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Luring brands back to Twitter

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2023-07-26

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X Corp is making strategic moves to lure brands back to its social media platform under the ownership of Elon Musk, and one of its key tactics is offering substantial discounts on ad prices.

Previously known as Twitter, the social network is now determined to attract advertisers with new incentives for specific ad formats in the U.S. and U.K.

In a bid to encourage higher ad spending, the company is also cautioning brands that they risk losing their verified status unless they meet certain spending thresholds. According to reliable sources who have seen emails sent to advertisers and shared them with The Wall Street Journal, X Corp. is facing difficulties in securing new ad commitments since Musk took over due to concerns surrounding his management style and content moderation approach.

The advertising industry's current slump has also driven several media companies to offer discounts to brands, adding to the challenges faced by X Corp.

This week, X Corp. launched a compelling offer, giving select advertisers reduced pricing on video ads that are featured alongside a list of trending topics in X's "Explore" tab. This strategic placement provides brands with prime 24-hour visibility atop the site's trending topics list.

Among the attractive discounts extended is a generous 50% off any new bookings of these video ads, but advertisers need to act fast as the offer stands until 31st July. One of the emails explained the rationale behind the discounts, stating, "The goal of these discounts is to help our advertisers gain reach during crucial moments on Twitter, such as the Women's World Cup."

X Corp. also issued a warning to advertisers, notifying them that commencing 7th August, brands' accounts may lose their valuable verification—a highly sought-after gold checkmark signifying an authentic representation of their brand—unless they reach a minimum ad spending threshold. Advertisers must have spent at least $1,000 on ads in the previous 30 days or a total of $6,000 on ads in the previous 180 days to retain their verified status. These measures were outlined in an email sent by X Corp. to advertisers.

Verification holds significant importance for many companies as they seek to protect their brand integrity, particularly given the risk of bad actors impersonating and misrepresenting their brand. During the initial weeks of Musk's ownership, the platform faced challenges with accounts posing as reputable brands, such as Eli Lilly, who tweeted about providing free insulin. Subsequently, Twitter implemented enhanced safeguards against impersonation to address these issues.

In the face of adversity, Musk recently acknowledged a "~50% drop in advertising revenue" at X Corp., which has led to negative cash flow. To chart a path towards recovery, he appointed Linda Yaccarino, the former head of advertising at NBCUniversal, as X Corp.'s new chief executive with the explicit mandate of revitalising the platform and regaining the trust of brands.

Musk's optimism regarding the company's potential for positive cash flow soon stems from his determination to reverse the company's financial trajectory. Prior to his takeover, Twitter experienced years of losses and took on substantial debt as part of the acquisition deal.

While this is not the first instance of the platform offering ad discounts to boost revenue, X Corp. previously extended significant incentives around the Super Bowl—the company's largest ad revenue generator—according to previous reports by The Journal.

While some brands, including Mondelez International, have returned to advertising on the platform, many others remain cautious, as indicated by ad buyers cited by The Journal.

At a recent Journal event during the Cannes Lions ad festival, Doug Rozen, CEO of Dentsu Media, Americas, revealed that his agency's spending on Twitter has declined by about 70%.

Nonetheless, there is hope among ad buyers that Yaccarino's appointment will restore stability to the platform. Her understanding of the critical role of content moderation for advertisers has generated optimism. Christina Hanson, CEO of ad-buying agency OMD USA, expressed confidence in Yaccarino, stating, "She is a known quantity in terms of understanding brands," during the Journal event.

Some advertisers have reported challenges when working with Twitter. For example, on 1st July, the company limited the number of posts users could read—an effort Musk said was intended to prevent other companies from scraping the platform for data. Twitter later clarified that the change was temporary and eased the restrictions shortly after.

However, the impact of this change was immediately felt across the advertising industry, resulting in fewer users seeing ads and a subsequent rise in ad prices. According to one ad buyer, their agency experienced an almost 15% increase in ad prices during the transition period.

Another ad buyer noticed a decrease in ad engagement initially, although the company later stated that the overall impact on advertising was minimal.

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