Why Tesla's U-Turn on Advertising Matters

“Brand decides to advertise” might seem like an unusual headline, it’s one that’s taken over the business press following Tesla’s annual shareholder meeting in Austin, Texas. That’s because after two decades eschewing conventional advertising in favor of word of mouth, emails, incentivized referrals, and a front-facing founder and chief executive in Elon Musk, the brand has decided to give it a go. What Marketers Expect From Elon Musk’s ‘Best Hope’ Linda Yaccarino at Twitter Musk—who famously tweeted “I hate advertising” in 2019—underscored the irony that Twitter, which he acquired for around $43 billion in October, is reliant on advertising dollars to stay afloat. “Here I am, never used advertising really before, and now have a company that’s highly dependent on advertising,” he elaborated. “So, I guess I should say advertising is awesome, everyone should do it!” Musk said Tesla ads would highlight features and functionalities unknown to mainstream audiences. In a post-event interview on Twitter Spaces with CNBC, he added said Tesla would be interested in running ads that were “informative and entertaining” as well as aesthetically appealing. “It needs to be something you don’t regret watching after it’s done," he continued, adding: “I only just agreed to it, so I don’t yet have a fully formed strategy.” After plunging nearly 70% in 2022, Tesla shares have clawed back some ground in 2023. However, brand perception and favorability are declining in the wake of Musk’s chaotic Twitter takeover. According to Morning Consult Brand Intelligence, just 13.4% of U.S. adults had a favorable view of Tesla in January 2023, a 15% drop on 2022. For Richard Exon, founder at London-based indie agency Joint, it’s telling that Musk’s U-turn drew such an enthusiastic reaction from Tesla shareholders. Investors are looking to Musk for a plan after the business posted its lowest quarterly gross margin since 2020 in April. “Modern investors know that advertising done well is an investment with provable ROI in both the short and the long term,” Exon said. “And of course, it’s no coincidence that four of the world’s biggest ad spenders today—Amazon, Alphabet, Alibaba and Meta—are late 20th century tech startups that, like Tesla, grew hugely successful businesses before spending money on paid-for promotion,” he added. “All of these businesses succeeded in growing very large user bases by offering something new, different and better by making maximum use of—and thereby accelerating—emergent technologies.” What might a Tesla ad look like? Though a global economic downturn is pushing ad budgets down across the board, auto companies remain some of advertising’s biggest spenders, funneling money into spots that showcase their latest models and transition to electric vehicles. According to media investment firm Magna, General Motors, Hyundai and Kia increased their marketing spend in 2022. Over the same period, Ford’s annual report revealed it spent $3.1 billion on advertising last year compared to Tesla’s $0. For now, it's unclear what a Tesla ad campaign might look like and where it might run, but Twitter—which has lost more than half of its top 1,000 advertisers since Musk took over—would be the obvious choice. Yvonne O’Brien, chief marketing officer at insights platform Zappi, said it was only a matter of time before Musk's advertising opposition came to an end. "To date, Tesla hasn't needed Super Bowl or indeed any other ads as demand has consistently outstripped supply," O'Brien said. "However, greater pressure from existing competitors—most of which devote much of their advertising spending to electric vehicles—coupled with the volatility of today's consumers will likely have made Musk reconsider the value of advertising in generating sales." She's curious to see what a Tesla ad might look like, but is betting it will be "innovative, forward-thinking and mission-driven with a captivating visual identity." Apple and Amazon Lead Global Brand Value Research While Tesla Has Greatest Momentum Joint's Exon said the brand should glean some lessons from Amazon. "The best advertising campaigns keep existing users enthused about a brand whilst simultaneously attracting new users and communicating new services and propositions," he explained. "Amazon is one of the best in the world at this, and if I were Musk I’d follow a similar path. Tesla shareholders would be sure to approve." Musk has had a busy seven months since snapping up Twitter. As well as cutting thousands of jobs and losing major advertising deals, he's relaxed guidelines around misinformation, welcomed back Donald Trump and tweeted his own political views. That prompted some Tesla owners to announce they were getting rid of their vehicles and potential customers to boycott the brand. Longtime NBCUniversal ad sales chief Linda Yaccarino was named Twitter’s new CEO on Friday, succeeding Musk, who will take on the role of chief technology officer and executive chair.

Automotive Advertising News

Long Averse to Advertising, Tesla Takes a U-Turn. Here's Why It Matters

Elon Musk is ready to 'try a little advertising' after avoiding it for two decades

Rebecca Stewart

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