Twitter ‘rudderless’ as Musk saga hurts advertising business
Twitter is struggling with staff departures, falling morale and reduced spending by marketers as Elon Musk’s on-off pursuit of the social media company hits its $4.5bn-a-year advertising business.
Company insiders, former staffers and ad industry executives have told the Financial Times that chief executive Parag Agrawal is leading an increasingly fraught effort to keep the company running smoothly amid a legal battle to prevent Musk from backing out of a $44bn deal to acquire Twitter.
Agrawal has sought to spend extra time with advertisers in recent months to answer their mounting concerns, according to multiple people familiar with his thinking.
That effort comes as the San-Francisco based group blamed “uncertainty” over the Tesla chief’s takeover and a slump in digital ad spending as among the reasons that revenues fell in the second quarter.
Tensions between staff and Twitter’s leadership have grown since Musk’s initial takeover bid in April. The company laid off about 30 per cent of its talent acquisition team in early July. That followed its decision in May to implement a hiring freeze and cost-cutting measures. On Tuesday, Twitter said it had “significantly slowed hiring” in the second quarter and had seen “our attrition rate increase”.
“Everyone’s given up on leadership,” one senior Twitter employee said, speaking on condition of anonymity. “It seems like Twitter’s take is ‘This man is awful [but] he should run the company’. Either way it seems like the loser gets Twitter.”
The disruption is hurting Twitter’s primary source of revenue: its advertising business.
Some advertising executives are warning that the appetite to allocate digital ad spend to the social media company will wane, concerned a messy legal battle against Musk will distract management, hampering product development — and further thinning its ranks as key employees move on.
Twitter is “appearing a bit rudderless”, said a former Twitter executive. “It is hard not to be a little sympathetic, as nothing is of anybody’s choosing, forced to do what they didn’t want to do by a rich guy’s whim.”
The company’s costs rose 31 per cent to $1.52bn in the three months to the end of June. In that period, more than $33mn was spent on issues related to the Musk acquisition while severance-related costs were about $19mn.
“Twitter is suffering,” said Ed East, chief executive of creative agency Billion Dollar Boy, which makes advertising for brands on social media. “The ongoing Elon Musk saga has created a lot of uncertainty about the platform.”
East added that his company has estimated a 14 per cent drop in the overall volume of creator advertisements on Twitter since May 13 — the day that Musk announced he was pausing the deal.
Another advertising agency executive said they had already noticed staff leaving Twitter’s advertising sales team in particular, although several others noted that all of its senior ads leaders were still at the company.
Regardless of the Musk effect on Twitter, advertisers are tightening their belts amid a wider slowdown in digital advertising. Inflation and supply chain woes are hurting companies, while consumers emerge from pandemic lockdowns, spend less time online and get more particular about discretionary spending.
Analysts said Twitter’s reputation for having a sluggish pace of product innovation, and a thinner advertising offering versus competitors such as Instagram, leaves it more perilously exposed.
“It’s always underperformed relative to peers in terms of revenues and users,” said Jasmine Enberg, principal social media analyst at Insider Intelligence. “If it hadn’t been so distracted by the Musk saga it probably could have addressed these concerns.”
Rivals such as Facebook, TikTok and Google “will take [market] share from Twitter in the next few months”, predicted an advertising agency executive. “There won’t be new ad products, people will leave. Others will start stealing business.”
They added: “It’s a sad indictment on the board and management. They got a good offer — [but] management and the board presented no countering vision in the absence of Elon. They had no plan B. I’m personally wondering whether Twitter will survive all of this.”
Twitter said the company was focused on “delivering priority solutions in areas such as performance marketing, measurement, shopping, brand strategy and more” and remained committed to “brand safety” — ensuring adverts did not run alongside toxic content.
Inside Twitter, where the office walls are decorated with neon signs of inspirational phrases such as #lovewhereyouwork, many staffers said they had been left confused by the company’s legal approach — which, if successful, would mean it is eventually owned by a person who does not appear to want it.
For those who remain at Twitter, the group’s falling share price since Musk began attacking it may give less of an incentive to stay, given stock is a core part of employee remuneration.
Twitter said: “Our attrition is slightly higher than best practice for normal macroeconomic times, but remains in line with current industry trends.”
An employee added that some staff were increasingly afraid to speak out on public channels such as the internal Slack messaging board as it had become actively discouraged by management — instead moving to discuss the Musk saga in private messages on apps such as Signal.
“We get asked about our end of year goals when we have no idea what state the company will be in. It’s laughable,” the person said. “There’s been a failure to truly acknowledge and address the crisis that we are in.”
Additional reporting by Patricia Nilsson in London