Twitter’s Elon Musk saga continues, and there are signs that the longer it drags on, the more brands will be weary of committing big ad bucks to the platform. Over the summer, some brands even retrenched from the service, including Kraft Heinz, Disney, Verizon and Nestlé, vastly reducing advertising on Twitter.

Top advertising executives told Ad Age that Twitter is struggling while it fights to close its deal with Musk. And Musk is very much considered a wild card who could scare off advertisers that could look to cut parts of their budgets in anticipation of leaner economic times, anyway. Some brands have already limited Twitter ad campaigns, according to data from Pathmatics, the digital ad analytics platform. For instance, from June to September this year, Verizon spent $2.5 million on Twitter ads, compared to $7.9 million in the same period in 2021, according to the firm. Pathmatics data is by no means a full picture about the state of Twitter's ad business, and there are positive indicators, too, including brands that have ramped up spending.

A person familiar with Verizon’s media plan said the pullback was partly affected by Twitter’s spat with Musk. “Verizon did cut their spend and a lot of brands definitely pulled back,” said the ad exec, who spoke on condition of anonymity. “Brands started putting more money into TikTok, and that’s been a switch for a lot of them, because there has been this big unknown with what’s going on at Twitter.” A Verizon spokesperson did not return a request for comment.

The Twitter turmoil has become one of the biggest stories in advertising. The prospect of the dynamic billionaire owning the influential platform was first met with some excitement that perhaps he could energize interest in the service. But Musk’s takeover attempt has become more of a circus attraction, and it’s undoubtedly affected Twitter’s work.

This weekend brought a fresh example of how social media, celebrity, politics and hateful content play out in bizarre ways on Twitter, and Musk always seems to find his way into the scrum. On Saturday, Musk tweeted to Kanye West, “Welcome back to Twitter, my friend.” West had just been restricted from Instagram, for unspecified content violations, and seemed to want to pick up his social media activity on Twitter. The famed artist was quicky penalized on Twitter, though, after tweeting that he would go “death con 3 on Jewish people.” The oblique tweet continued: “You guys have toyed with me and tried to black ball anyone who opposes your agenda.”

Claims of Jewish-controlled conspiracies are hallmarks of Anti-Semitic tropes. Musk tweeted at West before the artist sent his offending message. The whole incident was a reminder of why brands have asked all internet companies for a clear accounting of offensive speech within their services. Advertisers worry that permissive attitudes toward certain speech could degrade the quality of any platform. “The fear is it becomes a giant version of Truth Social,” said one advertising executive, who has been following Musk’s interest in Twitter. Truth Social is the public messaging app backed by former President Donald Trump. “It’s not about conservative trolls or liberal trolls,” this ad exec said. “The fear is that it just becomes so politicized, that it becomes a lightening rod that brands don’t want to be next to.”

A Twitter spokesperson declined to comment for this story.

How Musk approached Twitter

In January, Musk started to scoop up shares in Twitter, eventually amassing 9% of the company. By April, Musk was talking with Twitter leadership, including Jack Dorsey, its co-founder, about taking a seat on the board. Musk indicated he wanted to use his newfound influence to introduce more permissive policies. Musk disagreed with Twitter’s moderation rules, which he considered anathema to unfettered speech. For many, this sounded like it could allow more trollish behavior on the service.

In April, instead of just taking a board seat, Musk said he would buy the company and take it private, with a $44 billion offer. The $54.20 share price proposed by Musk was about $10 more than Twitter’s shares commanded prior to the offer.

By July, Musk got cold feet and said he was backing out of the deal. Twitter sued Musk to enforce the deal, and the sides are currently trying to work it out in court.

Why advertisers were concerned about Musk

Musk does not like advertising, which is obvious from how he runs Tesla, notorious for avoiding advertising. Private messages that have come out in his court battle with Twitter reinforced that disdain. In one exchange, Musk’s brother, Kimbal Musk, said: “I hate advertisements,” as the two discussed ways to monetize Twitter that could dislodge the business model from brands.

Read more: Inside Elon Musk’s text messages

“It doesn’t bode well,” said one ad agency executive, who spoke on condition of anonymity after reading Musk’s texts. “They suggest they don't want an ad business anyway.”

“Musk is clearly hostile to advertisers,” said Noah Mallin, chief strategy officer at IMGN Media, a media and tech company.

Twitter’s nearly $4.51 billion in ad revenue in 2021 made up the vast majority of its $5.08 billion in total revenue.

Musk, with 108.2 million Twitter followers, showed he could instill chaotic energy into the platform, and that brands needed to be on their toes. In late April, Musk started tweeting about brands like McDonald’s and Coca-Cola: “Next, I’m buying Coca-Cola to put the cocaine back in,” Musk tweeted.

Brand safety questions

What really alarmed advertisers, though, was Musk’s proposed moderation policies. Major brands have been working with social media platforms, including Twitter, YouTube, Meta, Reddit, TikTok, and more, to establish brand safety guidelines. The work has been met with varying degrees of success, but it was meant to set up rules around what constitutes harassment, hate speech, violence and misinformation online. Groups like the Global Alliance for Responsible Media, a part of the World Federation of Advertisers, have conferred with the social platforms to enforce new brand safety standards. In July 2021, Twitter showed how it was willing to adopt industry standards by conceding to an audit program through the Media Rating Council that could verify its adherence to brand safety policies.

