging users for premium services. The problem is that Musk’s first attempt at that, its revamped version of Twitter Blue, had a disastrous initial rollout and, so far, still doesn’t have nearly enough subscribers to make a meaningful impact on the company’s bottom line (as of mid-January, it reportedly had 180,000 subscribers, or about 0.2 percent of the platform).

More recently, Musk has proposed another solution to his advertising problem: targeted advertising. The idea is that Twitter should make ads more specific to users’ interests based on what they’re tweeting about and by using machine learning to predict their preferences.

“Historically, with [Twitter’s] advertising being mostly irrelevant in the past, we’ve been wasting people’s time. And that’s not good. Going forward, Twitter will have very relevant, useful advertising,” Musk said at the Morgan Stanley conference earlier this month, saying this new approach will bring a “massive increase in revenue.”

Twitter’s new advertising model will be similar to Google’s in that it will target ads to people based on what they’re interested in, Musk said.

Many people with knowledge of the online ads industry — including former Twitter advertising and product employees Vox spoke with — agree with Musk that Twitter’s advertising products have room for improvement. But some questioned whether Musk’s approach made sense, since Twitter, unlike Google and Facebook, has less data it can use to target ads.

Facebook knows people’s backgrounds, friends, and interests because people largely use their real name to sign up and are friends with their real-world connections. Google knows its users’ interests based on what they’re actively typing in their search bar. Twitter, by contrast, doesn’t have all of that information for most of its users, since you don’t need to share your real name to make an account and most people passively scroll Twitter rather than search for specific content.

“Search advertising and advertising on Twitter are just different models altogether. It’s not even an apples-to-oranges comparison, it’s just completely different,” said Jason Goldman, the former VP of product at Twitter from 2007 to 2010. Goldman said Musk’s comments about making Twitter’s ads more like Google’s “reveal a pretty profound ignorance of how the online advertising industry has evolved in the last 20 years.”

Twitter also doesn’t have nearly the number of users that Facebook and Google have. And while Musk claims that Twitter’s daily active users are higher than ever, the latest outside estimates are mixed. Two analytics firms, SimilarWeb and Pathmatics, show a drop in Twitter’s user growth year over year in the past few months. Another firm, however, Apptopia, showed slightly higher numbers in the past three months when compared to the year prior.

Despite all the challenges, there may be some hope for Musk to regain trust with advertisers. The CEO of one of the largest advertising agencies in the world, WPP, recently said that Twitter “seems to be a lot more stable the last few months than perhaps it was toward the end of last year” and that “clients want to start to look at how they can come back onto Twitter.” An executive at another major advertising firm, Publicis, made similar comments in December, leaving room for its clients to return to the platform.

In recent weeks, Twitter announced new tools it’s working on that let advertisers make sure their ads aren’t shown next to controversial tweets — a sign that it’s trying to entice advertisers who are spooked about brand safety. It may take time to win them over: “There’s just very little trust at the moment in Twitter’s ability to actually follow through on those moderation promises,” said Ruben Schreurs, chief product officer at the ad media consultancy firm Ebiquity.

To regain trust, some ad executives see a simple solution to Musk’s problems: Find a new CEO. If Musk resigned, as he said he would by the end of this year, that would go a long way to alleviate advertisers’ concerns, sources said.

“He should resign as CEO, stop tweeting, become chair, appoint a board, and put in a governance structure,” said one advertising executive. But the problem is, they said, that “Twitter is now so fundamentally broken that even if you’ve got a new CEO, I’m not confident that that CEO will be around for a month.”

There may even be a middle ground: Musk could remain CEO if he publicly backs and commits to a sales leader with “gravitas” who commits to “very clear, well-informed standards for advertising on Twitter.” Then advertisers “will gladly start to return,” said Schreurs. “I’m pretty sure about that.”

In his conference call with Morgan Stanley, Musk said that Twitter was close to breaking even in profitability by the end of the year. While that may be true at the moment because of how aggressively Musk is cutting costs, he’ll need to also increase revenue to keep Twitter afloat.

If Musk doesn’t change his advertising strategy, we may continue to see a degraded, or all-out denigrated, Twitter. Already, Twitter is having reliability problems, with an uptick in network outages and product glitches. That will only increase if the company can’t afford to pay its staff to run the site well.

One former employee on Twitter’s sales team who spoke with Vox on the condition of anonymity for fear of professional repercussions said that when Musk took over Twitter, they were initially hopeful that he might be able to energize the company’s advertising operations and make the company more profitable and competitive.

Instead, Elon is “crushing the company and everything that it built,” they said. “For what end, I don’t know.”



