by Philip Pilkington
Tuesday, 8
November 2022
Analysis
13:00

Why advertisers leaving Twitter benefits Elon Musk

A new model is required to insulate the company from activist pressure
by Philip Pilkington
Where’s your blue check? Credit: Getty

The backlash to Elon Musk’s Twitter deal did not not take long. Within days of his purchase IPG Megabrands — one of the four largest advertising companies — advised their clients to suspend advertising on the platform. In addition, Pfizer, General Motors and Volkswagen are among the other companies to have suspended paid adverts on the platform.

In 2021, advertising made up around 92% of Twitter’s total revenue. It is now clear, if it was ever in doubt, that for Musk’s vision for Twitter to succeed he will need to wean the company off its addiction to advertising money.

Musk’s first strategy has been to announce that Twitter will now sell its verification badges — commonly known as blue ticks — to users for a fee of $8 per month. Until now the verification process has remained shrouded in mystery. Twitter has the criteria laid out on its site, yet many users have found themselves rejected with no explanation despite meeting the explicit requirements of the verification process. It is not surprising, then, that only 0.2% of Twitter users are currently verified

Can Musk plug the gap of falling advertising revenues by selling checkmarks? Let’s consider the numbers. Of the $5.08 billion of revenue generated by Twitter in 2021, around $4.67 billion was from advertising. Given that there are currently around 424,000 verified users, this means that Twitter would need to increase the number of verified users to around 48.68 million. In other words, 23% of Twitter users would need to become verified to replace advertising revenue. That’s a lot. 

But perhaps we can be more modest in our assumptions. Twitter did not lose all its advertisers. Musk has said that it has taken a huge hit to its advertising revenues, although he has not specified a number. Since one of the four largest advertising firms recommended that their clients pull their ads, let’s assume that Twitter will lose around 25% of its advertising revenues.

In this case, Twitter would only need to increase the number of verified users from 424,000 to 12.2 million. This implies that around 6% of Twitter users would need to become verified to replace a 25% advertising revenue shortfall. That is still a very high number, but it is not outside the realm of possibility.

Yet it seems like selling blue ticks is only the beginning of Musk’s plans. In a short video released by the company, Musk and his team meditate on the idea of micropayments for paywalled content. Basically, the team are considering whether users might pay a small access fee — in the video they suggest ten cents — for access to a paywalled article at a major media publication.

While the idea is interesting in and of itself — it could have a profound impact on the online media ecosystem — it raises the larger question of whether Twitter might aim to become a payments app. If users needed to upload Twitter credits — ‘blue bucks’ or even ‘cluck bucks’, perhaps — then Twitter will probably need a banking licence. Were this to occur, it is not hard to imagine Twitter transitioning to become an integrated payments and social media app similar to WeChat.

This may be the direction Musk wants to take the company. It would also render Twitter completely resilient to attempts at blackballing it. In fact, if Musk were to turn Twitter into a Western WeChat, it could end up being Twitter that wields market power over other companies, not vice versa.

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Dougie Undersub
Dougie Undersub
28 days ago

As we saw with the launch of GB News, these large advertising companies seem quite happy to adopt the role of global arbiters of acceptable opinions.
I’ve trained myself to screen out all advertising, whatever the medium. I literally don’t notice it anymore. Perhaps we could all do it.

Steve Murray
Steve Murray
28 days ago

Indeed. I either record programmes on tv and skip the ads, or just pause for a short while and skip the ads that way. I find them literally intolerable to watch.

Online, a decent free ad-blocker works in most instances, and can easily be turned off/on for any important sites that don’t work with a blocker. Using a blocker can slow some sites down too but it’s a small.price to pay.

Rory Ferguson
Rory Ferguson
27 days ago
Reply to  Steve Murray

uBlock Origin if anyone is wondering.

Peter Johnson
Peter Johnson
28 days ago

Some of these advertisers are quite vulnerable to a backlash. In the US the right wing is much more mainstream and organized than other countries. So – for example – Disney lost millions of subscriptions over unwisely preaching about voting requirements (the horror of asking for ID). While some manufacturers are hard to target due to the number of products – others like General Motors should be careful.

Peter Joy
Peter Joy
27 days ago
Reply to  Peter Johnson

Well, speaking for myself, Unilever, Gilette, Paypal, Barclays and a host of other neoliberal Corporates are still paying a few pounds every month for their support for extreme Left political causes.
Almost every ad I see now – TV, online or poster – is so jammed with sickening and predictable woke tropes, the only effect is to make me make a note never to buy from them ever again.