Brands have been worried that Musk would undo the work. To add to that perception, Twitter has had two setbacks in recent months. First, there was whistleblower Peiter Zatko, who worked on cyber security at Twitter and publicly disparaged the platform. Zatko made claims about bots—automated accounts—running wild on Twitter, which was one of the excuses Musk has made for why he should be allowed to exit his deal. Musk claimed that there were more bots on Twitter than he previously understood, even though he repeatedly has spoken about the issue of bots as one of the problems he wanted to tackle if he bought Twitter.

The second recent setback at Twitter came late last month, with a report that illicit accounts were sharing links to content related to child sexual exploitation. Reuters reported that ads from major brands were appearing on the profile pages of accounts that posted the illegal links. The ordeal sullied Twitter’s reputation with advertisers. Multiple advertisers paused spending on Twitter while the platform sorted the issue, according to multiple ad agency executives. “We’ve already seen a dozen advertisers pull out because of that and I suspect more will follow,” one top marketing exec told Ad Age.

Twitter advertiser trends

Even before the problem with illicit links, there were signs that some major brands decreased advertising on Twitter, according to Pathmatics. Kraft Heinz, for instance, spent $14 million on Twitter ads from June to September 2021; it reduced its spending to $2.4 million in the same four-month period this year. Nestlé, which spent $7.8 million from June to September in 2021, reduced its spending to about $829,000 during the same months of 2022. Kraft Heinz and Nestlé spokespeople did not return requests for comment. 

Still, Twitter has thousands of advertisers, and many brands increased spending in that time period, including Meta, Apple, HBO, Hilton and IBM. It’s hard to analyze the patterns of how brands shift their digital ad money, which depends on the overall economy, product cycles and other factors.

In total, Pathmatics found that among its top 5,000 advertisers, Twitter’s ad revenue was fairly stable. From June to September of 2021, Twitter’s top 5,000 advertisers spent $437,752,556 compared with $438,474,135 this year.

One ad agency exec said that Musk’s shadow hangs over advertisers as they strategize for the coming holidays and into 2023. Brands could be looking to cut spending, and ongoing court drama, or uncertainty about ownership, could make it easier for brands to trim Twitter. “If there needs to be tradeoffs in advertising, and there is a lot of noise about this one social media platform, brands could just pull their money,” the ad exec said. “It makes it easier in a downward economy to pull Twitter.”

Similarweb, an internet traffic analytics firm, said that it has detected a slowdown in usage of Twitter’s self-serve ad portal, which could suggest lower advertiser demand. Traffic to Twitter’s online ad portal in September was down 11% from a year earlier, according to Similarweb. The firm said that Meta's Facebook and Instagram had similar slowdowns, while TikTok’s ad portal traffic was up 51.1% year over year.

User traffic to Twitter was up, though, according to Similarweb, with 6.8 billion visits in September, up 4.5% year over year.

Inside Twitter’s team

The Musk drama has been a drain on Twitter; CEO Parag Agrawal noted the distraction Musk had been causing in a private text to the billionaire. In April, Agrawal texted Musk: “You are free to tweet ‘is Twitter dying’ or anything else about Twitter, but it’s my responsibility to tell you that it’s not helping me make Twitter better in the current context. Next time we speak, I’d like to provide you perspective on the level of internal distraction right now and how it’s hurting our ability to do work.”

Twitter has publicly put on a brave face, and there has not been a mass exodus in its upper ranks. However, people familiar with Twitter’s teams, including on the ad sales side, said that there is unease within the company. Some ad agency execs said they have seen departures of sales reps who used to manage their ad accounts.

Last month, Twitter did lose popular executive God-is Rivera, the global director of culture and community, who left the company but has not yet announced where she is headed. Rivera has been credited with guiding Twitter’s values and principles. “I have no words, and a million words!” said Twitter Chief Marketing Officer Leslie Berland in a Tweet to Rivera. “You changed Twitter in a way that’s core and is now in our DNA.”

Read more: Twitter ad sales in disarray 

What’s next for Twitter

Twitter’s court case with Musk is still unsettled, even though it looked like a final deal materialized last week. Musk said he was ready to pay $44 billion to make good on his commitment to buy Twitter, and wanted to end the legal wrangling. However, the deal was delayed as Musk works out the financing.

The court case is on hold until the end of the month to give Musk time to complete the deal. Twitter shareholders want Musk to pay up—and $44 billion looks like a good value at this point. Since April, most of Twitter’s peers, like Meta and Snap, have taken financial hits. Snapchat’s share price is down about 70% in the past six months and the company is worth $17.4 billion. Meta is down about 40% in the past six months. Twitter’s value has held relatively steady because of the pending deal, with the shares now hovering a few bucks below the price Musk was willing to pay.

If Musk does take over, advertisers expect a much-changed Twitter with more lenient moderation policies.

As for Twitter employees, there could be concerns about job security. Other tech companies have made cutbacks while Twitter has been in limbo. Musk suggested in his private messages that there is a need to cut workers. In one exchange with prominent investor Jason Calacanis, the two analyzed how Twitter generates less revenue per employee than Google and Apple. “Insane potential for improvement,” Musk texted, indicating that the revenue per employee could improve by reducing staff. Calacanis then suggested a mandatory return to the office two days a week, which could lead to “20% voluntary departures.”