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.”