An Elon Musk-owned Twitter could be bad for advertisers
Elon Musk’s efforts to buy Twitter are being closely watched by advertisers.
Ad executives are concerned that the entrepreneur’s freewheeling approach to speech could make the social media platform less safe for brands. But fears of a seismic shift in ad dollars are overblown, industry experts say.
“Major advertisers today are naturally worried about a Musk-Twitter world,” Carter Murray, investor and marketing expert and former global CEO of ad agency FCB, wrote in an email to Yahoo Finance.
According to advertisers, a guardrail-free Twitter could mean ads are shown adjacent to controversial content that brands would not want to be associated with, like racism, bigotry or sexism. A less moderated version of Twitter “would mean trying to reach out to their customers in a Twitter world littered with hate speech and vitriol which will cost them both money to make sure they avoid, and when they can’t it will have their brands damaged by association," said Murray.
Musk has long advocated for a freer version of speech on Twitter. The billionaire’s gripe with Twitter goes back to his fight with the U.S. Securities and Exchange Commission over his infamous “funding secured” tweet, ultimately leading to a settlement in which Tesla lawyers would oversee Musk’s tweets. Musk has since claimed that the settlement was made under duress.
“Twitter has become the de facto town square,” Musk said in a TED Talk on April 14. “It’s really important that people have both the reality and the perception that they are able to speak freely within the bounds of the law.”
Twitter currently derives most of its revenue from advertising. In Q4 2021, the company reported advertising revenue of $1.41 billion out of $1.57 billion in total revenue during that quarter.
Musk has directly addressed advertising on the platform in several tweets, in one saying that Twitter under his leadership would have “no ads. The power of corporations to dictate policy is greatly enhanced if Twitter depends on advertising money to survive.” That tweet was deleted early last week.
In fact, Musk doesn’t seem to care about an advertiser exodus.
“Elon must have made it quite clear that he doesn’t appreciate advertising on Twitter, that it biases editorial policy,” said Sir Martin Sorrell, S4 Capital founder and executive chairman and former CEO of ad agency WPP, in an interview with Yahoo Finance. “Twitter is, I hesitate to say, a rounding error, but it is a small part of the advertising ecosystem.”
And likewise, new ownership by Musk will not necessarily send advertisers immediately running for the door. “I don’t expect that there will be an immediate change in ad dollar spend until advertisers see a material change in the policies,” said Murray.
Sorrel said that Musk’s interest in Twitter comes from its reach and influence. Owning Twitter would make Musk a “modern day press baron, no different to Hearst, Murdoch, Bezos, Benioff, but on a huge, global scale,” Sorrell wrote in an email to Yahoo Finance. Twitter ownership could also benefit Musk’s other companies and properties like Tesla and Starlink, he added.
“He claims he doesn’t spend anything at all, but he does in a very different way using new media and his brand extremely effectively,” said Sorrell, adding that Musk’s Tesla is known for its lack of marketing.
Mike Juang is a producer for Yahoo Finance.
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