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Is Musk Using Cannabis to Prop Up Twitter's Falling Revenue  Or Is the Social Media Prohibition on Cannabis Advertising Starting to Fold?

Is Musk Using Cannabis to Prop Up Twitter's Falling Revenue Or Is the Social Media Prohibition on Cannabis Advertising Starting to Fold?

Twitter has become the first major social media platform to openly allow the advertisement of cannabis brands in Canada and the US. Is this a sign of desperation on the part of Elon Musk in the face of falling revenue, or is this a shrewd move that will spark a realignment of advertising spend that will force other social media companies to follow suit.

Ben Stevens, BusinessCann

15 March 2023 at 09:00:00

BusinessCann reports that since the new policy was announced last month, US brands have scrambled to be among the first to promote themselves on the platform, with many already planning to spend tens of thousands of dollars of their advertising budgets, and spending expected to increase in the coming months.

While the policy is currently limited to US and Canadian companies, a similar move from Google to relax advertising restrictions on CBD brands in January, 2023, has encouraged many to speculate that these could represent the first dominoes to fall in the near-blanket-embargo on social media advertising.

Despite the move being welcomed as a positive and hopeful step forward for the cannabis industry on both sides of the Atlantic, concerns have been raised that an underbaked ‘cash grab’ strategy will do little to deter bad actors, and could cause more problems than it solves.

Twitter’s changes

Twitter has long been an essential online meeting ground for cannabis advocates with AdCann, which first reported the news of Twitter’s changes, suggesting that the site had confirmed there were over 20 million tweets about cannabis topics last year, more than coffee, golf and the NHL.

Prior to the ‘relaxation’ of advertising restrictions last month, Twitter only allowed certain CBD and hemp products to be advertised in the US, as long as they made no medical claims and targeted users over the age of 21.

It has also allowed the advertisement of cannabis brands in Canada, which federally legalised cannabis for adult use in 2018, for some time.

On 15 February 2023, it announced that it would now allow advertisers in the US to ‘promote brand preference and informational cannabis-related content for CBD, THC, and cannabis-related products and services.’

In order to gain access to Twitter’s full suite of advertising options, cannabis brands will need to pass ‘pre-authorisation’ to ensure they are licensed to sell cannabis products in at least one US state and that they are a legitimate business.

Once passed brands will still be relatively restricted in what they can include in their adverts.

They will not be able to directly ‘promote or offer the sale of cannabis’, advertise in any jurisdictions in which they are not licensed, advertise to anyone under the age of 21, depict cannabis use or those under the influence of cannabis, or encourage transport across state lines.

They will however, be allowed to promote brand preference, informational content and provide a link to their website where sales can be made.

Real world impact

While many have celebrated the move as a major step forward for the mainstream acceptance of the cannabis industry, the real world impact of these new guidelines is expected to be muted.

Clark Wu, Attorney at US cannabis-focused law firm Bianchi & Brandt, said that many brands were already posting adverts in the formats now officially allowed in efforts to bypass the platform’s algorithms.

He explained that as cannabis is legal in some US states but still a federally considered a Schedule 1 substance, an ‘interesting conflict’ has emerged where companies ‘exist, function, advertise and sell’, but are not technically allowed to advertise by the Federal Trade Commission (FTC).

“How the US government has handled this on a federal level is by lack of enforcement. So even though it’s technically illegal, the federal agencies haven’t taken much affirmative action against companies that violate these advertising laws.”

Despite this, larger advertising platforms like Twitter, Facebook, Instagram, and Google have taken a ‘more cautious approach’ and have prohibited advertising on their platforms, moving to take it down wherever they see it.

“Now, does that mean that it hasn’t been happening? No, it’s still very prevalent in the industry. So what has kind of existed is more of an understanding between cannabis companies and these advertising platforms, that as long as they advertise in a certain way that doesn’t promote the direct sale of cannabis then they’ll let you skate by.”

Twitter’s new advertising opportunities for cannabis brands, he says, are ‘not too different from what these cannabis companies are doing now’.

“So they just brought this informal understanding out to the front end and said ‘you can do this’, which is a pretty big deal”.

With this in mind, others have suggested the move is simply a ‘money grab’ by Twitter’s recently instated owner Elon Musk.

Since he took over Twitter, which makes 90% of its revenues from advertising, in late October, 2022, the site has reportedly lost 500 of its top advertisers and seen ad revenues plummet 40%.

Matthew Clifton, CEO of cannabis marketing agency Milk & Amber and former Head of Business Product Marketing at Facebook, told BusinessCann: “It’s hard not to look at it in a slightly disparaging money grabbing way, to be honest.”

A missed opportunity

Mr Clifton explained that he believed this policy is not likely to be sufficiently thought through to discourage bad actors.

“There’s an opportunity to actually grow an industry up in the right way and say, ‘these are bad business practices, you shouldn’t be doing this, this doesn’t keep people safe, in fact, it exposes people, and we won’t stand for that,” he said.

“I personally get a little bit concerned that the policy isn’t actually going to be rich enough to block out some of the bad behaviour that we see.”

He argued that the prohibition of advertising, or policies which are not fully thought through, encourage brands to find ways around the algorithms, ‘negative behaviour which does expose people to harm’.

Furthermore, concerns remain over how these new policies will be effectively policed. A recent story by the BBC suggested that ‘Twitter insiders’ say the company is no longer able to protect users from ‘trolling, state-coordinated disinformation and child sexual exploitation, following lay-offs’.

Mr Clifton said that while he believes Twitter’s verification process could be implemented by other social media platforms, using the Novel Foods public list to determine which CBD brands should be able to advertise, enforcement remained a major issue in preventing harm.

“The challenge that people face is you need to speak to a person to explain your case. And that has become harder and harder over time.”

Will other social media platforms follow suit?

Just like banking and insurance, advertising remains one of the critical parts of building a business to which cannabis companies are uniquely denied access.

Prohibition Partners Co-Founder and CEO Stephen Murphy said: “The recent changes in advertising policy on Twitter don’t really have an impact on cannabis companies.

“Despite restrictions on the promotion of cannabis (similar rules apply to other related categories), there are significant ad-tech and direct media platforms that allow brands to connect with their audiences. I would also add that it doesn’t feel like good business to support platforms that don’t support cannabis.”

Money grab or not, Mr Clifton says it is a ‘good sign’ that Twitter has moved its own dial towards the mainstream acceptance of cannabis companies, and that it will get companies thinking about how to manage cannabis advertising ‘in a more deliberate way’.

As to whether it will help shift the dial elsewhere, he cautions that this is likely ‘not the monumental step we would want it to be’, and that he believes it could be a ‘year or two before these policies really change’.

While Mr Wu agreed this could well be nothing more than a money grab by Mr Musk, he said this shouldn’t ‘detract from the message’, and will still go some way to ‘help with industry progression’.

“This might also entice some marketing agencies or other groups who previously haven’t thought about these avenues for advertising. Where they’ve taken the safer approach and avoided large social media platforms because they wanted to avoid fines, this might help them get over the edge.”

“I think some of these other platforms are going to look and see how the public receives the new Twitter development before determining whether they’ll make similar moves.

“And depending on how everything plays out, some of these other larger players should be more willing to join the fray.”

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