Elon Musk’s Biggest Problem on Twitter May Be Its Advertisers

Elon Musk’s Biggest Problem on Twitter May Be Its Advertisers
Jim Watson/Agence France-Presse — Getty Images
Twitter is free for users (for now, at least) because of advertising.

The same is true for practically all digital platforms: They depend on advertising for most of their revenue. But for Twitter, which was recently acquired by Elon Musk, that source of revenue may be under significant threat very soon.

Within days of acquiring the platform, Mr. Musk amplified misinformation that related to the attack on Paul Pelosi, the husband of Speaker of the House Nancy Pelosi. To many, this action contradicted Mr. Musk’s note to advertisers days earlier that Twitter “cannot become a free-for-all hellscape”. Despite the eventual deletion of the Pelosi-related item, the debate raged: Is Twitter in the Musk era a safe place for advertisers?

Mr. Musk has concluded, it seems, that there are no boundaries between his longtime status as much-followed user and his new role as sole proprietor. He has placed no limits on his own speech and, under his ownership, seems likely to enable the inflammatory, provocative and sometimes verifiably untrue speech of others.

I know from having represented the world’s biggest buyer of advertising space that advertisers worry about these things a lot. In this case, advertisers’ worries could lead them to flee en masse, costing Twitter almost all its current revenue. Without that revenue, Twitter could be a calamitous acquisition for Mr. Musk, and the very future of the platform could be at risk.

Advertisers exercise caution in their choice of media if they perceive a risk to their reputations. Advertisers don’t like losing sleep over guilt by association and tolerate the possibility of harm only if the opportunity forgone is too great.

There is a group of publishers, mostly at the extreme right of the political spectrum, that almost all major advertisers have elected to bypass. Newsmax, One America News Network, Breitbart and The Epoch Times barely carry ads from Fortune 500 companies. The judgment is easy: For major companies, the risk of association with these outlets is greater than the commercial cost of alienating a smaller population segment.

Advertisers go to great lengths to avoid appearing beside content that is socially unacceptable or illegal, as well as that which is extremely partisan. Their fears are exaggerated by digital platforms that place advertising using algorithms to match a brand or message to what seem like the correct users. They don’t always get it right. Some advertisers have a risk tolerance that is so low that they have withdrawn from advertising in traditional news media almost completely; they judge that the opportunity cost of losing the news audience is not significant. Losing the entire audience of YouTube, Facebook, Instagram or TikTok is another matter. Here the dollars flow, as the opportunity cost of not advertising is usually judged to be too great, so advertisers rely on technology to separate their messages from the darker corners of these platforms.

Unfortunately for Mr. Musk, Twitter is a bit player in comparison with other advertising-supported media platforms. Despite its celebrity and the undoubted influence it allows its much-followed users, its revenue in 2021 was less than a twentieth of Meta’s and less than a fiftieth of Alphabet’s. Twitter lacks the mission-critical status of its competitors, and few advertisers would be significantly affected by a complete withdrawal.

Perhaps the biggest problem Mr. Musk faces with Twitter is Mr. Musk. Proprietors and corporate hegemons have determined editorial positions for generations. It’s what media titans do. For the most part, however, it’s the guiding hand of the proprietor that we feel rather than the first-person voice that we hear. Consumers know the tone and manner of Fox News, and most know who sets it. Equally, many consumers know at some level the dangers posed by bad actors on Facebook and that its owners are responsible for the features that allow the publication and spread of that content.

Despite this, few people remember many things Rupert Murdoch or Mark Zuckerberg ever actually said. The same is not true of Donald Trump or Mr. Musk. This difference — and the distance between the individual and the content — might be crucial. It has protected Fox News and The Wall Street Journal, and it has protected Meta. The first person, however, ties the media to the man. It seems likely that many advertisers may think that advertising on Twitter is an implicit endorsement of Mr. Musk in the same way that advertising on Truth Social is an implicit endorsement of Mr. Trump.

Should Mr. Musk choose to remain a participant and provocateur on Twitter, it’s likely the platform is headed deeper into the world of toxicity and partisanship. If that happens, Twitter is doomed, from the perspective of advertising revenue.

There’s little motivation for any advertiser to support a platform or proprietor who is likely to produce more pain than gain. In Mr. Trump’s case, his public statements have cost him business, beyond Truth Social, at his hotels and golf courses, including the indefinite removal of the Turnberry golf resort from the Open Championship schedule in Britain. It’s too early to say if the potential toxification of Twitter might affect Tesla and Mr. Musk’s other business interests, but it is fair to say that few have more to lose than the world’s richest person.

Already there are suggestions for an additional revenue model at Twitter: a $20 monthly fee for the coveted blue check mark that highlights verified users. This would do nothing to protect the interests of advertisers, even if it would reduce the financial impact of their absence. (Roughly 19 million paying users would be required to make up the shortfall.) Perhaps most important, the idea that Twitter is not a safe place for advertisers might be an indicator that it is not a safe place for society as a whole.

Rob Norman advises companies in the advertising and technology sectors. For a decade, he was a senior executive at the advertising and marketing conglomerate WPP.

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