Twitter revenue and its advertiser quandary

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Advertising funds much of the media business. Even back in the pre-digital era it was acknowledged that the cover price of news papers & magazines would be prohibitively expensive for the reader. In markets like India, major dailies and magazines have been incredibly affordable. When the television industry took off, both GEC and niche channels depended on advertiser monies for support.

Since the rise of internet media brands, display ads have contributed to their sustenance. Only recently have media brands including the online-only brands have begun to explore revenue options beyond advertising: sponsorships, events, subscriptions, newsletters and more. Even in these, ‘advertiser money’ plays an important role in options such as sponsorships & events. Recently, monetisation options such as paid newsletters have also gained popularity. Very few brands have bypassed advertisers to get end-consumers to pay for content consumption. NYT, The Economist and few others have been successful in this endeavour. Mainstream media brands such as Times of India group (TOI+ and ET Prime), Indian Express and many others aim to generate revenues through user subscriptions allowing them to depend less on advertiser money.

I would consider Twitter, Instagram and Facebook as media brands too as they offer a platform for enterprises to build affinity, share rich media to convey a brand image, and also have a potential to sell directly to prospects or consumers (admittedly some such as Instagram better at it than the others). WhatsApp seems to chase a different kind of ‘advertiser’ through the ‘WhatsApp for Business’ route.

Twitter is different from the platforms. It has a relatively less user base (both total and active) but a highly disproportionate share of ‘cultural impact’.

It’s instant nature and regular usage by select celebrities across political, business, sports, tech & entertainment domains makes it great for content which are ‘announcements’ in nature. That’s the attraction of the platform as the preferred choice for live updates, important announcements – be it from government departments, country heads or brands. But feelings around the brand swings like a pendulum.

In the wake of Twitter’s acquisition by Elon Musk, there’s been a lot of discussion about its monetisation and attracting advertisers. In my view the issues that matter are as follows:

Over-dependence on ad money: in 2021, 92% of Twitter’s $5 billion revenue came from advertising. Twitter posted a net loss of $221 million in 2021 and according to Elon Musk, there’s a drop in revenue too as ‘more brands pause ads‘. Naturally, this would force the management to look for alternate monetisation sources such as getting Twitter users to pay for ‘premium’ services. I am not sure if a recurring payment of $8 to get a ‘blue tick’ qualifies as a real, value-added service. I thought a blue-tick (or ‘verified’) subliminally cues that the person is ‘recognised’, a voice of authority in their sphere of specialisation. Of course there could be other parameters such as follower count etc. Yes, someone deciding to ‘bestow’ a blue tick reeks of privilege. Now, anyone can get verified at a nominal cost (why a recurring cost I wonder). But who knows? There maybe enough people seeking vanity (or whatever reason) to get that blue tick at a cost.

Location matters in retail, context matters online: in retail it is said that the 3 most important parameters of success are ‘location, location and location’. Who you are seen in the company of matters. That’s why premium & luxury brands prefer to invest in high street locations or upscale malls. In the online world, be it display ads, YouTube videos or Twitter advertisers want to avoid being seen ‘in the context’ of toxic, hateful or controversial content. And there is no dearth of such content on Twitter, which would make advertisers wary of investments.

A must-have for free presence but not investments?: advertisers exhibit a shiny-new-toy syndrome seeking to be present in any new emerging platform, technology or fad- from Snapchat to metaverse, mainly driven by FOMO. A lot of brands have their handles on Twitter (it’s free after all) and use the platform in varying degrees of sophistication and effectiveness. They run hashtag campaigns to promote contests, ads and much more. Bit do all of them consider investing in promoted tweets at an investment? I doubt it. They are more likely to allocate their digital marketing funds on platform which they consider to be safe from the POV of ROI and free from controversies. Instagram or Facebook may have its share of dodgy content across politics and other topics but Twitter is more strongly associated with negative sentiment. There is a feeling that it is a cess pool with users hiding behind anonymity to attack anyone with a different point of view. Also in terms of visually engaging ad formats with clear CTA, especially that which is sales driven Instagram seems to be lot more effective.

Free-speech or moderation dilemma: there is no doubt that the world is divided into factions and camps across topics and its a phenomenon prior to the rise of social media. The platforms only served as amplification platforms for anyone with an opinion – so it feels that that fault lines have deepened. Every such faction feels they have been ‘wronged’ by Twitter when content was blocked or accounts suspended. There are no easy answers to moderation – no platform will tolerate a ‘anything goes’ approach when it comes to content. But if restrictions are put in place it will raise concerns about curbing free speech. Ironically, Elon Musk has himself ‘blocked a top marketer who questioned the platform’s retreat from content moderation‘.

Given all these complexities, it is understandable if advertisers continue to feel circumspect about making Twitter an automatic choice as a platform to advertise on.

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