Elon Musk running out of solutions in the face of the leak of advertisers

Elon Musk, pompier-pyromane du modèle publicitaire de Twitter.

Elon Musk’s Twitter is heading straight for a financial dead end if it continues in this direction. On the one hand, its historic financial engine, advertising, continues to collapse from week to week, when it supplied nearly 90% of its turnover. On the other hand, the new subscription-based monetization promoted by Elon Musk continues to be pushed back. And then you have to convince the users.

It would therefore be very unlikely that Twitter will manage to achieve its 2021 turnover again (5.1 billion dollars), while it must collect a billion dollars in additional costs, to repay part of the debt. contracted by Elon Musk with a consortium of banks in order to complete the takeover. But since the company is no longer listed on the stock exchange, the 2022 turnover could be kept secret by Elon Musk.

Twitter ad revenue continues to plummet

According to Platformer, Twitter’s advertising revenue in the EMEA region (Europe and the Middle East) is down 15% compared to last year, and weekly engagements have even collapsed by 49%. However, the week of Black Friday (which extends until Cyber ​​Monday), coupled with the start of the Football World Cup, was expected to bring a peak of advertisers back to the platform. Platformer gives the example of the WPP Group, which would have put an end to the equivalent of 1.16 million dollars in advertising campaigns, in the EMEA region alone, since the arrival of Elon Musk.

The leak seems widespread: according to the NGO Media Matters, 50 of the 100 largest global advertisers have stopped (or announced that they will stop) their spending on Twitter since Musk took power. The shortfall for the social network would be 317 million dollars. It must be said that Twitter is not an essential player in advertising, as Google, Meta (Facebook, Instagram) or Amazon can be. The social network is seen only as an additional relay, and therefore dispensable, especially at a time when online advertising budgets are being revised downwards across the entire market.

Elon Musk sends opposite signals

According to the FinancialTimes, to counter this leakage of advertisers, Elon Musk himself tries to contact the general managers and marketing directors of the companies that are disengaging. In some cases, this method works, but it only succeeds at best in achieving a reduction in advertising budgets instead of a simple cut.

It must be said that behind his reassuring statements, Elon Musk continues to send alarming signals to advertisers, between his invectives, his sharing of conspiratorial remarks and his interactions with dubious personalities. To make matters worse, this weekend, the sulphurous billionaire restored 62,000 accounts banned for violating Twitter rules, including 75 followed by more than a million subscribers, following a simple survey on his account, a partial voting system and very easy to influence.

But the FT highlights another issue: Twitter’s advertising team has also been hit hard by the outgoing waves. Robin Wheeler, who had taken over as head of Twitter’s ad sales division when the leadership changed, was fired on November 19. Elon Musk had yet convinced her to stay when she intended to resign a week earlier. But according to Bloombergshe was laid off after refusing to lay off more people on her teams.

As a result, many advertising agencies no longer have contact with the social network and receive very little or no communication. Similarly, some brands were unable to obtain quantified feedback on their previous campaigns. To complete this picture, some complain about the deterioration of Twitter’s advertising tools, which are no longer maintained as much.

Can Twitter really do without advertising?

To depend less on advertising, Elon Musk is bludgeoning his magic solution, the Twitter Blue subscription, at $8 a month, which gives access to a blue badge similar to that of current certified accounts. Eventually, the businessman hopes to derive half of the company’s turnover from it. Except that not only is Elon Musk’s Blue subscription slow to launch, but in addition, it seems undersized compared to the needs of the social network. Based on public figures, the Forbes site has tried a projection exercise. The result ? Twitter would need to convert 64 million users to its new subscription system (about a quarter of its 238 million daily active users) to make up for lost ad revenue. By way of comparison, the American site recalls that YouTube only has 80 million subscribers to its premium offer out of 2.6 billion users, even though the latter is more extensive than that of Twitter.

To make matters worse, Elon Musk embarked on a new crusade earlier this week, this time against Apple’s App Store. Regularly criticized, and at the center of a major legal dispute with the publisher of Fortnite Epic Games, the iPhone application store takes 30% of the revenue generated by large applications ($1 million in business volume per year). The billionaire is now standing up against this “tax”, whereas he has defended so far that the passage of the payment of the subscription by the App Store and Google Pay allowed him to display a level of reliability difficult to achieve, thanks to the protection tools already in place. Furthermore, according to the washington postApple was the social network’s largest customer in 2021, with $48 million in advertising spend…

As a result of Musk’s new fad, Twitter is postponing Blue’s deployment. Developers must build safeguards, including a tool to verify user identities. A new technological puzzle to solve for technical teams bled by the great waves of layoffs and resignations that have followed one another since Musk took power at the end of October.

How much money will Twitter lose?

Without a solid business model, can Twitter survive? In his Stratechery newsletter, analyst Ben Thompson estimates Twitter’s costs at three billion dollars – reduced with the layoffs – to which must be added the billion dollars of repayment of the loan contracted during the purchase. If the company achieved the same turnover as in 2021 -5.1 billion dollars-, it would be in the nails.

But repeating last year’s financial performance seems impossible given the continued deterioration of its advertising model, barring a miracle. As noted The echoes, Elon Musk is expected to speak at the quarterly meeting of the World Federation of Advertisers on Thursday. But can he put out the fire he himself started and fed?

Brussels calls on Twitter to fight misinformation

EU Internal Market Commissioner Thierry Breton warned Twitter boss Elon Musk on Wednesday that he should “significantly increase efforts” to comply with EU rules, in a phone interview. Twitter announced on Tuesday the mass reinstatement of banned accounts and the end of the fight against disinformation on the Covid. Thierry Breton recalled that Elon Musk had undertaken in May to comply with the new European legislation on online platforms.

Disinformation, hate speech, counterfeits… The very large online platforms, such as Facebook, Amazon or Twitter, will have to apply “around the summer of 2023” the new EU legislation which came into force in November to eliminate the no-go zones. – right on the internet. These rules include the obligation to act “promptly” to remove any illegal content as soon as the platform becomes aware of it, or the obligation to inform the judicial authorities when they suspect a “serious criminal offence”.

They also include prohibitions, such as those on using “sensitive” user data (gender, political leaning, religious affiliation, etc.) for targeted advertising. And transparency obligations, such as the publication of the main parameters used by recommendation systems.

The major platforms will be required to assess the risks associated with the use of their services themselves and will have to put in place the means to mitigate them, such as content moderation. They will also have to provide the regulator with access to their data and will be audited once a year, at their own expense, by independent bodies. They will be placed directly under the supervision of the European Commission, which may impose fines of up to 6% of their worldwide turnover, or even a ban on operating in the EU in the event of repeated serious infringements.

In a tweet on Wednesday evening, Thierry Breton sent a link to a reminder of the European rules published … on his Mastodon account, Twitter’s rival social network.

(AFP)