Source link

Keep an eye on what we are doing
Be the first to get latest updates and exclusive content straight to your email inbox.
We promise not to spam you. You can unsubscribe at any time.
Invalid email address

SOCIAL

Reddit files to go public as ‘RDDT’ on NYSE

Published

on

Online discussion platform Reddit is looking to ramp up revenue from ads, commerce, and allowing access to its data for training of large language models powering artificial intelligence

Online discussion platform Reddit is looking to ramp up revenue from ads, commerce, and allowing access to its data for training of large language models powering artificial intelligence – Copyright AFP/File SAMUEL ALABI

Glenn CHAPMAN

Reddit on Thursday told US stock regulators that it plans to go public on the New York Stock Exchange under the symbol “RDDT.”

Reddit did not provide details regarding the number or price of shares nor when the initial public offering would occur.

Co-founder and chief executive Steve Huffman said in a letter included with the filing that money raised by the share offering would be used to make Reddit a stronger, bigger company.

Founded in 2005, the platform is home to more than 100,000 online communities devoted to a sweeping range of topics and was visited by an average of 76 million people daily in December, according to a filing with the Securities and Exchange Commission.

“They come to Reddit to participate in a vibrant community, a constantly evolving place where anyone, anywhere, can connect with like-minded people and dive into any topic,” Huffman said in the letter.

“The conversation ranges from the sublime to the ridiculous, the trivial to the existential, the comic to the serious.”

Communities on the platform are referred to as “subreddits,” and one devoted to music star Taylor Swift eclipsed a million members last year, according to the filing.

Reddit had a net loss of $90.8 million in 2023 on revenue of $804 million, according to the filing.

Reddit is known for “Ask Me Anything” sessions during which influential people ranging from tech titans and famous athletes to celebrities and politicians field questions from users.

A Wall Street Bets subreddit fueled a GameStop share runup in 2021 in a frenzy that inspired a US congressional inquiry and a film titled “Dumb Money.”

Huffman credited Reddit communities with “campaigning for net neutrality in 2015, starting the March for Science in 2017, or standing up for retail investors, as r/wallstreetbets did in 2021.”

– AI training –

Plans to bring in money include advertising and licensing data for training large language models (LLMs) that power artificial intelligence, according to the filing.

“Reddit’s vast and unmatched archive of real, timely, and relevant human conversation on literally any topic is an invaluable dataset for a variety of purposes, including search, AI training, and research,” Huffman wrote.

“We expect our data advantage and intellectual property to continue to be a key element in the training of future LLMs.”

Last year moderators of communities at Reddit held a major protest over new fees for developer access to the platform.

Huffman had been unwilling to allow companies that build AI chatbots like ChatGPT to have free access to the site to perfect their large-language models.

AI companies had used a free interface to access the massive amounts of data at Reddit to train artificial intelligence models.

“Reddit needs to be a self-sustaining business, and to do that, we can no longer subsidize commercial entities that require large-scale data use,” Huffman wrote in a Reddit post at the time.

Source link

Keep an eye on what we are doing
Be the first to get latest updates and exclusive content straight to your email inbox.
We promise not to spam you. You can unsubscribe at any time.
Invalid email address
Continue Reading

SOCIAL

Pitfalls of the Social Media Advertising Model

Published

on

Pitfalls of the Social Media Advertising Model

Paul Romer, Nobel Prize-winning economist and Boston College Professor of Finance takes us through social media’s advertising model and the ethical …

Source link

Keep an eye on what we are doing
Be the first to get latest updates and exclusive content straight to your email inbox.
We promise not to spam you. You can unsubscribe at any time.
Invalid email address
Continue Reading

SOCIAL

Reddit Shares Performance Data and Growth Strategy Ahead of Coming IPO

Published

on

Reddit Shares Performance Data and Growth Strategy Ahead of Coming IPO

Reddit’s IPO is almost here, with the company filing its S-1 registration with the SEC today, which outlines its current finances and strategic goals, ahead of the pending listing.

And there are some interesting notes in the data provided.

First off, Reddit, which will soon be listed on the New York Stock Exchange under the symbol “RDDT”, claims that it has over 73 million daily active users, and 500 million monthly visitors.

Which is a highly unusual split of daily to monthly active usage.

In general, most social platforms see a 1:1.8 ratio of daily/monthly users, with some variance. Facebook, for example, has 2.11b DAU and 3.07b MAU (x1.45), while Snapchat has 414m DAU/800m MAU (x1.9).

Reddit claims to have a variation of x6.8 DAU to MAU, which is way out of proportion for those averages.

Could that be correct? Could Reddit be seeing a heap more visitors who don’t come back to the site daily?

I mean, I guess, when you factor in people who might be using Reddit to supplement their Google searches, so may visit infrequently. But it’s not exactly a great endorsement of the magnetism of its product if the vast majority of people who look at the app are not interested in coming back regularly.

