Musk’s Twitter acquisition could increase Facebook, Google, Snap ad revenue

The logos for Google, Facebook, Instagram, Twitter, Snapchat and TikTok are displayed on a computer screen.

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Elon Musk’s private takeover of Twitter could increase advertising revenue for YouTube, Snap, Facebook parent company Meta and TikTok, analysts from several Wall Street firms said in recent notes to investors.

Twitter, which announced that it accepted Musk’s bid on Monday, has heavily relied on ad sales, which accounted for $ 1.41 billion, the bulk of its revenue, in the most recent quarter.

But Musk could take the business in two ways that could potentially pull advertising dollars away. The outspoken Tesla and SpaceX CEO have argued that freedom of speech is crucial to the platform, which may mean less moderation of content. Brands that do not want their content to potentially appear next to misinformation or hate speech can pull their consumption, JMP analysts said in a note Tuesday.

“With ~ 85% of Twitter’s revenue generated through brand advertising, and since freedom of speech is a priority for Mr. Musk, advertisers can shift budgets to other channels due to fire safety concerns,” JMP analysts wrote. It could help YouTube, Snap, Meta and TikTok, the company said.

Content moderation is not something that Madison Avenue has taken lightly in the past. As part of the “StopHateForProfit” campaign against Facebook in July 2020, major advertisers from Unilever to Starbucks announced various breaks in spending. In 2017, brands like Coca-Cola and Microsoft withdrew advertising spending from YouTube due to incorrect placement of ads next to extremist content.

Musk has also shown interest in building the company’s subscription model, which would include fewer ads.

“Everyone who signs up for Twitter Blue (ie pays $ 3 / month) should get an authentication checkbox,” Musk said in a now-deleted tweet. “And no ads. Companies’ power to dictate policy is greatly enhanced if Twitter relies on advertising money to survive.”

That would potentially benefit smaller players like Pinterest and Snap, MKM analysts wrote in a Tuesday note.

Likewise, Evercore analysts said Monday that there is a “special opportunity” that marketers are taking their campaigns to platforms like Reddit, Google, Meta, Snap and TikTok.

Stifel analysts reiterated this sentiment. “If Twitter were to completely leave the advertising industry, we would consider it a bit positive for the rest of our coverage, as the approximately $ 7 billion in ad dollars that Twitter was likely to generate in 2023 would shift to others. platforms. ” said Stifel in a Monday note. These ad budgets are likely to shift to other platforms like Snap, Pinterest and TikTok, the company said.

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