The future of Twitter's main revenue driver — advertising — may have been in question long before Elon Musk entered the picture. 
Even before Musk began his dramatic effort to take over the social media giant, several agencies noted a lack of interest in the platform's advertising products. Twitter is best known for bringing awareness to brands or highlighting big cultural moments, explained Danny Weisman, the group media director at the Noble People media agency. As companies tighten their budgets in advance of a possible recession, they want to make sure their ads lead to direct sales, known as performance marketing.
Twitter just hasn't been able to prove impressive returns on investment on that front, especially after Apple's privacy changes weakened a third party's ability to get user data. 
"I honestly haven't considered the Musk stuff in regards with my brands, but haven't run on Twitter for a little bit," Weisman said. "In general, I haven't thought of it as a performance marketing platform." 
Musk adding "tension" hasn't helped the situation, said Doron Gerstel, CEO of the ad tech company Perion. Some, like agency R/GA, have noticed about a 15 percent pullback in advertising dollars spent with Twitter since the Musk saga began, as brands flock to platforms that appear more stable, like TikTok and Snap. 
"The reactions and feelings expressed from inside Twitter (from people on the ad side) have ranged from confusion to downright anger at leadership for their lack of control," said R/GA global head of media and connections Ellie Bamford via email. "Past months have also seen nervous conversations between brands and Twitter, with so much in flux and the uncertainty over what the platform would look like come Musk's reign."
Twitter is slated to report its latest quarterly earnings before markets open on July 22. Over the last few years, the company has been working to improve its direct sales advertising products by improving measurements, fixing infrastructure to increase speed, and preparing for privacy-focused changes in the industry. It's also recently expanded shopping options through partnerships with companies like Shopify and added tools like a campaign planner that can help predict how successful ad campaigns will be with a given budget.
"We are working closely with our clients and partners, who can continue to expect our best-in-class customer service, client solutions, and commitment to brand safety," a Twitter spokesperson told Cheddar News. "We remain focused on delivering priority solutions in areas such as performance marketing, measurement, shopping, brand strategy, and more."
Advertising accounts for about 90 percent of Twitter's revenue. As of the first quarter of this year, eMarketer projected that the company would earn about $3 billion in ad revenue. Compare that to Instagram, which is expected to take in a whopping $30 billion alone. Even relative newcomer TikTok could hit nearly $6 billion in advertising sales this year.
Digital advertising as a whole, while expected to reach $165.5 billion in U.S. revenue in 2022 according to PwC and the IAB, isn't growing as fast as it used to. In 2020, the industry grew 12.2 percent year over year. This year, that's expected to come in around 8 percent, in light of issues like impending regulatory action and competition in the space. Projections may shift lower if a recession occurs.
The controversy about toxic environments and bots has long been an issue for Twitter, even before Musk questioned the company's assertions that only 5 percent of its userbase is fraudulent, said Perion's Gerstel. While Twitter has tried to address the issues, it hasn't been enough to convince many companies to spend more on ads, especially with increasing competition from other social platforms, streaming, and other outlets.
"Twitter comes up in every media [ad buy] conversation," Gerstel said. "I would say in a lot of cases, it's being rejected. The advertisers, they don't want their brands associated with controversy [regarding negative content on Twitter]."
Without a different plan to come up with a new revenue stream, like what Musk may have brought in, Twitter’s days of relying on advertising dollars may have been numbered regardless.
"They're almost in limbo," Noble People's Weisman said.
Updated July 15, 2022 at 3:43 p.m. ET to add second to last paragraph.