Reddit reported reaching 430 million monthly actives back in 2019, then switched to sharing daily active user counts from 2020 onwards (it had 52m DAU then). My assumption was that Reddit made this switch because it lost users as a result of changes to its rules, which led to the expulsion of thousands of its most controversial communities. But Reddit’s data here suggests that it hasn’t necessarily lost ground, it just opted for an alternative reporting method. Though it does seem odd.

The documentation also provides a narrative overview of the platform, which it refers to as “a digital city.”

As per Reddit’s S-1:

Reddit is a global, digital city where anyone in the world can join a community to learn from one another, engage in authentic conversations, explore passions, research new hobbies, exchange goods and services, create new communities and experiences, share a few laughs, and find belonging. People are diverse and have multiple interests. Just like in a city, where citizens are part of multiple subcommunities, on Reddit, users often belong to multiple communities.”

“Exchange goods and services?” Not sure what that refers to exactly, but…

Reddit also refers to its “constantly evolving human archive of information”, which it recently sold to Google for $60 million per year.

Which is also interesting when you consider this listing:

Reddit IPO

OpenAI CEO Sam Altman owns 8.7% of the current Reddit shares, which gives him significant sway in the company’s decisions, and it’d be interesting to know what Altman thinks about Reddit selling its user data to Google for use in its competing AI applications.

Presumably he’s okay with it. Which seems unusual in itself.

On specific subreddit usage, Reddit says that:

  • Over 500 subreddits have at least a million subscribers
  • The average active minutes for logged-in users on Reddit is around 20 minutes per day, though that increases to over 35 minutes a day for those who’ve been active on the platform for over five years, and up to 45 minutes a day for those who’ve been active for over seven years.
  • 85% of Redditors say that the platform is “where they learn about the topics they love the most”, while 83% say that conversations on Reddit are more on-topic than any other social media platform

In terms of revenue, Reddit says that it generated $804 million in revenue in 2023, an increase of 21% year-over-year.

Reddit believes that it has significant opportunity to increase its intake in the coming years, particularly due to its current revenue split, which shows that it’s heavily reliant on US users.

Here’s Reddit’s current Average Revenue Per User charts:

Reddit IPO

Reddit’s audience is split almost 50/50 between the U.S. and everywhere else, and as Reddit expands its ad business, that should facilitate more monetization opportunities in other regions.

Reddit also says that it’s exploring new technological developments to enable more ways for customers to invest to grow their business.

Then there’s the Google data-sharing deal:

“We are also in the early stages of monetizing our emerging opportunity in data licensing by allowing third parties to access, search, and analyze data on our platform. In January 2024, we entered into certain data licensing arrangements with an aggregate contract value of $203.0 million and terms ranging from two to three years. We expect a minimum of $66.4 million of revenue to be recognized during the year ending December 31, 2024.”

So Reddit does have some additional avenues of monetization, and it’ll be interesting to see how the Google partnership plays out, and whether that helps to expand Reddit’s exposure and traffic as a result.

Reddit hasn’t provided an overview of the number of shares that it’s looking to offer at this stage, though it has included a plan to offer shares to its power users within its S-1 listing:

We will invite users and moderators to participate in the directed share program in six phased priority tiers. We will assign each eligible participant to a tier based on that participant’s contributions to Reddit. User contributions will be measured in karma (a user’s reputation score that reflects their community contributions). Moderator contributions will be measured by membership and moderator actions on our platform. Tier 1 will include certain users and moderators identified by us who have meaningfully contributed to Reddit community programs. Tier 2 will include users who hold at least 200,000 karma and moderators who have performed at least 5,000 moderator actions. Tier 3 will include users who hold at least 100,000 karma and moderators who have performed at least 2,500 moderator actions. Tier 4 will include users who hold at least 50,000 karma and moderators who have performed at least 1,000 moderator actions. Tier 5 will include users who hold at least 25,000 karma and moderators who have performed at least 500 moderator actions. Tier 6 will include all other eligible users and moderators.

That’s an interesting approach to get more user buy-in, and for a platform that is still reliant on volunteer labor for its moderation and management, that could be a critical assurance move.

Reddit does note that it’s seeking a $5 billion market capitalization valuation, dependent on various factors, with more details to come closer to the listing.

Which is a high price tag for an app with questionable value, but it’s not beyond the realm of possibility, and it could be where Reddit ends up when the next stage is announced.

Reddit’s initial public offering be launched after the SEC completes its review process, which is now well in motion, and set for next month.

Source link

Keep an eye on what we are doing
Be the first to get latest updates and exclusive content straight to your email inbox.
We promise not to spam you. You can unsubscribe at any time.
Invalid email address
Continue Reading

Trending

Follow by Email
RSS