The coronavirus pandemic has made Twitter more valuable than ever to its users. But that spike in interest isnt doing anything for Twitters ad business, which is in free fall because of the pandemic.
You can expect to see that story unfolding throughout the media business in the months to come.
Here are the numbers: Twitters daily usage has jumped by 23 percent this year as people flock to the service, over and over, to keep track of whats happening. But the companys revenue may have dropped by 20 percent in March as advertisers cut back on spending or perhaps stopped spending altogether.
Its always been obvious that the pandemic would hit media companies, because the pandemic is hitting every part of the economy. And advertising dollars, the thing that sustains many media companies, are often cut first as companies contract in bad times.
On Monday, Twitter told investors it no longer believed in the projections it had provided to them in early February, leading Wall Street analysts to do some back-of-the-envelope math and come up with that estimated 20 percent drop in revenue. So Twitters sort-of announcement about its decline reads as an official warning to the rest of the industry about how quickly things have deteriorated.
Its also a reminder that even though people are spending much more time with social media, news sites, and TV networks, those spikes in traffic and usage arent going to help if advertisers arent paying to reach those people
Twitter is one of two big media (or at least media-ish) companies to tell Wall Street that the pandemic has already hurt their ad business. The New York Times gave out its own warning earlier this month, noting that ad revenue was going to drop in the mid-teens in the first three months of this year, though its subscription business seemed okay.
But you will see many more.
The implication is that marketers are cutting spend across the board, RBC analyst Mark Mahaney wrote in a research report Monday night. Want another datapoint? Type Las Vegas Hotels in your Google search bar. Were seeing zero paid ads. Cant recall ever seeing that.
Alphabet, Googles parent company, never gives out projections to Wall Street, so it wont have to walk it back like Twitter just did. Ive also asked a Facebook rep if the company plans to provide an update on its finances but havent received an on-the-record response.
But its quite likely that both companies will see material drops in their ad business, in part because of the nature of the way their ad business is built. Its very easy to buy Google and Facebook ads, and its very easy to stop buying them.
Given the sheer size of digital ad spending in todays marketplace (i.e., more than 50% of all ad spend is now digital), we would expect other digital platforms to see significant deceleration in ad revenues in the coming months, MoffettNathanson analyst Michael Nathanson wrote in a report Tuesday morning.
On the other hand, Google and Facebook are likely to come out of the pandemic in much better shape than the rest of the media business, due to their enormous size. A smaller Facebook and Google are still very, very big.
Traditional media companies, which were already losing money to digital ad platforms to Google and Facebook, that is are in real trouble, though. Local news outlets, which were already under enormous pressure, may not make it out at all. And while big TV networks are more protected, in part because advertisers make commitments to buy from them many months in advance, they certainly arent shielded.
And thats just for right now: As the pandemic drags on, we will see more reasons for advertisers not to spend money, like the now-officially suspended Tokyo Olympics, the up-in-the-air Democratic and Republican conventions, and the who-knows-what of the presidential campaigns themselves, which were expected to generate enormous ad buys over the summer and fall.
