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Advertising guru Martin Sorrell has cast doubt on the prospects of Donald Trump’s new public platform Truth Social, saying it is currently “unfathomable” that customers want to buy adverts on the site.
The British businessman told CNBC on Wednesday that the former US president’s social media platform has yet to prove its financial viability in an already challenging advertising market.
“It’s a little unfathomable. What’s the revenue there?” Sorrell, founder and executive chairman of digital marketing firm S4 Capital, said when asked whether clients were inclined to advertise.
Trump Media & Technology Group (TMTG), the company behind Truth Social, went public Tuesday after merging with shell company Digital World Acquisition in a deal known as a special purpose acquisition (SPAC).
Shares jumped more than 50% during a volatile first day of trading before closing the session up 16%, giving the company a market capitalization of about $7.85 billion, according to the Associated Press.
The listing netted the presumptive Republican presidential nominee a paper fortune of more than $4 billion for his 58% stake in the company at a time when he faces mounting legal challenges. He was on the hook for $454 million bail in a civil fraud case, but the fee was reduced to $175 million Monday following an appeal.
The fanfare also comes as the company has struggled to demonstrate a path to profitability.
“It kind of defies reality, at least at first,” said Sorrell, who is also the founder and former CEO of the ad agency WPP.
A spokesperson for TMTG strongly rejected claims that the stock price movement defied logic when contacted by CNBC.
Truth Social lost $10.6 million in the first nine months of 2023 on revenue of $3.4 million. According to Semafor, the company has lost at least $57 million since its inception in 2021, when it was created by Trump despite his inclusion on Twitter’s blacklist following the January 6 Capitol attack.
It also said it could never reveal key performance data, such as signups, ad impressions and average revenue per user, key metrics for advertisers to evaluate potential market opportunities.
That could make the sale even more challenging as major social platforms compete for a share of ad spend in a still-challenging economic environment, Sorrell said.
The advertising executive warned on Wednesday that budgets are likely to remain tight in 2024 after reporting a decline in S4 Capital’s revenues for 2023.
“Social platforms, from an advertising perspective, are not great advertising features,” he said.
Citing Alphabet, Meta and Amazon as the three major advertising platforms in the West, and Alibaba, Tencent and Bytedance as the big players in the East, Sorrell said it may be difficult for other names to gain market share. Even Twitter, with its new X-branding and management, saw its advertising revenue halve.
“TikTok is the only one that has really broken through,” Sorrel said, estimating that TikTok would account for about a fifth of owner Bytedance’s ad revenue of about $90 billion in 2023. TikTok now faces a potential ban in the United States due to national security concerns.
However, Sorrell cautioned his comments by saying Trump could prove to be a formidable competitor, both in business and politics.
“You can never count President Trump out, either electorally or in terms of social platforms,” he said.