Twitter’s advertising revenue has declined by nearly 50% since the business was acquired by Elon Musk in October last year.
Musk, who bought the company for $44bn (£33.6bn), has posted on the platform that he blames this drop in ad revenue, as well as a “heavy debt load”, for Twitter’s cash flow remaining negative.
He had previously said in March that Twitter would reach positive cash flow by June this year, but admitted yesterday (16 July) “we did not see the increase in advertising revenue that was expected in June”. He added: “July is a bit more promising.”
We’re still negative cash flow, due to ~50% drop in advertising revenue plus heavy debt load. Need to reach positive cash flow before we have the luxury of anything else.
— Elon Musk (@elonmusk) July 15, 2023
Twitter lost a significant number of its top advertisers following Musk’s acquisition, with many pausing spend over fears around safety and the stability of the platform. When Musk first acquired Twitter in November, WPP-owned media agency GroupM declared it was “high risk” for advertisers to continue using the platform, for example.
Major brands including Coca-Cola, Unilever and Mondelez International pulled back from Twitter, with 625 of its top 1,000 advertisers reportedly cutting spend on the platform between October and January, according to data from Pathmatics by Sensor Tower published by CNN in February.
However, in an interview with the BBC in April, Musk claimed “almost all” of these advertisers had returned or were planning to return to the platform. While in May, GroupM reportedly said it no longer deemed Twitter a threat to brand safety, which came days after the appointment of NBCUniversal’s Linda Yaccarino as CEO.
But Twitter’s ad revenue has not recovered as quickly as Musk anticipated.
Before his acquisition, advertisers spent billions of dollars on Twitter. In 2021 alone, the platform generated $4.5bn (£3.9bn) in advertising revenue, but these figures have not been publicly reported since Musk took the company private.
Making the right decision
ISBA, the organisation that represents brand advertisers, has reiterated how important it is for brands to make their own decisions about where they advertise.
At the time of Musk’s takeover, ISBA director general Phil Smith said the trade body, which is also a member of the Global Alliance for Responsible Media (GARM), would be working to “ensure Twitter provides the welcoming environment, clear rules and consistent consequences that its new owner has promised”. It also urged brands to “take their own decisions” about where they place advertising.
The organisation’s position has not changed since that point, it told Marketing Week today.
Since the takeover, ISBA, both in its own right and through its role on the GARM steering group, has engaged with Twitter and says it is focused on user safety, asking for advertisers to have greater control over ad placement on Twitter.
Musk’s revelation over the weekend is the latest sign that his aggressive cost cutting measures and staff layoffs have not been enough to turn the business around.
Twitter’s workforce has dropped from just under 8,000 at the time he bought the company to around 1,500 today. The exit of many of its top engineers also raised concerns over the stability of the platform, another reason advertisers were keen to pause spend.
Musk has said Twitter is on track to post $3bn in revenue for 2023, down from $5.1bn in 2021.
Overall, advertising spend on social media channels dropped by 13.9% in the last six months of 2022, according to the latest AA/Warc Expenditure Report, marking the first time the UK market has seen a decline since measurement in 2014.
The report’s authors suggested this decline had continued into the beginning of 2023 as a result of the challenging economic climate and amid a period of unrest within the wider social media ad landscape.