Even within the nimble tech sector, Twitter was ahead of
the curve in responding to the COVID-19 crisis. Before some other companies flinched, it was telling employees to stay home and shifting its platform’s focus to the pandemic.
Now,
analysts fear that Twitter’s newly revised guidance might be another harbinger of things to come for the broader industry.
At the very least, it’s “one
potential early sign of the tough times to come for digital advertising,” according to Eric Haggstrom, forecasting analyst at eMarketer.
From the first quarter of 2020 to the same period
in 2021, Twitter previously told investors to expect total revenues to grow somewhere between 4.8% and 12.5%.
This week, however, the mobile giant said it was now expecting a slight decline in revenues year-over-year.
Offering a glimmer of hope, Haggstrom said Twitter’s adjustment does not guarantee a dismal ad market
moving forward.
Rather, “What Twitter’s updated guidance means for the broader digital ad market depends on how much of the social platform’s decline is due to shrinking ad
budgets and dollars disappearing from digital entirely,” he suggested in a new note to clients.
“It also depends on how much is due to a shift in spend away from Twitter and toward
other digital channels that are viewed as more essential,” according to Haggstrom.
Platforms deemed “more essential” to advertisers than Twitter is will likely see lower
percentage declines in ad revenues, he suspects.
However, dollar declines among these more essential platforms may be larger, simply as a result of their sizes and larger shares of media
budgets, Haggstrom added.
Haggstrom chose not to identify those potentially more “essential” platforms by name, but there is little doubt that Facebook’s flagship app and
Google’s YouTube are on that list.
While it might serve as a canary in the coalmine for the industry, it is worth noting that Twitter makes up a small percentage of the digital ad
market, and, by Haggstrom’s calculations, has even lost domestic digital ad market share in recent years.
Looking ahead to the third and fourth quarters, Haggstrom is also hopeful that
Twitter and the broader industry can be resuscitated.
Added Haggstrom: “Ad spending is seasonally stronger in [the second half of the year], so a turnaround late in the year would have a
disproportionate effect on maintaining ad spend growth.”