A recent analysis suggests that X, the social media platform formerly known as Twitter, will face a significant impact on its ad revenue due to a major advertiser exodus. This exodus was triggered by owner Elon Musk’s amplification of antisemitic conspiracy theories on the platform. Brands such as Apple, Disney, IBM, Paramount, and Comcast/NBCU have already paused or stopped their ad campaigns on X, with more likely to follow suit.
Key Takeaway
X is facing a major blow to its ad revenue as a result of a significant advertiser exodus triggered by Elon Musk’s amplification of hate speech and conspiracy theories. The platform’s already declining ad revenues are expected to worsen, with potential long-term implications for its sustainability. The departure of high-profile advertisers may inspire others to follow suit, resulting in a severe impact on X’s ad business. Additionally, X’s CEO, Linda Yaccarino, has faced calls for resignation as her efforts to ensure brand safety are undermined by Musk’s actions.
The Violent Blow to X’s Ad Business
Before this recent setback, X had already experienced a decline in ad revenues due to brand safety concerns. According to Insider Intelligence’s October forecast, X was on track for a 54.4% year-over-year decrease in worldwide ad spending from 2022 to 2023. With the additional advertiser pull-outs, this decline is expected to be even more severe.
X heavily relies on advertising for its revenue, with ads accounting for about 90% of its earnings. While X has been recognized as a reliable source for fast-breaking news, the impact of Musk’s endorsement of hate speech and misinformation poses a major societal danger. The exodus of high-profile advertisers may inspire others to follow suit, resulting in a significant blow to X’s ad business.
The Fallout from Musk’s Actions
X’s struggles in maintaining brand safety have been exacerbated by Musk’s controversial actions. The platform’s owner amplifying hate speech and emboldening conspiracy theorists has left advertisers in uncharted territory. Advertisers are accustomed to managing brand safety concerns during times of political and social tension, but they’re not accustomed to the platform owner himself contributing to the problem.
Insider Intelligence analyst Jasmine Enberg warns that X’s ad business will suffer severe damage. The departure of prominent advertisers is likely to encourage others to withdraw their spending as well. This exodus poses a significant risk to X’s long-term sustainability.
Predicted Decline in Revenue and User Base
Prior to the recent advertiser departures, X was already on a downward trajectory. Musk himself revealed that U.S. ad revenues were down by 60% in September, following pressure from the Anti-Defamation League’s accusation of anti-Semitism. Insider Intelligence’s forecast aligns with these figures, predicting a year-over-year decline of nearly 55% in U.S. advertising revenues and 54.4% worldwide.
The analysis also estimates a drop in X’s monthly active users, projecting a decrease of 4.1% to 348.6 million by the end of 2024. This decline is expected to be consistent among U.S. users as well.
The Implications for X’s Leadership and Future Funding
X’s CEO, Linda Yaccarino, has been under pressure from top advertising executives to resign due to the reputational damage caused by Musk’s actions. Yaccarino’s efforts to assure advertisers of brand safety are being undermined by the platform owner himself. However, Yaccarino remains committed to X’s vision and community, dismissing calls for her resignation.
The full impact of the recent advertiser departures has yet to be calculated by Insider Intelligence. However, it is expected to be significant and will likely play a role in their next update to the forecast.
