Although Twitter’s problems with advertising revenue are not related to the takeover of the platform by Elon Musk, the change in leadership at the head of the social network has led to a decrease in these sources of revenue.
Twitter’s troubles with advertisers don’t date back to when the platform was acquired Elon Musk. Indeed, Twitter already faced strong competition from larger and faster-growing social media platforms. In addition, advertisers’ focus on improved targeting with business results and a sluggish advertising economy also put Twitter’s revenue outlook at risk. So far, Elon Musk’s takeover of the social network has reduced Twitter’s already precarious sources of advertising revenue.
According to a recent report by Standard Media Index* (SMI) Advertising spending in November 2022, the first full month after Elon Musk bought Twitter, advertising costs of the social network 46% decreasedCompared to 2021. More worryingly, SMI also found that marketers who had “pre-ordered” ads on the platform for the last two months of 2022 have ceased operations. 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 revealed that Twitter had lost about 31% of the total advertising funds initially planned for the social network. SMI said such a sudden loss of ad funds was unusual, with the only comparable example being the month-long ad boycott faced by Facebook a few years ago. The report also found that TikTok has benefited the most from advertisers pulling out of Twitter. Market share of the platform compared to its competitors (TikTok, Facebook, Instagram, Snap and Pinterest) In November 2022 does It fell to 7%compared to 10% in October and 12% in September.
This sharp drop in ad volume on Twitter follows modest annual declines prior to Elon Musk’s takeover of the platform, which ended on October 27, 2022. For example, social network advertising expenses decreased by 12% in October and 15% in September. 5% in August, 1% in October. The decline is part of a broader context, as ad spending trends hit other ad-supported social networks in the second half of 2022, with marketers expressing concerns about the conflicts. macroeconomics.
The number of top advertisers leaving Twitter is well documented. Marketers have shared their concerns about massive layoffs within the platform, which have a direct impact on the social network’s day-to-day operations. Given the increasing number of fake news and hate messages emerging on the platform these days, marketers are also concerned about brand safety. On the other hand, marketers want stability, which is sorely lacking in Twitter’s new owner, Elon Musk, a businessman with a striking personality.
However, there are other reasons why Twitter has never been able to get the advertising dollars that other social media platforms have. A recently published report Forestertitled Twitter is not being canceled; Downgraded (which can be translated as “Twitter is not deleted, but demoted”) revealed the changes in ownership and policy, as well as other problems facing the platform. As the report notes, Twitter remains culturally relevant to users with posts from politicians, artists and news outlets, and is far more popular than rival Mastodon.
However, the report states that Twitter is no longer a priority for the advertising industry. Just 1.3% of ad funds digital in 2022 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 lags behind at 22%. Additionally, half of Americans who are online have never used Twitter.
In a survey of advertising executives, Forrester found that Twitter’s performance-based ad products are lagging behind Facebook and the faster-growing TikTok (especially among young people). According to advertisers, direct response ads on Twitter do not meet the requirements needed to achieve key objectives such as brand preference and purchase. That’s why marketers use Meta and other larger channels to achieve these goals. Twitter is best suited for top-level goals like product awareness and consideration.
Advertisers also told Forrester that Twitter’s targeting and personalization capabilities, which have become important in today’s market, are underdeveloped on the platform. Advertisers are increasingly using Facebook and other digital platforms to “hyper-target” users. Also, as the flow of advertisers receded, Twitter users were exposed to more irrelevant advertising messages.
Advertising has been Twitter’s main source of revenue. In 2021, the platform reported its total revenue $5.08 billionrepresents advertising $4.51 billion. At the time of his takeover, Elon Musk said he expected the company’s revenue to reach $26.4 billion in 2028, with $10 billion in subscription revenue. Given that Twitter has only been profitable for two years since its launch, these projections seem quite optimistic.
Given recent trends and advertiser concerns, Musk is unlikely to hit his revenue targets for Twitter.
*SMI compiles actual ad agency billing data from all major holding companies and most major independents, accounting for approximately 95% of brand ad spending nationwide.
Article translated from US Forbes – Author: Brad Adgate
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