The jump in the number of users who came to watch the chaos meant less as advertisers fled.
You know things are going badly in a company when theories circulate that its new owner is intentionally trying to run it into the ground.
Intentionally or unintentionally, the launch of Elon Musk’s half-baked product and the destruction of Twitter Inc. into a mess that can be devastating. In the past 24 hours, he has promoted possible bankruptcy and watched top executives resign. Impersonators of politicians and brands who bought blue badges for $8 went viral before Twitter could suspend them. Nintendo’s Mario flipped Twitter users for about two hours before his “verified” fake account was removed.
On Friday morning, Twitter appeared to change course and suspended the $8 Blue Badge Initiative. Maybe it was all too chaotic. Or perhaps the departure of senior compliance officers has made it more difficult to certify new products with the Federal Trade Commission. An internal Twitter lawyer warned engineers Thursday that they need to settle FTC compliance themselves or face legal action, according to a memo published in The Verge.
The lawyer added that Musk’s personal lawyer, who currently runs Twitter’s legal department, said Musk was taking a risk because he was “putting rockets into space.” [and is] I’m not afraid of the Federal Trade Commission.”
How big is the upside to all this risk? Not much.
Remember that if all 400,000 originally verified Twitter users paid Musk’s $8 subscription fee, that would amount to about $40 million in revenue per year. That’s a fraction of Twitter’s $1.2 billion in second-quarter sales, about 90% of which came from advertising. But Musk, inexplicably, said he wants half of the company’s future revenue to come from Twitter Blue, which is currently declining as one of the most confusing and ominous products in history. (Meanwhile, banks are trying to get rid of Twitter’s acquisition debt for as little as 60 cents on the dollar.)
Musk’s biggest mistake was firing advertisers on Twitter with his behavior. No matter how many millions of people visit Twitter to express the chaos, Musk really could tip the company toward bankruptcy if he can’t change his faltering relationship with brands.
Many big names such as General Motors have suspended their ads on the site, fearing hate speech and misinformation could spread under Musk. Twitter executives have struggled to sell 2023 ad space at a major ad conference in May 2022, due to all the uncertainty about a potential Musk deal, according to a tweet by Angelo Carusone, who runs Media Matters for America media watchdog.
Fortunately, hate speech and misinformation did not flood the site after purchasing a mask, according to multiple studies. Disinformation wasn’t just a passing picture during the US midterms.
But Musk still screwed up the situation, and in several ways. By cutting off a large part of the company’s advertising team, he ended the all-important personal relationships that executives had with major brands. A misconception about online advertising is that the entire business is driven by algorithms and automated auctions powered by machines. This is not the case. Transactions are digitally driven but relationships start with [global ad sales] “This whole team has been wiped out,” said Matt Scheckner, President of Advertising Week, a conference organizer for the advertising industry. … the part that [Musk] He’s missed human contact.”
These relationships are especially important because Twitter ads are not as performance driven as Google or Facebook ads. When you buy a drug company like Eli Lilly & Co. A space on Google, whose ads appear in search results related to a medical problem.
But on Twitter, brands buy ads to promote and create public awareness of their products. Of course, Eli Lilly has less incentive than ever to buy ads on Twitter after a parody account went viral this week.
Musk himself admitted that Twitter is “weak” because “70% of our ads are branded,” according to a memo he sent to employees. That memo mentioned the economic risks but did not say that brands might equally refuse to launch a failed product or erratic billionaire behavior on the site, such as tweeting a conspiracy theory about the attack on Paul Pelosi or tweeting that Americans should vote for it. The Republican Party during the midterm elections.
And Musk’s efforts to mend his relationship with advertisers didn’t go well, either. On Thursday he held a public call on Twitter Spaces — a live audio discussion that anyone on Twitter can listen to — with dozens of major brands like Warner Bros. Entertainment and Nike Inc.’s Jordan. Offering his assurances that Twitter was making sure there were no “bad things” next to ads, he said Twitter was also working to help make ads more relevant and targeted to users.
While Musk did not say how Twitter would do this, he said in a separate meeting with employees Thursday that the company will combine the technology to power its recommendation engines for ads and tweets, which so far have operated separately.
However, that’s exactly what the company’s departing lawyer warned: Twitter can’t move forward with new products that process user data without a special FTC checkout. The regulator said it was following recent developments on Twitter with “deep concern.”
Musk may go ahead with his plans anyway. Not only did he “put rockets into space,” his attorney put it, he received slaps on the wrist and a few from the Securities and Exchange Commission for his past transgressions.
That won’t stop the flow of losses coming because advertisers, who don’t really need Twitter as much as Twitter does, are taking their money elsewhere. On Thursday, amid the chaos, Musk was touting an increase in the number of active users on his site.
“Twitter usage continues to rise,” he wrote on Twitter. “One thing is for sure: it’s not boring!” But it may not be around for long.
Parmi Olson is a columnist for Bloomberg Opinion covering technology. She was a former reporter for The Wall Street Journal and Forbes, and the author of We Are Anonymous.
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