Twitter ad business could surge as advertisers pin hope on Musk
2022.05.11 13:22
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FILE PHOTO: Founder and CEO of Tesla Motors Elon Musk speaks during a media tour of the Tesla Gigafactory, which will produce batteries for the electric carmaker, in Sparks, Nevada, U.S. July 26, 2016. REUTERS/James Glover II
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By Sheila Dang
(Reuters) – Elon Musk’s $44 billion deal to take Twitter Inc (NYSE:TWTR) private could mark the end of the social media platform’s advertising business, many in the ad industry have worried.
But in the weeks since April 25 when the Tesla (NASDAQ:TSLA) Inc chief executive announced the deal, Madison Avenue’s attitude to Musk’s upcoming version of Twitter is evolving.
Optimism is taking hold and is playing out in two ways.
Some ad buyers are hoping to extract better deals from a company undergoing a massive transition. Others are betting that Musk, who has dribbled new product ideas daily on Twitter, can deliver what Twitter has fallen short on – launch new products more quickly, according to advertising executives who spoke with Reuters.
The belief is that Musk’s push for faster product development will attract more new users who will become the foundation for a better marketing environment.
The view is a shift from the ad industry’s dim outlook after Musk appeared to dump cold water on Twitter’s $5 billion ad business, tweeting that the company should be a forum for free speech and questioning the platform’s reliance on ads for revenue.
According to slides Musk presented to investors, he expects Twitter to reach 931 million users by 2028 from 229 million in the most recent quarter, and ad revenue to more than double to $12 billion, representing about 45% of its total revenue in the same time frame, the New York Times reported.
Despite Musk’s repeated statements on minimizing content censorship on the platform, he appeared in a video on Monday with European Union industry chief Thierry Breton to discuss the upcoming Digital Services Act, which will require platforms to curb illegal content. Musk said he “was very much of the same mind” and agreed with “everything [Breton] said.”
In the short term, some ad agencies are already advising clients to take a fresh look at doing business with Twitter.
One ad agency executive who declined to be named said they expected negotiations to begin in the coming months to strike lower ad prices on behalf of some clients, as Twitter may be more flexible during the period of uncertainty before Musk closes his takeover deal.
Code3, an agency that has worked with brands like Chipotle (NYSE:CMG), Dior and Gap, will advise some clients to consider increasing their investment on Twitter in the near term to take advantage of the buzz that Musk has helped generate on the platform, said Lizzy Glazer, vice president of connections planning at Code3.
On Tuesday, Musk said during a Financial Times conference that he would reverse Twitter’s permanent suspension on former U.S. President Donald Trump.
Ad and marketing executives who spoke with Reuters said they are watching closely for changes Twitter could make to the platform, and most advertisers have not yet made significant shifts in spending, tamping down fears of abandoning Twitter.
Some experts forecast Twitter could actually become a more attractive environment for brands under Musk.
Musk could help jolt Twitter to be more competitive with new features and lead to bigger user growth, said Erica Patrick, director of paid social media at ad agency Mediahub Worldwide, which counts Netflix Inc (NASDAQ:NFLX) and Fox Sports among its clients.
“Twitter has always been fourth in line as a social platform,” she said. “(Musk) does innovate and he can think outside the box. If it’s a private company, there’s a lot they can do more quickly.”
Even the expectation that Musk’s ownership could lead to looser rules on content will be an advantage for some marketers who aim to play off viral events, said Ishan Goel, founder of Goel Strategies, a marketing agency that has worked with brands like Hulu and Colgate.
“As a marketer, you get the most viral moment when there’s disruption,” he said.