Geoff Cooper
Geoff Cooper
27 days ago
Reply to  Peter Joy

Yep, me too. Nothing Gillette again. Never – ever.

Richard Calhoun
Richard Calhoun
28 days ago

When those using twitter without a blue tick are faced with having to decide whether to subscribe I believe many will do so if it’s only $8 per month … it is an excellent platform to access all your #MSM.
It’s the route to independence from the Corporates who seem to wish to control the way we lead our lives
I wish Mr Musk good luck!

N Forster
N Forster
28 days ago

Well, we now need a free speech replacement for Paypal, a business Musk understands well. So becoming a payment app would be great. I’d sign up now that I’ve cancelled Paypal.

J Bryant
J Bryant
28 days ago

yet many users have found themselves rejected with no explanation despite meeting the explicit requirements of the verification process.
I’d guess the legacy Twitter employees are trying to hamstring Musk’s revenue source.

Aaron James
Aaron James
28 days ago

This is nothing to do with Elon and his goal for Twitter –

Twitter is to become his ‘Everything’ Site.

Pay your bills, give a couple bucks to your kid, to a friend, get some guy to mow your grass, call a taxi, rent a lakeside cottage, buy car insurance, have a family get together in an app, set an appointment for the car oil change, give a homeless guy a dollar, look for a date….

He plans for twitter to be your phone’s interface with the world. The fossil Alphabet, Meta… they are to become the Xerox and Kodak….It is going to be Musk World – and Twitter is his play to do it. A nightmare plan…but one who is ready – the Nu world is like ‘Highlander’ at the end there can only be One.

Peter Johnson
Peter Johnson
27 days ago
Reply to  Aaron James

Yes – he has already publicly talked about an everything app called “X”. There definitely is a market for a politically neutral payment app. I just cancelled PayPal due to their conceit that my politics are any of their business. We hear that Visa and Mastercard are being asked to start tracking and reporting on gun purchases, carbon footprint, etc. That is terrifying.

Peter Joy
Peter Joy
27 days ago
Reply to  Aaron James

All the features you describe are available on other platforms already. Why does this become a techno-dystopia nightmare only when someone who isn’t a Neoliberal Rainbow LGBTQPZMAP++?? owns the business?

albert lucientes
albert lucientes
28 days ago

He is just so the wrong kind of person to own a company like Twitter. He paid a fortune for it. Was literally forced to buy it, bc he makes dumb and impulsive moves sometimes. Selling blue ticks will turn them into a badge of how dumb people are and defeat their entire purpose. Thanks, but I rather give $100. a year to some homeless family than to pay for digital flair to prove its really me. Its as absurd as how he bought the company. Now anyone can buy one and parody anyone else. He’ll lure some of those advertisers back. Obviously, as he has no problem with censorship provided the person being censored is someone he wants silenced. He’s shown that again and again. Listen to the Project Veritas Zoom call, at abt 5 mins in, he starts speaking about ‘free speech vs limited reach’ – That ‘ltd reach’ means echo chambering, i.e, censoring content they dont want getting out. He has too much of a VC mindset to run a company like Twitter. So, he’ll fold to the establishment, and turn it into a crappy place to work. With what he paid, there must be some massive interest payments. All I can see him doing is finding ever more ‘creative’ (destructive) ways to monetize and monetize some more. Maybe a paywall? An annual subscription? And people will just stop using it. The censorship we were all against will persist, one way or the other. Which is why speaking out individually is what’s most important. No oligarch is coming to rescue us.

Richard Calhoun
Richard Calhoun
28 days ago

Who are you to decide what ‘kind’ of person should own twitter … if he’s got the $ and there is a willing seller who’s to say no?

Doug Pingel
Doug Pingel
28 days ago

On a public patform there is always, in extremis, a need for some form of censorship unless you (and that means YOU!) are willing to underwrite the platform owners liabilty for libel, etc. There will always be the angry fool who oversteps the mark and there will always be (even in the UK) the extreme litiginous (creep, pr1k, etc) or even just someone who fancies a payday, instructing council.

Peter Johnson
Peter Johnson
27 days ago

Jeff Bezos and his counterparts at Apple and Google decided to destroy Parler at the request of the Democrats – so they are much worse. At least if Elon turns evil like them – it will be an amusing impulsive kind of evil – not the plodding boring suck up to progressive politicians kind of evil we have grown used to in Big Tech.

Jerry Carroll
Jerry Carroll
27 days ago

When were you fired by Twitter, or was it Meta?